Organogenesis Holdings Inc. Reports Third Quarter and Nine Months of 2019 Financial Results
Third Quarter 2019 Financial Summary:
- Net revenue of
$64.3 million for the third quarter of 2019, up 27% compared to net revenue of$50.8 million for the third quarter of 2018. Net revenue comprised:- Net revenue from Advanced Wound Care products of
$54.3 million , up 25% from the third quarter of 2018. - Net revenue from Surgical & Sports Medicine products of
$10.0 million , up 39% from the third quarter of 2018.
- Net revenue from Advanced Wound Care products of
- Net revenue from the sale of PuraPly products of
$31.8 million for the third quarter of 2019, up 78% from the third quarter of 2018. - Net revenue from the sale of non-PuraPly products of
$32.5 million for the third quarter of 2019, down 1% from the third quarter of 2018. Net revenue from the sales of non-PuraPly commercially available products (specifically excluding Affinity) increased 12% from the third quarter of 2018. - Net loss was
$10.7 million for the third quarter of 2019, compared to a net loss of$13.1 million for the third quarter of 2018. - Adjusted EBITDA loss of
$4.8 million for the third quarter of 2019, compared to Adjusted EBITDA loss of$7.3 million for the third quarter of 2018.
Third Quarter 2019 and Recent Highlights:
- On
July 1, 2019 , the Company announced that the common stock ofOrganogenesis Holdings Inc. had been added to the Russell 2000®, Russell 3000® and Russell Microcap® Indexes. - On
July 8, 2019 , the Company announced its 2019 sponsorship of theAmerican Podiatric Medical Association (APMA), including support for two of the APMA’s leading educational programs. - On
August 19, 2019 , the Company announced the completion of its exchange offer relating to its publicly traded warrants and subsequently issued an aggregate of 2,925,731 shares of its Class A common stock. Following the exchange offer and the related mandatory redemption, no public warrants are outstanding. - On
October 7, 2019 , the Company presented new data on ReNu® at the International Cartilage Regeneration & Joint Preservation Society’s (ICRS) 2019 15thWorld Congress , heldOct. 5-9 inVancouver, British Columbia , Canada. Research, which included two podium presentations demonstrating the use of ReNu in reducing the severity of symptoms associated with knee osteoarthritis (OA), as well as a poster presentation providing evidence of the potential for ReNu to decrease pro-inflammatory cytokines and proteases, while increasing anti-inflammatory cytokines and inhibitors. - On
October 12, 2019 , the Company presented the latest advanced wound care research on Apligraf® and NuShield® at the Symposium on Advanced Wound Care (SAWC) Fall 2019 meeting, which was held fromOct. 12-14 inLas Vegas, NV.
“We delivered another quarter of significant year-over-year revenue growth across both our Advanced Wound Care and Surgical and Sports Medicine portfolios,” said
Mr. Gillheeney, Sr. continued: “With continued execution against our PuraPly commercial strategy and improved amniotic capacity exiting Q3, we expect a strong finish to the year. We have updated our full-year 2019 revenue guidance and now expect to grow in a range of 31% to 34%. We remain committed to delivering on our mission to provide integrated healing solutions that substantially improve medical outcomes while lowering the overall cost of care.”
Net Revenue Summary:
The following table represents net revenue by product grouping for the three and nine months ended
| Three Months Ended September 30, |
Increase/Decrease |
Nine Months Ended September 30, |
Increase/Decrease |
||||||||||||||||||||
| (In thousands) | 2019 |
2018 |
$ Change |
% Change |
2019 |
2018 |
$ Change |
% Change |
|||||||||||||||
| Advanced Wound Care | $ | 54,310 | $ | 43,597 | $ | 10,713 | 25 | % | $ | 157,365 | $ | 109,711 | $ | 47,654 | 43 | % | |||||||
| Surgical & Sports Medicine | 9,955 | 7,172 | 2,783 | 39 | % | 28,971 | 20,139 | 8,832 | 44 | % | |||||||||||||
| Net revenue | $ | 64,265 | $ | 50,769 | $ | 13,496 | 27 | % | $ | 186,336 | $ | 129,850 | $ | 56,486 | 44 | % | |||||||
Third Quarter 2019 Results:
Net revenue for the third quarter of 2019 was
Gross profit for the third quarter of 2019 was
Operating expenses for the third quarter of 2019 were
Operating loss for the third quarter of 2019 was
Net loss for the third quarter of 2019 was
As of
First Nine Months of 2019 Results:
Net revenue for the nine months ended
Gross profit for the nine months ended
Operating expenses for the nine months ended
Operating loss for the nine months ended
Net loss for the nine months ended
Fiscal Year 2019 Revenue Guidance:
The Company is updating its fiscal year 2019 revenue expectations. For the twelve months ending
- Net revenue of between $253 million and $260 million, representing growth of approximately 31% to 34% year-over-year, as compared to net revenue of
$193.4 million for the twelve months endedDecember 31 , 2018. The Company’s prior guidance range for net revenue was$250 million to $262 million , representing growth of 29% to 35% year-over-year.
