Welcome, ladies and gentlemen, to the Second Quarter 2025 Earnings Conference Call for Organogenesis Holdings, Inc. [Operator Instructions] Please note that this conference call is being recorded and that the recording will be available on the company's website for replay shortly. Before we begin, I would like to remind everyone that our remarks today may contain forward-looking statements that are based on the current expectations of management and involve inherent risks and uncertainties that could cause actual results to differ materially from those indicated, including the risk and uncertainties described in the company's filings with the Securities and Exchange Commission, including the Item 1A, Risk Factors of the company's most recent annual report and its subsequently filed quarterly reports. You are cautioned not to place undue reliance upon any forward-looking statements, which speak only as of the date made. Although it may voluntarily do so from time to time, the company undertakes no commitment to update or revise the forward-looking statements, whether as a result of new information, future events or otherwise, except as required by applicable securities laws. This call will also include references to certain financial measures that are not calculated in accordance with the generally accepted accounting principles or GAAP. We generally refer to this as non-GAAP financial measures. Reconciliations of those non-GAAP financial measures to the most comparable measures calculated and presented in accordance with GAAP are available in the earnings press release on the Investor Relations portion of our website. I would now like to turn the call over to Mr. Gary S. Gillheeney, Sr ., Organogenesis Holdings President, Chief Executive Officer and Chair of the Board. Please go ahead, sir.

Thank you, operator and welcome, everyone, to Organogenesis Holdings Second Quarter 2025 Earnings Conference Call. I am joined on the call today by Dave Francisco, our Chief Financial Officer. Let me start with a brief agenda of what we will cover during our prepared remarks. I'll begin with an overview of our second quarter revenue results and provide an update on key operating and strategic developments in recent months and then Dave will provide you with an in-depth review of our second quarter financial results, our balance sheet and financial condition at quarter end as well as our financial guidance for 2025, which we updated in our press release this afternoon. Then we will open up the calls for questions. Beginning with a review of our revenue results in Q2, we delivered sales results within the guidance range outlined on our first quarter call, driven by better-than-expected growth in our Surgical & Sports Medicine products and sales of Advanced Wound Care products that came in at the lower end of our expectations. Our second quarter Advanced Wound Care results reflect the expected disruption in customer demand and ordering patterns related to the delay in the effective date of the final LCD for skin substitute grafts and cellular tissue-based products for the treatment of DFUs and VLUs until January 1, 2026. Our team's second quarter execution and focus on engagement, education and support helped our customers navigate a confusing and challenging environment. While the delay in the effective date for the final LCD fueled even more aggressive pricing strategies from our competitors, our team remains committed to building upon our deep customer relations and promoting access to existing and recently launched products. Last month, CMS announced the proposed Medicare physician fee schedule and outpatient prospective payment systems for calendar year 2026.…

Thanks, Gary. I'll begin with a review of our second quarter financial results. Unless otherwise specified, all growth rates referenced during our prepared remarks are on a year-over-year basis. Net product revenue for the second quarter was $100.8 million, down 23%. As Gary mentioned, these results came in within the range of the expectations we provided on our Q1 call, which called for total revenue in the range of $100 million to $110 million. Our Advanced Wound Care net product revenue for the second quarter was $92.7 million, down 25%. As Gary mentioned, the commercial team executed well in the period, driving increased momentum towards the end of Q2 despite the delay of the effective date of the LCD, which increased the aggressive competitive pricing tactics in the period. Net product revenue from Surgical & Sports Medicine products for the second quarter was up -- was $8.1 million, up 16%. Our total revenue results for the second quarter included $0.2 million of grant income related to the grant issued from the Rhode Island Life Sciences Hub, offsetting our employee-related costs in our Smithfield facility. This compares to no impact in the prior year period and we expect grant income to be immaterial in 2025. Gross profit for the second quarter was $73.1 million or 73% of net product revenue compared to 78% last year. Gross profit was unfavorably impacted in the period due primarily to lower revenue over our fixed costs as well as the expiration of excess product resulting from the delayed implementation of the LCD and related uncertainty. Operating expenses for the second quarter were $113.6 million compared to $144.1 million last year, a decrease of $30.5 million or 21%. Excluding cost of goods sold of $27.6 million for the second quarter and $29.2 million last year, our…

[Operator Instructions] And our first question will come from the line of Ryan Zimmerman with BTIG.

Maybe we could start with the CMS proposal for 2026. It is a radical change from what we've seen. And I believe the proposal was set at about $125 and change per square centimeter, if I'm not mistaken. Maybe, Gary, you could talk about kind of how you see ORGO fitting within that structure as it starts the year in 2026. And what are your expectations for the market from, let's say, today through the back half of '25? And then what changes in '26 with that proposal and how the market may change?

