Organogenesis Holdings Inc. Reports Fourth Quarter and Fiscal Year 2018 Financial Results
Fourth Quarter 2018 Financial Summary:
- Net revenue of
$63.6 million for the fourth quarter of 2018, up 19.7% compared to net revenue of$53.1 million for the fourth quarter of 2017. Net revenue comprised:
º Net revenue from Advanced Wound Care products of$54.6 million , up 15. 8% from the fourth quarter of 2017.
º Net revenue from Surgical & Sports Medicine products of$9.0 million , up 50.6% from the fourth quarter of 2017. - Net revenue from the sale of PuraPly products of
$28.5 million for the fourth quarter of 2018, up 1.1% from the fourth quarter of 2017. - Net loss was
$9.3 million , compared to a net loss of$4.4 million for the fourth quarter of 2017. - Adjusted EBITDA loss of
$0.1 million , compared to Adjusted EBITDA loss of$1.2 million for the fourth quarter of 2017.
Fiscal Year 2018 Financial Summary:
- Net revenue of
$193.4 million for the year endedDecember 31, 2018 , down 2.5% compared to net revenue of$198.5 million for the year endedDecember 31, 2017 . Net revenue comprised:
º Net revenue from Advanced Wound Care products of$164.3 million , down 8.1% year-over-year.
º Net revenue from Surgical & Sports Medicine products of$29.1 million , up 48.5% year-over-year. - Net revenue from the sale of PuraPly products of
$69.8 million for the year endedDecember 31, 2018 , down 36% year-over-year. - Net loss was
$64.8 million for the year endedDecember 31, 2018 , compared to a net loss attributable toOrganogenesis Holdings Inc. common stockholders of$8.4 million for the year endedDecember 31, 2017 . - Adjusted EBITDA loss of
$36.2 million for the year endedDecember 31, 2018 , compared to Adjusted EBITDA loss of$25 thousand for the year endedDecember 31, 2017 .
Fourth Quarter 2018 and Recent Highlights:
- On
December 10, 2018 , the Company completed its business combination betweenOrganogenesis Inc. andAvista Healthcare Public Acquisition Corp. (AHPAC). Funds affiliated withAvista Capital Partners , a leading private equity firm, invested a total of$92 million in the combined company in conjunction with the business combination. - On
March 14, 2019 , the Company closed on a new credit agreement withSilicon Valley Bank and MidCap Financial providing an aggregate principal amount of$100 million in the form of a$60 million term loan and a$40 million revolving credit facility. - On
March 14, 2019 ,Jack Farr , MD, Medical Director of theCartilage Research Center of Indiana presented clinical trial results demonstrating effectiveness of ReNu® in treating symptoms associated with knee osteoarthritis at theAmerican Academy of Orthopedic Surgeons Annual Meeting.
“2018 was a year of strong execution and significant accomplishments on all fronts,” said
Mr. Gillheeney, Sr. continued: “This substantial momentum has continued into 2019, and we are well positioned to execute our strategic objectives. Our broad and diversified commercial portfolio and pipeline assets combined with our enhanced balance sheet, provide a unique platform to deliver innovative therapies to our customers and patients and to accelerate our short- and long-term growth.”
Net Revenue Summary:
The following table represents revenue by product grouping for the three and twelve months ended
Three Months Ended December 31, |
Increase/Decrease | Twelve Months Ended December 31, |
Increase/Decrease | |||||||||||||||||||||||||||||||
(In thousands) | 2018 | 2017 | $ Change |
% Change | 2018 | 2017 | $ Change | % Change | ||||||||||||||||||||||||||
Advanced Wound Care | $ | 54,621 | $ | 47,179 | $ | 7,442 | 15.8 | % | $ | 164,332 | $ | 178,896 | $ | (14,564 | ) | (8.1 | )% | |||||||||||||||||
Surgical & Sports Medicine | 8,978 | 5,963 | 3,015 | 50.6 | % | 29,117 | 19,612 | 9,505 | 48.5 | % | ||||||||||||||||||||||||
Net revenue | $ | 63,599 | $ | 53,142 | $ | 10,457 | 19.7 | % | $ | 193,449 | $ | 198,508 | $ | (5,059 | ) | (2.5 | )% |
Fourth Quarter 2018 Results:
Net revenue for the fourth quarter of 2018 was
Gross profit for the fourth quarter of 2018 was
Operating expenses for the fourth quarter of 2018 were
Operating loss for the fourth quarter of 2018 was
Net loss for the fourth quarter of 2018 was
Fiscal Year 2018 Results:
Net revenue for the year ended
Gross profit for the year ended
Operating expenses for the year ended
Operating loss for the year ended
Net loss for the year ended
As of
Fiscal Year 2019 Revenue Guidance:
The Company is reaffirming the previously announced fiscal year 2019 revenue expectations which were introduced on
For the twelve months ending
- Net revenue of between $248 million and $259 million, representing growth of approximately 28% to 34% year-over-year, as compared to net revenue of
$193.4 million for the twelve months endedDecember 31 , 2018. - The 2019 net revenue forecast assumes:
º Net revenue from Advanced Wound Care products of between $219 million and $229 million, representing growth of approximately 33% to 39% year-over-year as compared to net revenue of$164.3 million for the twelve months endedDecember 31, 2018 .
