10-Q
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Table of Contents

 

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

 

FORM 10-Q

 

(Mark One)

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the Quarterly Period Ended June 30, 2022

OR

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Commission File Number 001-37906

 

ORGANOGENESIS HOLDINGS INC.

(Exact Name of Registrant as Specified in Its Charter)

 

 

Delaware

98-1329150

(State or Other Jurisdiction of

Incorporation or Organization)

(I.R.S. Employer

Identification No.)

 

 

85 Dan Road

 

Canton, MA

02021

                                    (Address of principal executive offices)

(Zip Code)

 

(781) 575-0775

(Registrant’s Telephone Number, Including Area Code)

 

 

Not Applicable

(Former name, former address and former fiscal year, if changed since last report)

 

 

Securities registered pursuant to Section 12(b) of the Act:

 

 

 

Title of each class

 

Trading Symbol(s)

 

Name of each exchange on which registered

Class A Common Stock, $0.0001 par value

 

ORGO

 

Nasdaq Capital Market

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes No

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer

Accelerated filer

 

 

 

 

Non-accelerated filer

Smaller reporting company

 

 

 

 

 

 

Emerging growth company

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes No

 

The number of shares of the registrant’s Class A common stock outstanding as of August 1, 2022 was 130,887,817.

 

 

 

 


Table of Contents

 

Organogenesis Holdings Inc.

Quarterly Report on Form 10-Q

For the Quarterly Period Ended June 30, 2022

Table of Contents

 

 

Page

PART I. FINANCIAL INFORMATION

4

Item 1.

Unaudited Consolidated Financial Statements

4

 

Consolidated Balance Sheets

4

 

Consolidated Statements of Operations

5

 

Consolidated Statements of Stockholders’ Equity

6

 

Consolidated Statements of Cash Flows

7

 

Notes to Consolidated Financial Statements

8

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

23

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

32

Item 4.

Controls and Procedures

33

 

 

PART II. OTHER INFORMATION

34

Item 1.

Legal Proceedings

34

Item 1A

Risk Factors

34

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

34

Item 3.

Defaults Upon Senior Securities

34

Item 4.

Mine Safety Disclosures

34

Item 5.

Other Information

34

Item 6.

Exhibits

35

 

 

SIGNATURES

36

 

2


Table of Contents

 

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q (this “Form 10-Q”) contains forward-looking statements. These statements may relate to, but are not limited to, expectations of our future results of operations, business strategies and operations, financing plans, potential growth opportunities, potential market opportunities and the effects of competition, as well as assumptions relating to the foregoing. Forward-looking statements are inherently subject to risks and uncertainties, some of which cannot be predicted or quantified. These risks and other factors include, but are not limited to, those listed under “Risk Factors.” In some cases, you can identify forward-looking statements by terminology such as “may,” “will,” “should,” “could,” “expect,” “plan,” “anticipate,” “believe,” “estimate,” “predict,” “intend,” “potential,” “might,” “would,” “continue” or the negative of these terms or other comparable terminology. These forward-looking statements are based on our management’s current expectations, estimates, forecasts and projections about our business and the industry in which we operate and our management’s beliefs and assumptions. These forward-looking statements are not guarantees of future performance or development and involve known and unknown risks, uncertainties and other factors that are in some cases beyond our control. As a result, any or all of our forward-looking statements in this Form 10-Q may turn out to be inaccurate. Factors that may cause actual results to differ materially from current expectations include, among other things, those listed under “Risk Factors” and discussed elsewhere in this Form 10-Q and in “Part I, Item 1A—Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2021. These forward-looking statements speak only as of the date of this Form 10-Q. Except as required by law, we assume no obligation to update or revise these forward-looking statements for any reason, even if new information becomes available in the future. You should, however, review the factors and risks we describe in the reports we will file from time to time with the U.S. Securities and Exchange Commission (the “SEC”) after the date of this Form 10-Q.

As used herein, except as otherwise indicated by context, references to “we,” “us,” “our,” “the Company,” “Organogenesis” and “ORGO” will refer to Organogenesis Holdings Inc. and its subsidiaries.

3


Table of Contents

 

PART I—FINANCIAL INFORMATION

Item 1. Unaudited Consolidated Financial Statements.

ORGANOGENESIS HOLDINGS INC.

