Sanara MedTech (NASDAQ:SMTI) reported higher first-quarter revenue, improved margins and a move to GAAP profitability as management said the company’s shift to a pure-play surgical focus began to show early benefits.
President and Chief Executive Officer Seth Yon said the first quarter of 2026 was the company’s first full quarter entirely focused on the surgical market. He said results exceeded internal expectations, with net revenue rising 19% from the prior-year quarter and net income from continuing operations reaching $0.4 million, or $0.04 per diluted share.
Yon noted that the first quarter is historically Sanara’s seasonally slowest period, and said the quarter was also affected by a three-day weather-related shutdown in January that halted shipping. Even so, he said March was the strongest sales month in company history, excluding October 2024, when BIASURGE sales benefited from industry disruption caused by Hurricane Helene.
Margins Improve as Surgical Focus Takes Hold
Chief Financial Officer Elizabeth Taylor said first-quarter net revenue increased $4.4 million, or 19%, compared with the first quarter of 2025. Gross profit rose $4.3 million, or 20%, to $25.9 million, while gross margin improved by about 100 basis points to 93% of net revenue.
Taylor attributed the higher gross profit and margin expansion to increased market penetration, geographic expansion, product mix and the company’s continued development of its independent distribution network in new and existing U.S. markets.
Operating expenses were $23.2 million, or 83.6% of sales, compared with $20.8 million, or 88.6% of sales, a year earlier. Taylor said the increase was mainly due to higher selling, general and administrative expenses, partly offset by lower research and development spending.
Research and development expense declined to $0.8 million, or 2.7% of sales, from $0.9 million, or 4.1% of sales, in the prior-year period. Taylor said R&D may fluctuate by quarter, but the company expects annual R&D spending to be within industry standards of 5% to 7% of sales.
Operating income increased to $2.6 million from $0.8 million a year earlier. Other expense rose to $2.2 million from $1.4 million, primarily due to higher interest expense and fees related to the company’s CRG term loan and losses from equity method investments.
Adjusted EBITDA increased $1.6 million, or 58%, to $4.3 million, which Taylor said was primarily tied to revenue growth, offset by higher SG&A expenses.
Sales Network Expands
Yon said Sanara ended the quarter with 43 sales representatives after strengthening the team late in 2025 and into 2026. He said the company’s products were contracted or approved for sale in more than 4,000 hospitals and ambulatory surgery centers across the United States as of quarter-end.
The company’s products were sold in more than 1,400 facilities during the quarter, up from more than 1,300 in the first quarter of 2025. Sanara also had agreements with more than 450 distributors, compared with 400 a year earlier.
While the company does not disclose specific figures for its active surgeon user base, Yon said Sanara saw solid year-over-year growth in surgeon users during the quarter.
Yon also emphasized that Sanara is not subject to reimbursement risk because it is fully focused on the surgical setting. He said that positioning gives the company lower exposure to fluctuations in patient-care costs and volumes and supports “a predictable and reliable revenue stream with consistently strong margins.”
Cash Flow and Capital Allocation
As of March 31, Sanara had $13.6 million in cash and $46.2 million in long-term debt, compared with $16.6 million in cash and $46 million in long-term debt at the end of 2025.
Net cash used in operating activities was $2.5 million for the quarter, compared with $2 million in the same period last year. Taylor said Sanara paid its debt service entirely in cash during the quarter, rather than using a combination of cash and payment-in-kind as it had in prior periods.
“We view this as a milestone and a reflection of our improving free cash flow generation,” Taylor said. She added that the company was pleased with working capital performance, particularly because the first quarter typically requires higher cash usage tied to employee commissions and annual bonuses.
Yon said Sanara’s capital allocation strategy is focused on organic growth, selective R&D investment and development of products aligned with its surgical focus. He specifically cited OsStic, the company’s licensed synthetic injectable structural bioadhesive bone void filler, which remains on track for market introduction in the first quarter of 2027.
Guidance Reaffirmed
For the second quarter, Sanara expects net revenue of $28.5 million to $29.5 million, representing year-over-year growth of 10% to 14%. The company also reaffirmed full-year 2026 revenue guidance of $116 million to $121 million, implying growth of about 13% to 17%.
During the question-and-answer session, Yon said the company had confidence entering the year and that first-quarter growth of 19% was a strong achievement. He said the combination of first-quarter results and second-quarter guidance puts the company near the midpoint of its full-year outlook.
Yon also said hospitals continue to evaluate spending inside the operating room, and that Sanara is focused on supporting its products with clinical and economic evidence while maintaining appropriate selling prices.
About Sanara MedTech (NASDAQ:SMTI)
Sanara MedTech is a medical technology company focused on developing and commercializing innovative devices for ear, nose and throat (ENT) healthcare. The company’s core offering centers on minimally invasive sinus dilation systems designed to treat chronic sinusitis and related conditions. These products leverage balloon catheter technology to expand sinus pathways and improve patient outcomes while reducing recovery times. In addition to sinus solutions, the portfolio extends to procedural tools and implants for otology and cranial applications.
With its legacy rooted in the assets of a former Johnson & Johnson business, Sanara MedTech combines decades of research and development in ENT therapies.