- The updated 2019 net revenue guidance range assumes:
- Net revenue from Advanced Wound Care products of between $215 million and $220 million, representing growth of approximately 31% to 34% year-over-year as compared to net revenue of
$164.3 million for the twelve months endedDecember 31, 2018 . - Net revenue from Surgical & Sports Medicine products of between $38 million and $40 million, representing growth of approximately 31% to 37% year-over-year as compared to net revenue of
$29 .1 million for the twelve months endedDecember 31, 2018 . - The 2019 net revenue guidance range also assumes that net revenue from the sale of PuraPly products will represent between $119 million and $124 million of net revenue, representing growth of approximately 70% to 78% year-over-year, as compared to net revenue of
$69.8 million for the twelve months endedDecember 31, 2018 .
- Net revenue from Advanced Wound Care products of between $215 million and $220 million, representing growth of approximately 31% to 34% year-over-year as compared to net revenue of
Conference Call:
Management will host a conference call at
For those unable to participate, a replay of the call will be available for two weeks at 855-859-2056 (404-537-3406 for international callers); access code 4658443. The webcast will be archived at investors.organogenesis.com.
Forward-Looking Statements
This release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements relate to expectations or forecasts of future events. Forward-looking statements may be identified by the use of words such as “forecast,” “intend,” “seek,” “target,” “anticipate,” “believe,” “expect,” “estimate,” “plan,” “outlook,” and “project” and other similar expressions that predict or indicate future events or trends or that are not statements of historical matters. Such forward-looking statements include statements relating to the Company’s expected revenue for fiscal 2019 and the breakdown of such revenue in both its Advanced Wound Care and Surgical & Sports Medicine categories as well as the estimated revenue contribution of its PuraPly products. Forward-looking statements with respect to the operations of the Company, strategies, prospects and other aspects of the business of the Company are based on current expectations that are subject to known and unknown risks and uncertainties, which could cause actual results or outcomes to differ materially from expectations expressed or implied by such forward-looking statements. These factors include, but are not limited to: (1) the Company has incurred significant losses since inception and anticipates that it will incur substantial losses for the foreseeable future; (2) the Company faces significant and continuing competition, which could adversely affect its business, results of operations and financial condition; (3) rapid technological change could cause the Company’s products to become obsolete and if the Company does not enhance its product offerings through its research and development efforts, it may be unable to effectively compete; (4) to be commercially successful, the Company must convince physicians that its products are safe and effective alternatives to existing treatments and that its products should be used in their procedures; (5) the Company’s ability to raise funds to expand its business; (6) the impact of any changes to the reimbursement levels for the Company’s products and the impact to the Company of the loss of preferred “pass through” status for PuraPly AM and PuraPly on
About
Investor Inquiries:
OrganoIR@westwicke.com
443-213-0500
Press and Media Inquiries:
alowe@organo.com
781-774-9364
| ORGANOGENESIS HOLDINGS INC. | |||||||
| CONSOLIDATED BALANCE SHEETS | |||||||
| (in thousands, except share and per share amounts) | |||||||
| September 30, | December 31, | ||||||
| 2019 | 2018 | ||||||
| Assets | |||||||
| Current assets: | |||||||
| Cash | $ | 22,974 | $ | 21,291 | |||
| Restricted cash | 185 | 114 | |||||