º Net revenue from Surgical & Sports Medicine products of between$29 .5 million and $31 million, representing growth of approximately 1% to 6% year-over-year as compared to net revenue of$29 .1 million for the twelve months endedDecember 31, 2018 .
º The 2019 net revenue guidance range also assumes that net revenue from the sale of its PuraPly products will represent between $96 million and $103 million of net revenue, representing growth of approximately 38% to 48% year-over-year, as compared to net revenue of$69.8 million for the twelve months endedDecember 31, 2018 .
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 7278992. 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
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ORGANOGENESIS HOLDINGS INC.
CONSOLIDATED BALANCE SHEETS
(in thousands, except share and per share amounts)
December 31, | December 31, | ||||||||
2018 | 2017 | ||||||||
Assets | |||||||||
Current assets: | |||||||||
Cash | $ | 21,291 | $ | 2,309 | |||||
Restricted cash | 114 | 49 | |||||||
Accounts receivable, net | 34,077 | 28,124 | |||||||
Inventory | 13,321 | 14,270 | |||||||
Prepaid expenses and other current assets | 2,328 | 4,399 | |||||||
Contingent consideration forfeiture rights | - | 589 | |||||||
Total current assets | 71,131 | 49,740 | |||||||
Property and equipment, net | 39,623 | 42,112 | |||||||
Notes receivable from related parties | 477 | 413 | |||||||
Intangible assets, net | 26,091 | 29,759 | |||||||
Goodwill | 25,539 | 25,539 | |||||||
Deferred tax asset | 238 | 424 | |||||||
Other assets | 579 | 735 | |||||||
Total assets | $ | 163,678 | $ | 148,722 | |||||
Liabilities, Redeemable Common Stock and Stockholders’ Equity (Deficit) | |||||||||
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 | 7,501 | 5,369 | |||||||
Accounts payable | 19,165 | 19,053 | |||||||
Accrued expenses and other current liabilities | 25,415 | 22,551 | |||||||
Total current liabilities | 66,388 | 51,973 | |||||||
Line of credit | 26,484 | 17,618 | |||||||
Notes payable, net of current portion | 12,578 | 14,816 | |||||||
Long-term debt - affiliates | - | 52,142 | |||||||
Due to affiliates | - | 4,500 | |||||||
Warrant liability | - | 2,238 | |||||||
Deferred rent, net of current portion | 130 | 74 | |||||||
Capital lease obligations, net of current portion | 10,154 | 12,390 | |||||||
Other liabilities | 903 | 1,526 | |||||||
Total liabilities | 116,637 | 157,277 | |||||||
Commitments and contingencies (Notes 20 and 24) | |||||||||
Redeemable common stock, $0.0001 par value; 728,549 shares issued and | |||||||||
outstanding at December 31, 2018 and December 31, 2017. | - | 6,762 | |||||||
Stockholders’ equity (deficit): | |||||||||
Common stock, $0.0001 par value; 400,000,000 and 81,200,000 shares authorized at December 31, 2018 and December 31, 2017, respectively; 91,261,412 and 66,983,138 shares issued and outstanding at December 31, 2018 and December 31, 2017, respectively. |
9 | 6 | |||||||
Additional paid-in capital | 177,272 | 50,086 | |||||||
Accumulated deficit | (130,240 | ) | (65,409 | ) | |||||
Total stockholders' equity (deficit) | 47,041 | (15,317 | ) | ||||||
Total liabilities, redeemable common stock and stockholders' equity (deficit) | $ | 163,678 | $ | 148,722 |
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except share and per share amounts)
Three Months Ended December 31, | Year Ended December 31, | ||||||||||||||
2018 | 2017 | 2018 | 2017 | ||||||||||||
(in thousands) | (in thousands) | ||||||||||||||
Net revenue | $ | 63,599 | $ | 53,142 | $ | 193,449 | $ | 198,508 | |||||||
Cost of goods sold | 17,510 | 16,422 | 68,808 | 61,220 | |||||||||||
Gross profit | 46,089 | 36,720 | 124,641 | 137,288 | |||||||||||
Operating expenses: | |||||||||||||||
Selling, general and administrative | 47,478 | 36,387 | 161,961 | 133,717 | |||||||||||
Research and development | 3,091 | 2,735 | 10,742 | 9,065 | |||||||||||
Write-off of deferred offering costs | - | - | 3,494 | - | |||||||||||
Total operating expenses | 50,569 | 39,122 | 176,197 | 142,782 | |||||||||||
