Organogenesis Holdings Inc. Reports Second Quarter and First Half 2020 Financial Results
Second Quarter 2020 Financial Summary:
- Net revenue of
$69.0 million for the second quarter of 2020, up 6% compared to net revenue of$64.9 million for the second quarter of 2019. Net revenue is based upon:- Net revenue from Advanced Wound Care products for the second quarter of 2020 of
$59.7 million , an increase of 8% from the second quarter of 2019. - Net revenue from Surgical & Sports Medicine products for the second quarter of 2020 of
$9.2 million , a decrease of 5% from the second quarter of 2019.
- Net revenue from Advanced Wound Care products for the second quarter of 2020 of
- Net revenue from the sale of PuraPly products of
$28.5 million for the second quarter of 2020, a decrease of 4% from the second quarter of 2019. - Net revenue from the sale of non-PuraPly products of
$40.4 million , an increase of 15% as compared to net revenue from the sale of non-PuraPly products in the second quarter of 2019. - Net loss of
$5.2 million for the second quarter of 2020, compared to a net loss of$9.6 million for the second quarter of 2019, a decrease of$4.5 million , or 46%. - Adjusted EBITDA of
$274 thousand for the second quarter of 2020, compared to Adjusted EBITDA loss of$4.8 million for the second quarter of 2019, an increase of$5.1 million , or 106%.
Second Quarter 2020 and Recent Highlights:
- In
April 2020 , the Company hosted a series of five virtual education events geared toward clinicians and other advanced wound care and surgical & sports medicine stakeholders. The virtual events featured leading clinical experts and offered relevant, engaging and accessible educational content to clinicians and administrators. - In
July 2020 , the Company’s latest advanced wound care research on its Apligraf®, Affinity®, Dermagraft®, Nushield® and PuraPly® AM product lines was showcased at the 2020 Symposium on Advanced Wound Care (SAWC) Spring | Wound Healing Society Virtual Experience.
“We delivered second quarter revenue growth of 6%, which was well ahead of expectations and exceeded the high-end of our preliminary revenue range announced on
Net Revenue Summary:
The following table sets forth net revenue by product grouping for the three months ended
| Three Months Ended |
Change | ||||||||||||||
| 2020 | 2019 | $ | % | ||||||||||||
| (in thousands, except for percentages) | |||||||||||||||
| Advanced Wound Care | $ | 59,731 | $ | 55,211 | $ | 4,520 | 8 | % | |||||||
| Surgical & Sports Medicine | 9,229 | 9,737 | (508 | ) | (5 | )% | |||||||||
| Net revenue | $ | 68,960 | $ | 64,948 | $ | 4,012 | 6 | % | |||||||
Second Quarter 2020 Results:
Net revenue for the second quarter of 2020 was
Gross profit for the second quarter of 2020 was
Operating expenses for the second quarter of 2020 were
Operating loss for the second quarter of 2020 was
Total other expenses, net, for the second quarter of 2020 were
Net loss for the second quarter of 2020 was
As of
First Half 2020 Results:
The following table sets forth net revenue by product grouping for the six months ended
| Six Months Ended |
Change | ||||||||||||||
| 2020 | 2019 | $ | % | ||||||||||||
| (in thousands, except for percentages) | |||||||||||||||
| Advanced Wound Care | $ | 111,019 | $ | 103,055 | $ | 7,964 | 8 | % | |||||||
| Surgical & Sports Medicine | 19,673 | 19,016 | 657 | 3 | % | ||||||||||
| Net revenue | $ | 130,692 | $ | 122,071 | $ | 8,621 | 7 | % | |||||||
Net revenue for the six months ended
Gross profit for the six months ended
Operating expenses for the six months ended
Operating loss for the six months ended
Net loss the six months ended
Fiscal Year 2020 Revenue Guidance:
The Company is reinstating its fiscal year 2020 revenue guidance, originally issued on
For the twelve months ending
- Net revenue of between
$273 million and$277 million , representing growth of approximately 5% to 6% year-over-year, as compared to net revenue of$261 million for the twelve months endedDecember 31, 2019 . - The 2020 net revenue guidance range assumes:
- Net revenue from Advanced Wound Care products of between
$236 million and$238 million , representing growth of approximately 7% to 8% year-over-year as compared to net revenue of$221 million for the twelve months endedDecember 31, 2019 . - Net revenue from Surgical & Sports Medicine products of between
$37 million and$39 million , representing a decrease of approximately 3% to 8% year-over-year as compared to net revenue of$40 million for the twelve months endedDecember 31, 2019 . - Net revenue from the sale of PuraPly products of between
$108 million and$110 million , representing a decrease of approximately 13% to 15% year-over-year, as compared to net revenue of$127 million for the twelve months endedDecember 31, 2019 .