| Accounts receivable, net | 34,383 | 34,077 | |||||
| Inventory | 20,184 | 13,321 | |||||
| Prepaid expenses and other current assets | 3,117 | 2,328 | |||||
| Total current assets | 80,843 | 71,131 | |||||
| Property and equipment, net | 44,254 | 39,623 | |||||
| Notes receivable from related parties | 536 | 477 | |||||
| Intangible assets, net | 22,314 | 26,091 | |||||
| Goodwill | 25,539 | 25,539 | |||||
| Deferred tax asset | 238 | 238 | |||||
| Other assets | 916 | 579 | |||||
| Total assets | $ | 174,640 | $ | 163,678 | |||
| Liabilities and Stockholders’ Equity | |||||||
| Current liabilities: | |||||||
| Deferred acquisition consideration | $ | 5,000 | $ | 5,000 | |||
| Redeemable common stock liability | - | 6,762 | |||||
| Current portion of notes payable | - | 2,545 | |||||
| Current portion of capital lease obligations | 2,872 | 2,236 | |||||
| Accounts payable | 28,251 | 19,165 | |||||
| Accrued expenses and other current liabilities | 20,606 | 20,388 | |||||
| Total current liabilities | 56,729 | 56,096 | |||||
| Line of credit | 33,484 | 26,484 | |||||
| Notes payable, net of current portion | - | 12,578 | |||||
| Term loan | 49,599 | - | |||||
| Deferred rent | 736 | 130 | |||||
| Capital lease obligations, net of current portion | 14,893 | 15,418 | |||||
| Other liabilities | 6,391 | 5,931 | |||||
| Total liabilities | 161,832 | 116,637 | |||||
| Commitments and contingencies (Note 13) | |||||||
| Stockholders’ equity: | |||||||
| Common stock, $0.0001 par value; 400,000,000 shares authorized; 95,470,290 and 91,261,413 shares issued; 94,741,742 and 91,261,413 shares outstanding at September 30, 2019 and December 31, 2018, respectively. | 9 | 9 | |||||
| Additional paid-in capital | 179,408 | 177,272 | |||||
| Accumulated deficit | (166,609 | ) | (130,240 | ) | |||
| Total stockholders’ equity | 12,808 | 47,041 | |||||
| Total liabilities and stockholders’ equity | $ | 174,640 | $ | 163,678 | |||
| ORGANOGENESIS HOLDINGS INC. | ||||||||||||||||
| CONSOLIDATED STATEMENTS OF OPERATIONS | ||||||||||||||||
| (in thousands, except share and per share amounts) | ||||||||||||||||
| Three Months Ended | Nine Months Ended | |||||||||||||||
| September 30, | September 30, | |||||||||||||||
| 2019 | 2018 | 2019 | 2018 | |||||||||||||
| Net revenue | $ | 64,265 | $ | 50,769 | $ | 186,336 | $ | 129,850 | ||||||||
| Cost of goods sold | 19,131 | 19,477 | 55,557 | 51,298 | ||||||||||||
| Gross profit | 45,134 | 31,292 | 130,779 | 78,552 | ||||||||||||
| Operating expenses: | ||||||||||||||||
| Selling, general and administrative | 49,475 | 38,583 | 147,325 | 114,483 | ||||||||||||
| Research and development | 3,924 | 2,779 | 11,159 | 7,651 | ||||||||||||
| Write-off of deferred offering costs | - | - | - | 3,494 | ||||||||||||
| Total operating expenses | 53,399 | 41,362 | 158,484 | 125,628 | ||||||||||||
| Loss from operations | (8,265 | ) | (10,070 | ) | (27,705 | ) | (47,076 | ) | ||||||||
| Other income (expense), net: | ||||||||||||||||
| Interest expense, net | (2,427 | ) | (2,940 | ) | (6,392 | ) | (8,131 | ) | ||||||||
| Change in fair value of warrants | - | (50 | ) | - | (299 | ) | ||||||||||
| Loss on the extinguishment of debt | - | - | (1,862 | ) | - | |||||||||||
| Other income (expense), net | (1 | ) | 9 | 11 | 12 | |||||||||||
| Total other income (expense), net | (2,428 | ) | (2,981 | ) | (8,243 | ) | (8,418 | ) | ||||||||
| Net loss before income taxes | (10,693 | ) | (13,051 | ) | (35,948 | ) | (55,494 | ) | ||||||||
| Income tax expense | (48 | ) | (27 | ) | (108 | ) | (82 | ) | ||||||||
| Net loss | (10,741 | ) | (13,078 | ) | (36,056 | ) | (55,576 | ) | ||||||||
| Non-cash deemed dividend to warrant holders | (645 | ) | - | (645 | ) | - | ||||||||||
| Net loss attributed to common shareholders | $ | (11,386 | ) | $ | (13,078 | ) | $ | (36,701 | ) | $ | (55,576 | ) | ||||
| Net loss per share attributed to common shareholders—basic and diluted | $ | (0.12 | ) | $ | (0.19 | ) | $ | (0.40 | ) | $ | (0.83 | ) | ||||