CONSOLIDATED BALANCE SHEETS

(unaudited)

(amounts in thousands, except share and per share data)

 

 

 

June 30,

 

 

December 31,

 

 

 

2022

 

 

2021

 

Assets

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

Cash and cash equivalents

 

$

112,279

 

 

$

113,929

 

Restricted cash

 

 

665

 

 

 

599

 

Accounts receivable, net

 

 

88,824

 

 

 

82,460

 

Inventory, net

 

 

23,235

 

 

 

25,022

 

Prepaid expenses and other current assets

 

 

6,540

 

 

 

4,969

 

Total current assets

 

 

231,543

 

 

 

226,979

 

Property and equipment, net

 

 

93,292

 

 

 

79,160

 

Intangible assets, net

 

 

23,231

 

 

 

25,673

 

Goodwill

 

 

28,772

 

 

 

28,772

 

Operating lease right-of-use assets, net

 

 

45,860

 

 

 

49,144

 

Deferred tax asset, net

 

 

31,994

 

 

 

31,994

 

Other assets

 

 

1,665

 

 

 

1,537

 

Total assets

 

$

456,357

 

 

$

443,259

 

Liabilities and Stockholders’ Equity

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

Deferred acquisition consideration

 

$

-

 

 

$

1,436

 

Current portion of term loan

 

 

3,596

 

 

 

2,656

 

Finance lease obligations

 

 

-

 

 

 

200

 

Current portion of operating lease obligations

 

 

11,871

 

 

 

11,785

 

Accounts payable

 

 

36,373

 

 

 

29,339

 

Accrued expenses and other current liabilities

 

 

36,390

 

 

 

37,289

 

Total current liabilities

 

 

88,230

 

 

 

82,705

 

Term loan, net of current portion

 

 

68,969

 

 

 

70,769

 

Operating lease obligations, net of current portion

 

 

43,700

 

 

 

46,893

 

Other liabilities

 

 

1,073

 

 

 

1,557

 

Total liabilities

 

 

201,972

 

 

 

201,924

 

Commitments and contingencies (Note 18)

 

 

 

 

 

 

Stockholders’ equity:

 

 

 

 

 

 

Preferred stock, $0.0001 par value; 1,000,000 shares authorized; none issued

 

 

-

 

 

 

-

 

Common stock, $0.0001 par value; 400,000,000 shares authorized; 131,613,917 and 129,408,740 shares issued; 130,885,369 and 128,680,192 shares outstanding at June 30, 2022 and December 31, 2021, respectively.

 

 

13

 

 

 

13

 

Additional paid-in capital

 

 

307,374

 

 

 

302,155

 

Accumulated deficit

 

 

(53,002

)

 

 

(60,833

)

Total stockholders’ equity

 

 

254,385

 

 

 

241,335

 

Total liabilities and stockholders’ equity

 

$

456,357

 

 

$

443,259

 

 

The accompanying notes are an integral part of these unaudited consolidated financial statements.

4


Table of Contents

 

ORGANOGENESIS HOLDINGS INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

(unaudited)

(amounts in thousands, except share and per share data)

 

 

 

 

 

Three Months Ended
June 30,

 

 

Six Months Ended
June 30,

 

 

 

2022

 

 

2021

 

 

2022

 

 

2021

 

Net revenue

 

$

121,401

 

 

$

123,196

 

 

$

218,518

 

 

$

225,748

 

Cost of goods sold

 

 

26,652

 

 

 

29,940

 

 

 

51,732

 

 

 

55,435

 

Gross profit

 

 

94,749

 

 

 

93,256

 

 

 

166,786

 

 

 

170,313

 

Operating expenses:

 

 

 

 

 

 

 

 

 

 

 

 

Selling, general and administrative

 

 

72,609

 

 

 

62,349

 

 

 

136,187

 

 

 

120,581

 

Research and development

 

 

10,205

 

 

 

7,320

 

 

 

18,792

 

 

 

13,529

 

Total operating expenses

 

 

82,814

 

 

 

69,669

 

 

 

154,979

 

 

 

134,110

 

Income from operations

 

 

11,935

 

 

 

23,587

 

 

 

11,807

 

 

 

36,203

 

Other expense, net:

 

 

 

 

 

 

 

 

 

 

 

 

Interest expense

 

 

(730

)

 

 

(2,431

)

 

 

(1,467

)

 

 

(4,901

)

Other expense, net

 

 

(21

)

 

 

18

 

 

 

(24

)

 

 