Loss from operations | (4,480 | ) | (2,402 | ) | (51,556 | ) | (5,494 | ) | |||||||
Other income (expense), net: | |||||||||||||||
Interest expense | (2,663 | ) | (2,283 | ) | (10,853 | ) | (8,139 | ) | |||||||
Interest income | 5 | 28 | 64 | 129 | |||||||||||
Change in fair value of warrants | (170 | ) | (53 | ) | (469 | ) | (1,037 | ) | |||||||
Loss on the extinguishment of debt | (2,095 | ) | - | (2,095 | ) | - | |||||||||
Other income (expense), net | 150 | 49 | 162 | (9 | ) | ||||||||||
Total other income (expense), net | (4,773 | ) | (2,259 | ) | (13,191 | ) | (9,056 | ) | |||||||
Net loss before income taxes | (9,253 | ) | (4,661 | ) | (64,747 | ) | (14,550 | ) | |||||||
Income tax (expense) benefit | (2 | ) | 233 | (84 | ) | 7,025 | |||||||||
Net loss | (9,255 | ) | (4,428 | ) | (64,831 | ) | (7,525 | ) | |||||||
Net income attributable to non-controlling interest in affiliates | - | - | 863 | ||||||||||||
Net loss attributable to Organogenesis Holdings Inc. | $ | (9,255 | ) | $ | (4,428 | ) | $ | (64,831 | ) | $ | (8,388 | ) | |||
Net loss per share attributable to Organogenesis Holdings Inc. - basic and diluted | $ | (0.12 | ) | $ | (0.07 | ) | $ | (0.94 | ) | $ | (0.14 | ) | |||
Weighted average common shares outstanding - basic and diluted | 76,952,174 | $ | 64,121,501 | 69,318,456 | 63,876,767 |
ORGANOGENESIS HOLDINGS INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
Year Ended December 31, | |||||||
2018 | 2017 | ||||||
Cash flows from operating activities: | |||||||
Net loss | $ | (64,831 | ) | $ | (7,525 | ) | |
Adjustments to reconcile net loss to net cash used in operating activities: | |||||||
Depreciation | 3,309 | 3,591 | |||||
Amortization of intangible assets | 3,669 | 2,037 | |||||
Non-cash interest expense | 3,300 | 2,415 | |||||
Non-cash interest income | (64 | ) | (111 | ) | |||
Non-cash rent expense | 56 | 70 | |||||
Deferred tax (benefit) expense | 186 | (7,301 | ) | ||||
Loss (gain) on disposal of property and equipment | 1,209 | (8 | ) | ||||
Impairment of notes receivable | - | 113 | |||||
Write-off of deferred offering costs | 3,494 | - | |||||
Provision (benefit) recorded for sales returns and doubtful accounts | 1,157 | 1,166 | |||||
Provision recorded for inventory reserve | 5,949 | 5,497 | |||||
Stock-based compensation | 1,075 | 919 | |||||
Change in fair value of warrant liability | 469 | 1,037 | |||||
Loss on extinguishment of debt | 2,095 | - | |||||
Change in fair value of interest rate swap | - | 6 | |||||
Change in fair value of forfeiture rights | 589 | (212 | ) | ||||
Changes in operating assets and liabilities: | |||||||
Accounts receivable | (7,110 | ) | (7,010 | ) | |||
Inventory | (5,000 | ) | (3,817 | ) | |||
Prepaid expenses and other current assets | (1,414 | ) | (2,680 | ) | |||
Accounts payable | (60 | ) | 3,967 | ||||
Accrued expenses and other current liabilities | 368 | 982 | |||||
Accrued interest - affiliate debt | (9,241 | ) | 3,190 | ||||
Other liabilities | 56 | 100 | |||||
Net cash used in operating activities | (60,739 | ) | (3,574 | ) | |||
Cash flows from investing activities: | |||||||
Purchases of property and equipment | (1,857 | ) | (2,426 | ) | |||
Proceeds from disposal of property and equipment | 1 | 8 | |||||
Acquisition of NuTech Medical, net of cash acquired | - | (11,790 | ) | ||||
VIE deconsolidation | - | (666 | ) | ||||
Net cash used in investing activities | (1,856 | ) | (14,874 | ) | |||
Cash flows from financing activities: | |||||||
Line of credit borrowings (repayment), net | 8,866 | 12,749 | |||||
Notes payables - related party borrowings (repayment), net | - | (1,335 | ) | ||||
Repayment of debt and debt issuance cost on affiliate debt | (22,680 | ) | - | ||||
Proceeds from long-term debt - affiliates | 15,000 | - | |||||
Proceeds from equity financing, net of issuance costs | 92,000 | - | |||||
Payment of equity issuance costs | (270 | ) | - | ||||
Payment of recapitalization costs | (11,206 | ) | - | ||||
Repayment of notes payable | (10 | ) | (6,325 | ) | |||