| Weighted-average common shares outstanding—basic and diluted | 92,276,858 | 69,496,280 | 91,182,233 | 66,745,895 | ||||||||||||
| ORGANOGENESIS HOLDINGS INC. | ||||||||
| CONSOLIDATED STATEMENTS OF CASH FLOWS | ||||||||
| (in thousands) | ||||||||
| Nine Months Ended | ||||||||
| September 30, | ||||||||
| 2019 | 2018 | |||||||
| Cash flows from operating activities: | ||||||||
| Net loss | $ | (36,056 | ) | $ | (55,576 | ) | ||
| Adjustments to reconcile net loss to net cash used in operating activities: | ||||||||
| Depreciation | 2,553 | 2,608 | ||||||
| Amortization of intangible assets | 4,526 | 2,752 | ||||||
| Non-cash interest expense | 196 | 595 | ||||||
| Deferred interest expense | 974 | 179 | ||||||
| Deferred rent expense | 606 | 42 | ||||||
| Gain on disposal of property and equipment | - | (1 | ) | |||||
| Write-off of deferred offering costs | - | 3,494 | ||||||
| Benefit recorded for sales returns and doubtful accounts | (29 | ) | (18 | ) | ||||
| Provision recorded for inventory reserve | 809 | 2,068 | ||||||
| Stock-based compensation | 700 | 820 | ||||||
| Change in fair value of warrant liability | - | 299 | ||||||
| Loss on extinguishment of debt | 1,862 | - | ||||||
| Changes in fair value of forfeiture rights | - | 589 | ||||||
| Changes in operating assets and liabilities: | ||||||||
| Accounts receivable | 553 | (815 | ) | |||||
| Inventory | (7,840 | ) | 145 | |||||
| Prepaid expenses and other current assets | (699 | ) | (2,665 | ) | ||||
| Accounts payable | 5,348 | (508 | ) | |||||
| Accrued expenses and other current liabilities | 85 | (675 | ) | |||||
| Accrued interest—affiliate debt | - | 2,859 | ||||||
| Other liabilities | (715 | ) | 578 | |||||
| Net cash used in operating activities | (27,127 | ) | (43,230 | ) | ||||
| Cash flows from investing activities: | ||||||||
| Purchases of property and equipment | (2,526 | ) | (1,495 | ) | ||||
| Proceeds from disposal of property and equipment | - | 1 | ||||||
| Acquisition of intangible asset | (250 | ) | - | |||||
| Net cash used in investing activities | (2,776 | ) | (1,494 | ) | ||||
| Cash flows from financing activities: | ||||||||
| Line of credit borrowings | 7,000 | 2,616 | ||||||
| Proceeds from term loan | 50,000 | - | ||||||
| Proceeds from long - term debt - affiliates | - | 15,000 | ||||||
| Proceeds from notes payable | - | 5,000 | ||||||
| Proceeds from equity financing | - | 46,000 | ||||||
| Repayment of notes payable | (17,585 | ) | (10 | ) | ||||
| Proceeds from the exercise of stock options | 163 | 111 | ||||||
| Proceeds from the exercise of common stock warrants | 628 | - | ||||||
| Redemption of redeemable common stock placed into treasury | (6,762 | ) | - | |||||
| Principal repayments of capital lease obligations | (863 | ) | (17 | ) | ||||
| Payment of debt issuance costs | (924 | ) | (177 | ) | ||||
| Payment of equity issuance costs | - | (270 | ) | |||||
| Net cash provided by financing activities | 31,657 | 68,253 | ||||||
| Change in cash and restricted cash | 1,754 | 23,529 | ||||||
| Cash and restricted cash, beginning of period | 21,405 | 2,358 | ||||||
| Cash and restricted cash, end of period | $ | 23,159 | $ | 25,887 | ||||
| Supplemental disclosure of cash flow information: | ||||||||
| Cash paid for interest | $ | 5,922 | $ | 3,812 | ||||
| Cash paid for income taxes | $ | 110 | $ | 62 | ||||
| Supplemental disclosure of non-cash investing and financing activities: | ||||||||
| Non-cash deemed dividend related to warrant exchange | $ | 645 | $ | - | ||||
| Debt and equity issuance costs included in accounts payable | $ | 91 | $ | - | ||||
| Purchases of property and equipment included in accounts payable and accrued expenses | $ | 3,698 | $ | 39 | ||||
| Equipment acquired under capital lease | $ | 973 | $ | - | ||||
| Acquisition of intangible assets included in accrued expenses and other liabilities | $ | 500 | $ | - | ||||
Use of Non‑GAAP Measures
Our management uses financial measures that are not in accordance with generally accepted accounting principles in