- Net revenue from Advanced Wound Care products of between
Second Quarter 2020 Earnings Conference Call:
Financial results for the second fiscal quarter of 2020 will be reported after the market closes on
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 4153175. 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 2020 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
CONSOLIDATED BALANCE SHEETS
(unaudited)
(amounts in thousands, except share and per share data)
| 2020 | 2019 | ||||||
| Assets | |||||||
| Current assets: | |||||||
| Cash | $ | 40,455 | $ | 60,174 | |||
| Restricted cash | 299 | 196 | |||||
| Accounts receivable, net | 44,024 | 39,359 | |||||
| Inventory | 28,562 | 22,918 | |||||
| Prepaid expenses and other current assets | 4,366 | 2,953 | |||||
| Total current assets | 117,706 | 125,600 | |||||
| Property and equipment, net | 53,033 | 47,184 | |||||
| Notes receivable from related parties | 302 | 556 | |||||
| Intangible assets, net | 19,164 | 20,797 | |||||
| 25,539 | 25,539 | ||||||
| Deferred tax asset | 15 | 127 | |||||
| Other assets | 728 | 884 | |||||
| Total assets | $ | 216,487 | $ | 220,687 | |||
| Liabilities and Stockholders’ Equity | |||||||
| Current liabilities: | |||||||
| Deferred acquisition consideration | $ | 1,432 | $ | 5,000 | |||
| Current portion of term loan | 6,667 | - | |||||
| Current portion of capital lease obligations | 3,327 | 3,057 | |||||
| Accounts payable | 29,944 | 28,387 | |||||
| Accrued expenses and other current liabilities | 24,688 | 23,450 | |||||
| Total current liabilities | 66,058 | 59,894 | |||||
| Line of credit | 39,353 | 33,484 | |||||
| Term loan, net of current portion | 52,954 | 49,634 | |||||
| Deferred rent | 1,097 | 1,012 | |||||
| Capital lease obligations, net of current portion | 13,011 | 14,431 | |||||
| Other liabilities | 8,264 | 6,649 | |||||
| Total liabilities | 180,737 | 165,104 | |||||
| Commitments and contingencies (Note 13) | |||||||
| Stockholders’ equity: | |||||||
| Common stock, |
11 | 10 | |||||
| Additional paid-in capital | 228,225 | 226,580 | |||||
| Accumulated deficit | (192,486 | ) | (171,007 | ) | |||
| Total stockholders’ equity | 35,750 | 55,583 | |||||
| Total liabilities and stockholders’ equity | $ | 216,487 | $ | 220,687 | |||
CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited)
(amounts in thousands, except share and per share data)
| Three Months Ended |
Six Months Ended |
||||||||||||||||
| 2020 | 2019 | 2020 | 2019 | ||||||||||||||
| Net revenue | $ | 68,960 | $ | 64,948 | $ | 130,692 | $ | 122,071 | |||||||||
| Cost of goods sold | 20,042 | 19,446 | 38,835 | 36,426 | |||||||||||||
| Gross profit | 48,918 | 45,502 | 91,857 | 85,645 | |||||||||||||
| Operating expenses: | |||||||||||||||||
| Selling, general and administrative | 46,502 | 48,957 | 99,115 | 97,850 | |||||||||||||
| Research and development | 4,668 | 3,864 | 10,078 | 7,235 | |||||||||||||
| Total operating expenses | 51,170 | 52,821 | 109,193 | 105,085 | |||||||||||||
| Loss from operations | (2,252 | ) | (7,319 | ) | (17,336 | ) | (19,440 | ) | |||||||||
| Other expense, net: | |||||||||||||||||
| Interest expense, net | (2,912 | ) | (2,187 | ) | (5,422 | ) | (3,965 | ) | |||||||||
| Loss on the extinguishment of debt | - | - | - | (1,862 | ) | ||||||||||||
| Gain on settlement of deferred acquisition consideration | - | - | 1,295 | - | |||||||||||||
