BioStem Technologies, Inc. (BSEM) Earnings Call Transcript & Summary

Hello, everyone, and welcome to this conference call, where we'll go over BioStem's financial results for the second quarter of 2026 along with corporate highlights. Today's speakers include Jason Matuszewski, who serves as Chairman and Chief Executive Officer; Brandon Poe, our Chief Financial Officer; and Barry Hassett, our Chief Commercial Officer. I want to note before we proceed that statements made during this call could include forward-looking statements reflecting management's present expectations. You can find a fuller description of these risks and uncertainties in the press release we issued today, as well as in the documents we file with the U.S. Securities and Exchange Commission. Those SEC filings are available on our website and on the SEC's website. We urge investors not to rely excessively on forward-looking statements. Also, please note that non-GAAP financial measures are referenced during this call. Information reconciling these to comparable GAAP measures, along with related details, appears in our earnings press release, which is posted in the Investor Relations section of BioStem's website. Having said that, I'll hand things over now to Jason Matuszewski.

Thanks, Tripp, and good afternoon to all of you. For BioStem, the second quarter marked the first complete period in which we operated mainly as a hospital-centered company. Over those three months, hospital revenue rose on a sequential basis to $6.7 million, we finished rolling out BioStem's proprietary customer relationship management system, and we kept expanding the commercial team required to back our growth plan. Once the quarter had closed, we also finished our move up to the Nasdaq Capital Market, and shares of our common stock started trading there on August 7. I'd like to congratulate everyone on our team and express gratitude to our shareholders, our employees, and our business partners, whose dedication helped us arrive at this significant milestone. Listing on Nasdaq gives BioStem greater visibility, widens our reach into the capital markets, and strengthens our capacity to draw in and keep talented people; this is a major corporate accomplishment, and it's a pleasure to be trading on a national exchange that will let us maximize the company's value through disciplined execution of our core business. We continue to concentrate on 4 priorities meant to maximize value. The first is finishing and fine-tuning how our product lines, internal systems, and commercial organization come together. The second is pushing adoption and utilization throughout the hospital channel. The third is moving forward with our initial 510(k) product along with the wider product roadmap. And the fourth is getting ready for the manufacturing transfer of the NEOX and CLARIX product lines. Across the quarter, we advanced on all of these priorities. Starting with integration, our essential commercial infrastructure is now established and performing as we anticipated. Through the start of August, BioTissue handled sales logistics, operational support, invoicing, and collections under a transition services agreement. That arrangement kept the business running smoothly while we developed our own systems and capabilities. Those functions are now handled internally, and we rolled out the first phase of our new customer relationship management platform, tied into our enterprise resource planning system. This automates and links order processing, invoicing, and collections throughout our organization. With these capabilities, we gain clearer insight into account activity, ordering patterns, product utilization, and sales performance; they also sharpen our ability to pursue new accounts and assist the organization as it grows. At the same time, we kept merging and growing the commercial team. Over the quarter, we brought our BioRetain dry products to the hospital sales organization, handing the team one more product line to present across its customer base. As our systems, order processing, and logistics grow more connected and automated, we anticipate that the organization will keep getting more productive. To go into our commercial efforts and product roadmap in more depth, I'll hand the call to Barry Hassett, our Chief Commercial Officer.