15

 

Total other expense, net

 

 

(751

)

 

 

(2,413

)

 

 

(1,491

)

 

 

(4,886

)

Net income before income taxes

 

 

11,184

 

 

 

21,174

 

 

 

10,316

 

 

 

31,317

 

Income tax expense

 

 

(2,440

)

 

 

(487

)

 

 

(2,485

)

 

 

(687

)

Net income

 

$

8,744

 

 

$

20,687

 

 

$

7,831

 

 

$

30,630

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income, per share:

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

$

0.07

 

 

$

0.16

 

 

$

0.06

 

 

$

0.24

 

Diluted

 

$

0.07

 

 

$

0.15

 

 

$

0.06

 

 

$

0.23

 

Weighted-average common shares outstanding

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

 

129,635,682

 

 

 

128,235,224

 

 

 

129,214,541

 

 

 

128,053,654

 

Diluted

 

 

132,600,579

 

 

 

133,988,413

 

 

 

132,705,206

 

 

 

133,721,191

 

 

The accompanying notes are an integral part of these unaudited consolidated financial statements.

 

5


Table of Contents

 

ORGANOGENESIS HOLDINGS INC.

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(unaudited)

(amounts in thousands, except share data)

 

 

 

Three and Six Months Ended June 30, 2022

 

 

 

 

 

 

 

 

 

Additional

 

 

 

 

 

 

 

 

 

Common Stock

 

 

Paid-in

 

 

Accumulated

 

 

Total

 

 

 

Shares

 

 

Amount

 

 

Capital

 

 

Deficit

 

 

Stockholders’ Equity

 

Balance as of March 31, 2022 (as reported)

 

 

128,887,184

 

 

$

13

 

 

$

303,261

 

 

$

(60,046

)

 

$

243,228

 

Adjustment due to settlement of GPO fee dispute

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(1,700

)

 

 

(1,700

)

Balance as of March 31, 2022 (as adjusted)

 

 

128,887,184

 

 

 

13

 

 

 

303,261

 

 

 

(61,746

)

 

 

241,528

 

Exercise of stock options

 

 

1,759,776

 

 

 

-

 

 

 

1,751

 

 

 

-

 

 

 

1,751

 

Vesting of RSUs, net of shares surrendered to pay taxes

 

 

34,924

 

 

 

-

 

 

 

(158

)

 

 

-

 

 

 

(158

)

Issuance of common stock associated with business acquisition

 

 

203,485

 

 

 

-

 

 

 

828

 

 

 

-

 

 

 

828

 

Stock-based compensation expense

 

 

-

 

 

 

-

 

 

 

1,692

 

 

 

-

 

 

 

1,692

 

Net income

 

 

-

 

 

 

-

 

 

 

-

 

 

 

8,744

 

 

 

8,744

 

Balance as of June 30, 2022

 

 

130,885,369

 

 

$

13

 

 

$

307,374

 

 

$

(53,002

)

 

$

254,385

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance as of December 31, 2021 (as reported)

 

 

128,680,192

 

 

$

13

 

 

$

302,155

 

 

$

(60,133

)

 

$

242,035

 

Adjustment due to settlement of GPO fee dispute

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(700

)

 

 

(700

)

Balance as of December 31, 2021 (as adjusted)

 

 

128,680,192

 

 

 

13

 

 

 

302,155

 

 

 

(60,833

)

 

 

241,335

 

Exercise of stock options

 

 

1,845,897

 

 

 

-

 

 

 

2,042

 

 

 

-

 

 

 

2,042

 

Vesting of RSUs, net of shares surrendered to pay taxes

 

 

155,795

 

 

 

-

 

 

 

(646

)

 

 

-

 

 

 

(646

)

Issuance of common stock associated with business acquisition

 

 

203,485

 

 

 

-

 

 

 

828

 

 

 

-

 

 

 

828

 

Stock-based compensation expense

 

 

-

 

 

 

-

 

 

 

2,995

 

 

 

-

 

 

 

2,995

 

Net income

 

 

-

 

 

 

-

 

 

 

-

 

 

 

7,831

 

 

 

7,831

 

Balance as of June 30, 2022

 

 

130,885,369

 

 

$

13

 

 

$

307,374

 

 

$

(53,002

)

 

$

254,385

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three and Six Months Ended June 30, 2021

 

 

 

 

 

 

 

 

 

Additional

 

 