| Other income (expense), net | 25 | (120 | ) | 46 | 12 | ||||||||||||
| Total other expense, net | (2,887 | ) | (2,307 | ) | (4,081 | ) | (5,815 | ) | |||||||||
| Net loss before income taxes | (5,139 | ) | (9,626 | ) | (21,417 | ) | (25,255 | ) | |||||||||
| Income tax expense | (27 | ) | (23 | ) | (62 | ) | (60 | ) | |||||||||
| Net loss | $ | (5,166 | ) | $ | (9,649 | ) | $ | (21,479 | ) | $ | (25,315 | ) | |||||
| Net loss per share —basic and diluted | $ | (0.05 | ) | $ | (0.11 | ) | $ | (0.21 | ) | $ | (0.28 | ) | |||||
| Weighted-average common shares outstanding—basic and diluted | 104,714,725 | 90,647,352 | 104,600,825 | 90,625,850 | |||||||||||||
CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
(amounts in thousands)
| Six Months Ended |
||||||||||
| 2020 | 2019 | |||||||||
| Cash flows from operating activities: | ||||||||||
| Net loss | $ | (21,479 | ) | $ | (25,315 | ) | ||||
| Adjustments to reconcile net loss to net cash used in operating activities: | ||||||||||
| Depreciation | 1,793 | 1,761 | ||||||||
| Amortization of intangible assets | 1,633 | 2,997 | ||||||||
| Non-cash interest expense | 103 | 154 | ||||||||
| Deferred interest expense | 1,022 | 536 | ||||||||
| Deferred rent expense | 64 | 326 | ||||||||
| Gain on settlement of deferred acquisition consideration | (1,295 | ) | - | |||||||
| Provision recorded for sales returns and doubtful accounts | 970 | 27 | ||||||||
| Loss on disposal of property and equipment | 201 | - | ||||||||
| Adjustment for excess and obsolete inventories | 1,709 | 523 | ||||||||
| Stock-based compensation | 678 | 458 | ||||||||
| Loss on extinguishment of debt | - | 1,862 | ||||||||
| Changes in operating assets and liabilities: | ||||||||||
| Accounts receivable | (5,727 | ) | 723 | |||||||
| Inventory | (7,353 | ) | (6,087 | ) | ||||||
| Prepaid expenses and other current assets | (1,302 | ) | (785 | ) | ||||||
| Accounts payable | 235 | 1,473 | ||||||||
| Accrued expenses and other current liabilities | 1,266 | 122 | ||||||||
| Other liabilities | 864 | (449 | ) | |||||||
| Net cash used in operating activities | (26,618 | ) | (21,674 | ) | ||||||
| Cash flows from investing activities: | ||||||||||
| Purchases of property and equipment | (6,411 | ) | (1,251 | ) | ||||||
| Proceeds from the repayment of notes receivable from related parties | 293 | - | ||||||||
| Acquisition of intangible asset | - | (250 | ) | |||||||
| Net cash used in investing activities | (6,118 | ) | (1,501 | ) | ||||||
| Cash flows from financing activities: | ||||||||||
| Line of credit borrowings | 5,869 | 7,000 | ||||||||
| Proceeds from term loan | 10,000 | 40,000 | ||||||||
| Repayment of notes payable | - | (17,585 | ) | |||||||
| Proceeds from the exercise of stock options | 968 | 54 | ||||||||
| 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 | (1,149 | ) | (557 | ) | ||||||
| Payment of deferred acquisition consideration | (2,568 | ) | - | |||||||
| Payment of debt issuance costs | - | (849 | ) | |||||||
| Net cash provided by financing activities | 13,120 | 21,929 | ||||||||
| Change in cash and restricted cash | (19,616 | ) | (1,246 | ) | ||||||
| Cash and restricted cash, beginning of period | 60,370 | 21,405 | ||||||||
| Cash and restricted cash, end of period | $ | 40,754 | $ | 20,159 | ||||||
| Supplemental disclosure of cash flow information: | ||||||||||