Appreciate that, Jason. Now on to priority number two — getting our product portfolio adopted, which includes the NEOX, CLARIX, and VENDAJE brands within the hospital channel. These products serve a wide and expanding range of surgical and wound care uses — urology, orthopedics, spine, women's health, foot and ankle, colorectal surgery, plus acute and chronic wound care. Taken together, those applications add up to a market BioStem can address that we estimate at $26 billion. Our commercial approach is simple: keep bringing on additional surgeons and hospital accounts, while boosting utilization among the surgeons and hospitals that already use the NEOX and CLARIX allografts. Now that core integration is essentially finished, we've kept growing our direct sales organization and we're still on track to finish the year with over 40 W-2 representatives and over 30 independent sales agents — that's more than twice the direct sales force we had when the acquisition closed. This growth widens the hospital call points we cover across the country, lets us engage more deeply with current customers, and opens doors to new accounts. With the scaling of our commercial organization nearing completion, we feel we're positioned well to push broader adoption of our portfolio and underpin sustained growth. We're also focused on converting our extensive contractual access into real market penetration. We hold agreements with major hospital group purchasing organizations, and the member facilities in those networks give us access to over 70% of U.S. hospital beds. Our effort now is to get the VENDAJE product line added to the relevant GPO contracts, which would give surgeons access to our complete product portfolio — every one of which has clinical evidence behind it. Locally, our team keeps its attention on value analysis committee approvals, educating surgeons, and repeat case utilization. Differentiation of our products is another key part of the strategy. This quarter we were granted 8 new U.S. design patents covering elements of our fenestrated human placental allograft designs. Those patents broaden the protection around our product form factors and build on our clinical and commercial differentiation. Moving to priority number three — pushing our product roadmap forward — we still expect to launch our first 510(k) cleared product before this year is out. We think this product can give BioStem another point of differentiation versus our competitors and help our portfolio keep expanding. We're also assessing whether certain existing products might benefit from alternative regulatory pathways; that review weighs clinical need, market opportunity, development requirements, and the right regulatory next steps. Clinical evidence stays a core pillar of our commercial strategy, and we see it as another differentiator in this market that only grows more important. Our BioRetain DFU and VLU programs, anchored by the Level 1 randomized control trial results, show just how deeply we've invested in generating clinical data — as the publication of our top-line DFU results in late 2025 demonstrates. We expect to publish more results from our DFU trial in the months ahead and to finish the VLU study with top-line published data later this year. With the way reimbursement is changing, we think strong clinical evidence is going to matter more and more when it comes to picking products and making coverage choices. Our plan is to leverage that data to drive ongoing adoption as well as broader payer coverage; on top of that, this body of evidence shapes the way we interact directly with surgeons and clinicians. This quarter, we grew our footprint at major professional society conferences, put on hands-on training sessions, and collaborated with key opinion leaders to build awareness of what we offer and the clinical experience, backing them across a range of specialties. Through these efforts, clinicians are becoming more familiar with our differentiated portfolio, their confidence in how our products perform is being strengthened, and we're generating more chances to grow utilization among both current and new accounts. Last, I want to touch briefly on the physician office market. This quarter's results came in above what we had anticipated, yet a single quarter isn't a sign of wider stabilization or a market recovery. Our expectation remains that things will stabilize gradually over the back half of the year. Venture Medical, together with the pilot program we rolled out recently, keeps serving physician office, mobile wound care, and alternative site customers. We'll keep backing this segment through those channels, even as we steer most of our added commercial resources toward the hospital market. Now I'll hand things back to Jason, who will go into more depth on our technology transfer.

Thanks, Barry. Priority number four for us involves moving production of the NEOX and CLARIX lines over to BioStem's sites. On the operations side, we keep going through what the products require and the plan for that transfer alongside BioTissue. Starting the technology transfer during the first half of 2027 is still what we're tracking toward. At our current site, we can make NEOX and CLARIX items while needing only minimal capital expenditures. Once we bring manufacturing of these items in-house, the resulting synergies ought to strengthen our operating leverage and push gross margin and profitability higher; our expectation is that the gross margin gain kicks in after the transfer wraps up successfully, with additional upside as production volumes scale. During the whole transition, we anticipate product continuity will hold under the manufacturing and supply agreement we have with BioTissue; having said that, I'll hand things over to Brandon so he can cover our financial results for the quarter.

Thanks, Jason. For Q2, revenue came in at $7.9 million, up against $6.1 million during 2026's first quarter. That quarter-over-quarter gain shows we're still executing well on the strategy centered on hospitals, helped by the expanded sales team ramping up and greater utilization throughout our GPO contract base. The comparison likewise got a boost because the acquired business contributed a whole quarter's worth of revenue in Q2, since that deal only closed partway into Q1. Hospital revenue reached $6.7 million versus $5.4 million in Q1, and physician office revenue totaled $1.1 million versus $772,000 in Q1. Our strategy and resources stay pointed at hospital market growth, even as we keep watching how the physician office segment recovers. Gross profit came to $4.8 million, a 61% gross margin, versus $3.8 million of gross profit and a 61% gross margin in Q1. Higher revenue drove that gross profit gain, and gross margin held steady from quarter to quarter. As we talked about on the Q1 call, we anticipate some modest gross margin pressure in this year's second half while we sell through the pre-existing NEOX and CLARIX inventory bought soon after the acquisition at a discount relative to supply agreement pricing. Once the manufacturing transfer succeeds, we expect gross margin to improve, with even more upside as internal production grows. Operating expenses totaled $13.2 million, versus $12.6 million in Q1. That sequential rise came mainly from ongoing investment in the commercial organization and the infrastructure supporting it, partly offset by reduced clinical trial and administrative spending. On a GAAP basis, net loss was $9 million, or $0.52 per share, versus net income of $10,000, or $0.00 per share, in 2025's second quarter. Adjusted EBITDA loss was $4.6 million, versus adjusted EBITDA income of $2.5 million in 2025's second quarter. Cash and cash equivalents stood at $7 million on June 30, 2026, versus $13.7 million on March 31, 2026. Operating cash use for the quarter was $5.5 million. We also closed a $2.5 million institutional financing during the quarter. And to remind everyone, in late April we made a $3.5 million cash payment and issued a secured promissory note with a $1 million principal amount, settling $3 million of outstanding promissory notes plus $2.3 million of accrued interest. To support our growth plans, we'll aim to strengthen our balance sheet further as we figure out the best capital structure for the business; we're weighing several options, among them non-dilutive ones. Now for guidance: we've been happy with how the newly acquired hospital business is performing, and we're lifting our full year 2026 revenue guidance to a range of $26 million to $29 million, up from the prior guidance of $25 million to $29 million. When it comes to our hospital segment, we still anticipate growth on a sequential basis throughout this year. That's driven by rising productivity among sales reps and greater scale, deeper use of GPO accounts, and seasonal patterns lifting elective surgical procedure volumes during this year's second half. Over in the physician office market, though this quarter's results give us encouragement, we still look for a gradual recovery across the back half of the year instead of a durable inflection. Turning to expenses, we expect operating expenses to stay roughly flat sequentially for the rest of the year, leaving out the Q3 impact from costs tied to our Nasdaq uplisting. Higher sales and marketing spending should be offset mainly by lower general and administrative costs for legal and accounting fees connected to our uplisting as we enter Q4, plus decreases in stock-based compensation and R&D costs across both Q3 and Q4. At this point, I'll hand the call back to Jason for his closing remarks.