Proceeds from the exercise of stock options | 119 | 221 | |||||
Cash contributions from members of affiliates | - | 1,000 | |||||
Proceeds from notes payable - master lease | - | 16,000 | |||||
Payments of deferred acquisition consideration | - | (2,500 | ) | ||||
Payment of debt issuance costs | (177 | ) | (862 | ) | |||
Net cash provided by financing activities | 81,642 | 18,948 | |||||
Change in cash and restricted cash | 19,047 | 500 | |||||
Cash and restricted cash, beginning of year | 2,358 | 1,858 | |||||
Cash and restricted cash, end of year | $ | 21,405 | $ | 2,358 | |||
Supplemental disclosure of cash flow information: | |||||||
Cash paid for interest | $ | 7,553 | $ | 5,715 | |||
Cash paid for income taxes | $ | 8 | $ | 96 | |||
Supplemental disclosure of non-cash investing and financing activities: | |||||||
Fair value of shares issued in connection with investor debt settlement | $ | 42,764 | $ | - | |||
Fair value of shares issued in connection with settlement of warrants | $ | 2,707 | $ | - | |||
Common stock issued in exchange for AHPAC shares | $ | 1 | $ | - | |||
Notice of put option exercise of redeemable common shares | $ | 6,762 | $ | - | |||
Purchases of property and equipment in accounts payable and accrued expenses | $ | 172 | $ | 764 | |||
Fair value of warrant issued in connection with notes payable | $ | - | $ | 959 | |||
Extinguishment of Subordinated Notes - affiliates | $ | - | $ | 4,577 | |||
Accretion of redeemable common stock | $ | - | $ | 423 | |||
Shares issued in connection with NuTech Medical acquisition | $ | - | $ | 16,609 | |||
Deconsolidation of variable interest entities, net of cash | $ | - | $ | 9,052 | |||
Issuance of deferred acquisition consideration | $ | - | $ | 7,500 | |||
Issuance of contingent consideration forfeiture rights | $ | - | $ | 377 |
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) attributable to Organogenesis Holdings Inc. 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 fair value of interest rate swaps and 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) attributable to Organogenesis Holdings Inc., 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, our contingent consideration forfeiture asset, and the fair value of interest rate swaps;
- Adjusted EBITDA excludes the write-off of deferred offering costs, 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 debt;
- 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 Adjusted EBITDA to net loss attributable to Organogenesis Holdings Inc., the most directly comparable measure calculated in accordance with GAAP, has been included herein.
Three Months Ended December 31, | Year Ended December 31, | ||||||||||||||
2018 | 2017 | 2018 | 2017 | ||||||||||||
(in thousands) | (in thousands) | ||||||||||||||
Net income (loss) attributable to Organogenesis Holdings Inc. | $ | (9,255 | ) | $ | (4,428 | ) | $ | (64,831 | ) | $ | (8,388 | ) | |||
Interest expense, net | 2,658 | 2,255 | 10,789 | 8,010 | |||||||||||
Income tax expense (benefit) | 2 | (233 | ) | 84 | (7,025 | ) | |||||||||
Depreciation | 701 | 367 | 3,309 | 3,591 | |||||||||||
Amortization | 917 | 530 | 3,669 | 2,037 | |||||||||||
EBITDA | $ | (4,977 | ) | $ | (1,509 | ) | $ | (46,980 | ) | $ | (1,775 | ) | |||
Stock-based compensation expense | 255 | 267 | 1,075 | 919 | |||||||||||
Change in contingent consideration forfeiture asset | - | (15 | ) | 589 | (212 | ) | |||||||||
Change in fair value of interest rate swaps | - | - | - | 6 | |||||||||||
Change in fair value of warrant liability | 170 | 53 | 469 | 1,037 | |||||||||||
Write-off of deferred offering costs | - | - | 3,494 | - | |||||||||||
Merger transaction costs | 2,324 | - | 3,072 | - | |||||||||||
Loss on extinguishment of debt | 2,095 | - | 2,095 | - | |||||||||||
Adjusted EBITDA | $ | (133 | ) | $ | (1,204 | ) | $ | (36,186 | ) | $ | (25 | ) | |||
Investor Inquiries:Westwicke Partners Mike Piccinino , CFA OrganoIR@westwicke.com 443-213-0500 Press and Media Inquiries:Organogenesis Angelyn Lowe alowe@organo.com 781-774-9364
Source: Organogenesis Holdings Inc.