| Cash paid for interest | $ | 4,626 | $ | 3,890 | ||||||
| Cash paid for income taxes | $ | - | $ | 67 | ||||||
| Supplemental disclosure of non-cash investing and financing activities: | ||||||||||
| Debt issuance costs included in accounts payable | $ | - | $ | 75 | ||||||
| Purchases of property and equipment included in accounts payable and accrued expenses | $ | 4,692 | $ | 1,638 | ||||||
| Amounts due related to 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 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, the gain on settlement of deferred acquisition consideration, loss on the extinguishment of debt, and other costs and expenses not related to the Company’s core operations. We have presented Adjusted EBITDA in this press release because it is a key measure used by our management and Board of Directors to understand and evaluate our operating performance, generate future operating plans and make strategic decisions regarding the allocation of capital. In particular, we believe that the exclusion of certain items in calculating Adjusted EBITDA can produce a useful measure for period-to-period comparisons of our business.
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 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 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 gain on settlement of deferred acquisition consideration, which is the gain on the settlement of the deferred acquisition consideration dispute with the sellers of NuTech Medical;
- Adjusted EBITDA excludes other costs and expenses incurred not related to operations;
- Adjusted EBITDA excludes income tax expense; 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.
The following is a reconciliation of GAAP net loss to non-GAAP EBITDA and non-GAAP Adjusted EBITDA for each of the periods presented:
| Three Months Ended |
Six Months Ended |
|||||||||||||||
| 2020 | 2019 | 2020 | 2019 | |||||||||||||
| (in thousands) | (in thousands) | |||||||||||||||
| Net loss | $ | (5,166 | ) | $ | (9,649 | ) | $ | (21,479 | ) | $ | (25,315 | ) | ||||
| Interest expense, net | 2,912 | 2,187 | 5,422 | 3,965 | ||||||||||||
| Income tax expense | 27 | 23 | 62 | 60 | ||||||||||||
| Depreciation | 891 | 859 | 1,793 | 1,761 | ||||||||||||
| Amortization | 816 | 1,499 | 1,633 | 2,997 | ||||||||||||
| EBITDA | (520 | ) | (5,081 | ) | (12,569 | ) | (16,532 | ) | ||||||||
| Stock-based compensation expense | 469 | 234 | 678 | 458 | ||||||||||||
| Gain on settlement of deferred acquisition consideration (1) | - | - | (1,295 | ) | - | |||||||||||
| Loss on extinguishment of debt (2) | - | - | - | 1,862 | ||||||||||||
| Other costs and expenses (3) | 325 | - | 568 | - | ||||||||||||
| Adjusted EBITDA | $ | 274 | $ | (4,847 | ) | $ | (12,618 | ) | $ | (14,212 | ) | |||||
(1) The amount reflects the gain recognized related to the settlement of the deferred acquisition consideration dispute with the sellers of NuTech Medical.
(2) The amount reflects the loss recognized on the extinguishment of the Master Lease Agreement upon repayment.
(3) The amounts reflect other costs and expenses incurred not related to operations in the three and six months ended
Investor Inquiries:Westwicke Partners Mike Piccinino , CFA OrganoIR@westwicke.com 443-213-0500 Press and Media Inquiries: OrganogenesisMarcus Girolamo MGirolamo@organo.com 817-688-4767
Source: Organogenesis Holdings Inc.