We define EBITDA as net income (loss) before depreciation and amortization, net interest expense and income taxes and we define Adjusted EBITDA as EBITDA, further adjusted for the impact of certain items that we do not consider indicative of our core operating performance. These items consist of non-cash equity compensation, mark to market adjustments on our warrant liabilities, change in our contingent asset and liabilities, write-off of deferred offering costs,
Our Adjusted EBITDA is not prepared in accordance with GAAP, and should not be considered in isolation of, or as an alternative to, measures prepared in accordance with GAAP. There are a number of limitations related to the use of Adjusted EBITDA rather than net income (loss), which is the most directly comparable GAAP equivalent. Some of these limitations are:
- Adjusted EBITDA excludes stock-based compensation expense, as stock-based compensation expense has recently been, and will continue to be for the foreseeable future, a significant recurring expense for our business and an important part of our compensation strategy;
- Adjusted EBITDA excludes depreciation and amortization expense and, although these are non-cash expenses, the assets being depreciated may have to be replaced in the future;
- Adjusted EBITDA excludes net interest expense, or the cash requirements necessary to service interest, which reduces cash available to us;
- Adjusted EBITDA excludes the impact of the changes in the fair value of our warrant liability and our contingent consideration forfeiture asset;
- Adjusted EBITDA excludes the write-off of deferred offering costs in connection with an abandoned public offering, as well as merger transaction costs, consisting primarily of legal and professional fees;
- Adjusted EBITDA excludes the loss on extinguishment of debt, which is a non-cash loss related to the write-off of unamortized debt issuance costs upon repayment of affiliate and third-party debt, and related prepayment penalties;
- Adjusted EBITDA excludes the advisory, legal, and professional fees incurred in connection with the warrant exchange transactions;
- Adjusted EBITDA excludes income tax expense (benefit); and
- Other companies, including companies in our industry, may calculate Adjusted EBITDA differently, which reduces its usefulness as a comparative measure.
Because of these limitations, we consider, and you should consider, Adjusted EBITDA together with other operating and financial performance measures presented in accordance with GAAP. A reconciliation of Net loss, the most directly comparable measure calculated in accordance with GAAP, to Adjusted EBITDA, has been included below.
| Three Months Ended | Nine Months Ended | |||||||||||||||
| September 30, | September 30, | |||||||||||||||
| 2019 | 2018 | 2019 | 2018 | |||||||||||||
| (in thousands) | (in thousands) | |||||||||||||||
| Net loss | $ | (10,741 | ) | $ | (13,078 | ) | $ | (36,056 | ) | $ | (55,576 | ) | ||||
| Interest expense, net | 2,427 | 2,940 | 6,392 | 8,131 | ||||||||||||
| Income tax expense | 48 | 27 | 108 | 82 | ||||||||||||
| Depreciation | 792 | 861 | 2,553 | 2,608 | ||||||||||||
| Amortization | 1,529 | 918 | 4,526 | 2,752 | ||||||||||||
| EBITDA | (5,945 | ) | (8,332 | ) | (22,477 | ) | (42,003 | ) | ||||||||
| Stock-based compensation expense | 242 | 252 | 700 | 820 | ||||||||||||
| Change in contingent consideration forfeiture asset | - | - | - | 589 | ||||||||||||
| Change in fair value of warrant liability | - | 50 | - | 299 | ||||||||||||
| Loss on extinguishment of debt | - | - | 1,862 | - | ||||||||||||
| Write-off of deferred offering costs | - | - | - | 3,494 | ||||||||||||
| Merger transaction costs | - | 748 | - | 748 | ||||||||||||
| Exchange offer transaction costs | 916 | - | 916 | - | ||||||||||||
| Adjusted EBITDA | $ | (4,787 | ) | $ | (7,282 | ) | $ | (18,999 | ) | $ | (36,053 | ) | ||||
Source: Organogenesis Holdings Inc.