 

 

 

 

 

 

 

Common Stock

 

 

Paid-in

 

 

Accumulated

 

 

Total

 

 

 

Shares

 

 

Amount

 

 

Capital

 

 

Deficit

 

 

Stockholders’ Equity

 

Balance as of March 31, 2021

 

 

128,102,255

 

 

$

13

 

 

$

298,095

 

 

$

(145,092

)

 

$

153,016

 

Exercise of stock options

 

 

78,163

 

 

 

-

 

 

 

221

 

 

 

-

 

 

 

221

 

Vesting of RSUs, net of shares surrendered to pay taxes

 

 

102,823

 

 

 

-

 

 

 

(320

)

 

 

-

 

 

 

(320

)

Stock-based compensation expense

 

 

-

 

 

 

-

 

 

 

1,042

 

 

 

-

 

 

 

1,042

 

Net income

 

 

-

 

 

 

-

 

 

 

-

 

 

 

20,687

 

 

 

20,687

 

Balance as of June 30, 2021

 

 

128,283,241

 

 

$

13

 

 

$

299,038

 

 

$

(124,405

)

 

$

174,646

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance as of December 31, 2020

 

 

127,731,833

 

 

 

13

 

 

 

296,830

 

 

 

(155,035

)

 

 

141,808

 

Exercise of stock options

 

 

363,507

 

 

 

-

 

 

 

1,205

 

 

 

-

 

 

 

1,205

 

Vesting of RSUs, net of shares surrendered to pay taxes

 

 

187,901

 

 

 

-

 

 

 

(737

)

 

 

-

 

 

 

(737

)

Stock-based compensation expense

 

 

-

 

 

 

-

 

 

 

1,740

 

 

 

-

 

 

 

1,740

 

Net income

 

 

-

 

 

 

-

 

 

 

-

 

 

 

30,630

 

 

 

30,630

 

Balance as of June 30, 2021

 

 

128,283,241

 

 

$

13

 

 

$

299,038

 

 

$

(124,405

)

 

$

174,646

 

 

The accompanying notes are an integral part of these unaudited consolidated financial statements.

6


Table of Contents

 

ORGANOGENESIS HOLDINGS INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(unaudited)

(amounts in thousands)

 

 

 

Six Months Ended
June 30,

 

 

 

2022

 

 

2021

 

Cash flows from operating activities:

 

 

 

 

 

 

Net income

 

$

7,831

 

 

$

30,630

 

Adjustments to reconcile net income to net cash provided by operating activities:

 

 

 

 

 

 

Depreciation

 

 

2,875

 

 

 

2,073

 

Amortization of intangible assets

 

 

2,442

 

 

 

2,486

 

Amortization of operating lease right-of-use assets

 

 

3,649

 

 

 

2,562

 

Non-cash interest expense

 

 

217

 

 

 

143

 

Deferred interest expense

 

 

291

 

 

 

1,036

 

Provision recorded for doubtful accounts

 

 

122

 

 

 

1,496

 

Loss on disposal of property and equipment

 

 

196

 

 

 

239

 

Adjustment for excess and obsolete inventories

 

 

5,228

 

 

 

4,678

 

Stock-based compensation

 

 

2,995

 

 

 

1,740

 

Change in fair value of Earnout liability

 

 

-

 

 

 

(3,058

)

Changes in operating assets and liabilities:

 

 

 

 

 

 

Accounts receivable

 

 

(6,485

)

 

 

(21,460

)

Inventory

 

 

(3,441

)

 

 

(4,984

)

Prepaid expenses and other current assets

 

 

(1,839

)

 

 

(1,649

)

Operating leases

 

 

(3,472

)

 

 

(2,774

)

Accounts payable

 

 

2,671

 

 

 

716

 

Accrued expenses and other current liabilities

 

 

(1,697

)

 

 

2,646

 

Other liabilities

 

 

23

 

 

 

(340

)

Net cash provided by operating activities

 

 

11,606

 

 

 

16,180

 

Cash flows from investing activities:

 

 

 

 

 

 

Purchases of property and equipment

 

 

(12,840

)

 

 

(9,290

)

Net cash used in investing activities

 

 

(12,840

)

 

 

(9,290

)

Cash flows from financing activities:

 

 

 

 

 

 

Payments of term loan

 

 

(938

)

 

 

-

 

Payments of withholding taxes in connection with RSUs vesting