Thank you, Brandon. During Q2, BioStem moved further along the path toward a commercial model centered on hospitals. The key operational shift is now behind us, we've grown our commercial team, made headway on both product and clinical initiatives, and after the quarter closed, finished our uplisting to the Nasdaq Capital Market. Looking at the rest of 2026, three areas we can measure will get our attention: turning wider hospital access into greater use of our products, boosting output from the larger commercial organization, and finishing the operational and regulatory work needed for the NEOX and CLARIX manufacturing transfer. The Nasdaq uplisting hands us a bigger platform, yet value creation for shareholders depends on how well we deliver against these priorities. With that, operator, the line is open for questions.

RK here, calling in from H.C. Wainwright. I'd like to start with something on the balance sheet. There's a $10 million contingent consideration showing up there. My guess is that's tied to the catalyst everyone expects on August 13. Given where your cash balance sits, how do you want us to think about that? Also, can any piece of that amount be settled in stock, or pushed out to a later date, or is there some other mechanism to take care of it?

Yeah, hey, RK. Brandon here. Yeah, that's correct. That $10 million line you're seeing on the balance sheet represents the contingent consideration tied directly to the $10 million paper for the milestone; and like you said, we're currently working through how to make that payment. We're evaluating our choices on that front. Some of it is wrapped into what we've said about financing for the company and exploring various financing alternatives. So that's what we're in the middle of right now. We did manage to arrange an extension of the payment with BioTissue. So at this point we believe we're positioned well enough to satisfy that extension, though we're still working it through, and there will be more to share on that later. Jason, is there anything you'd like to chime in with?

Yeah, I'd simply say that the 510(k) is honestly a truly strong, value-accretive addition to what we offer; and I believe when we consider the product and the chance it presents, particularly regarding what this asset is worth, I think there's a massive opportunity ahead for the product with Barry and his team at the helm.

Now regarding that guidance range, I notice you moved the bottom end up somewhat, yet it also suggests you anticipate roughly $12 million to $15 million across the second half, while you just reported $14 million in the first half. What still has you being somewhat cautious, and what are the factors pushing and pulling on that figure to reach the top end of the guidance?

Look, I'd say we've felt very pleased thus far about how the acquired hospital business has performed. As we've mentioned previously, our objective for the first half was to maintain our existing position when it comes to revenue, personnel, and clients. Barry and the commercial team have accomplished something remarkable there; and we're enthusiastic about the second half. We still anticipate sequential growth within the hospital business, as we've discussed concerning sales productivity, GPO account utilization, and certain seasonal patterns in the business that we've mentioned. Right now, look, we're freshly uplisted onto Nasdaq, and we're attempting to provide guidance we consider prudent as we weigh the risks present out there. Still, we're enthusiastic about the back half of the year, I suppose that's the finest way I can put it. I'm enthusiastic about where we head from here.

Alright, so with that I'll step out of the queue after one final question. Regarding the pipeline and the VLU study, my understanding is that enrollment is now complete. Is the expectation still that we'll see the data, at minimum the top-line, come out during the second half of 2026, or has the plan shifted somewhat?