Sure. I'd be happy to. So as you know, we've been advocating for this type of payment reform for years, literally years. So it is a transformational event for the industry and a real opportunity for our products and the Organogenesis organization. We agree with the CMS approach of setting tiers and those tiers based on clinical differentiation, relative resource cost. They've kind of broken them out based on FDA classifications where data and evidence really matters. So we feel great about this change. And the fact that it's also in HOPD, it's not just in the ASP sites of care. It's now opened up the HOPD market to larger, more complex wounds where we are the leader in that space, that just gives more opportunity for folks to utilize our technologies like Apligraf and soon to be released Dermagraft. So Apligraf is reimbursed today at $30 per square centimeter and the current proposal at $125 would be a significant change. It would eliminate any of the disincentives financially to use the product and put it on a level playing field. But what we really appreciate is CMS establishing these tiers and we expect that we'll be lobbying for different payment rates based on those tiers. So Apligraf and Dermagraft and other PMA products will have the appropriate reimbursement based on the evidence and relative resource cost to produce those products. So this is very exciting for us, very exciting for the industry. As it relates to the market, today, Apligraf represents about 3% of the units sold, believe it or not, a PMA product with arguably the best evidence in the space has about 3% of the market. And we see that significantly changing in 2026. 510(k) products as well. Our PuraPly product is priced below the $125 per square centimeter today. So we would see an enhancement in that product and more utilization going forward. And then a level playing field for all the amnions. So there wouldn't be a significant price advantage going forward, levels the playing field. So we see a lot of reasons why '26 is going to be extremely positive for us. The rest of '25, I think we've seen in Q2, we've seen some aggressive pricing. We think that's going to continue and get worse at the end of the year. I assume there'll be a lot of discounting and inventory sales. Anybody who's got a lot of inventory at higher prices are going to need to move those products and we expect to see aggressive pricing. But for us, we've seen strong momentum coming out of the second quarter. Dave will talk a little bit about that. That momentum is continuing, both in accounts and in revenue. And we have a couple of new products that we've launched that will compete extremely well in this market as we bridge to 2026.

Yes. Just -- well, just to follow up on that. Your guidance reduction, I think, is around $12.5 million, if I'm not mistake -- if I did my math right, for the year at the midpoint. Given the results today, Dave, how do you -- do you think you've sufficiently accounted for this kind of aggressive behavior in the back half of the year with the reduction of the AWC segment for the balance of the year?

Yes, we do, Ryan. Thanks for the question. I mean, obviously, as Gary mentioned, we did exit Q2. We came in at the low end but exited with a fair amount of momentum. And we've recently launched some new products. And in this environment, you have to have the right products in the portfolio to succeed. And so we believe those recently launched products are going to contribute quite a bit in the back half. As Gary mentioned, there could be some challenging periods, call it, in the late period of Q4 but we think we've accounted for that. We've always anticipated that this would be -- remember, it was a relatively wide range when we first issued guidance simply because the market is in such an unusual spot here. So from our perspective, at least we just took down the top end, knowing that we've got 2 quarters behind us, 2 quarters ahead. So we just thought we'd narrow that range. But we think at the low end, we're confident and given the performance that we saw at the end of the second quarter.

Okay. Last one for me, and I'll hop back in queue. Gary, I don't think I heard, you may not want to say the timing of the Dermagraft reintroduction, can you be more specific? Or for competitive purposes, are you not saying?

Well, we can give you a sense. We think that by the second half of '27 that we'll have the opportunity to launch Dermagraft.

[Operator Instructions] We are currently showing no remaining questions in the queue. A question is raised from Ross Osborn with Cantor Fitzgerald.

This is Matt Park on for Ross today. I guess something right n ReNu. As you guys move closer to BLA submission, I guess I was trying to get your thoughts on how you think about ReNu's positioning within the broader knee OA treatment landscape? And I guess, what you guys view as the key differentiators versus existing injectable options?

I think what's really exciting is the actual data. So in the -- in both studies, we had a significant number of KL4s in the study. So the second study hasn't been completed yet but in the first study, those KL4s performed similar to KL3s and KL2s. So that is unique and it speaks to the strength of the product and potential labeling improvements in the product over anything else. So we're pretty excited that the data is showing that it's a robust product and will compete extremely well against the other competitors, which is primarily hyaluronic acid and steroids.

Got it. That's helpful. And then maybe just one more for me on the Surgical & Sports side of the business. I was just hoping to get some more color on what's driving -- or on what drove strength in the quarter and how you expect this momentum to continue in the back half of the year?

Yes, sure. We didn't adjust the guidance there. I think we did see some very strong performance. I think you're seeing some transition into some of the key products that we've got in the portfolio. And so we continue to see some nice numbers coming up from there. In addition to that, we've kind of implemented some hybrid rep situations where you're really seeing reps spanning across both Wound Care and Surgical and that added some value in the quarter as well. So we held that guidance but it's between 6% and 23%. So nice performance in the first half, up 12 -- excuse me, 16% in the quarter and 13% for the half. So we're excited to see that.

[Operator Instructions] We are currently showing no remaining questions in the queue at this time. That does conclude our conference for today. Thank you for your participation.