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 September 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 November 1, 2022 was 130,915,099.

 

 

 

 


Table of Contents

 

Organogenesis Holdings Inc.

Quarterly Report on Form 10-Q

For the Quarterly Period Ended September 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

35

Item 3.

Defaults Upon Senior Securities

35

Item 4.

Mine Safety Disclosures

35

Item 5.

Other Information

35

Item 6.

Exhibits

36

 

 

SIGNATURES

37

 

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)

 

 

 

September 30,

 

 

December 31,

 

 

 

2022

 

 

2021

 

Assets

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

Cash and cash equivalents

 

$

107,250

 

 

$

113,929

 

Restricted cash

 

 

771

 

 

 

599

 

Accounts receivable, net

 

 

93,115

 

 

 

82,460

 

Inventory, net

 

 

24,683

 

 

 

25,022

 

Prepaid expenses and other current assets

 

 

4,707

 

 

 

4,969

 

Total current assets

 

 

230,526

 

 

 

226,979

 

Property and equipment, net

 

 

97,012

 

 

 

79,160

 

Intangible assets, net

 

 

22,010

 

 

 

25,673

 

Goodwill

 

 

28,772

 

 

 

28,772

 

Operating lease right-of-use assets, net

 

 

45,369

 

 

 

49,144

 

Deferred tax asset, net

 

 

31,994

 

 

 

31,994

 

Other assets

 

 

1,589

 

 

 

1,537

 

Total assets

 

$

457,272

 

 

$

443,259

 

Liabilities and Stockholders’ Equity

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

Deferred acquisition consideration

 

$

-

 

 

$

1,436

 

Current portion of term loan

 

 

5,004

 

 

 

2,656

 

Finance lease obligations

 

 

-

 

 

 

200

 

Current portion of operating lease obligations

 

 

12,155

 

 

 

11,785

 

Accounts payable

 

 

37,952

 

 

 

29,339

 

Accrued expenses and other current liabilities

 

 

34,162

 

 

 

37,289

 

Total current liabilities

 

 

89,273

 

 

 

82,705

 

Term loan, net of current portion

 

 

67,600

 

 

 

70,769

 

Operating lease obligations, net of current portion

 

 

42,981

 

 

 

46,893

 

Other liabilities

 

 

1,090

 

 

 

1,557

 

Total liabilities

 

 

200,944

 

 

 

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; 131,643,647 and 129,408,740 shares issued; 130,915,099 and 128,680,192 shares outstanding at September 30, 2022 and December 31, 2021, respectively.

 

 

13

 

 

 

13

 

Additional paid-in capital

 

 

309,102

 

 

 

302,155

 

Accumulated deficit

 

 

(52,787

)

 

 

(60,833

)

Total stockholders’ equity

 

 

256,328

 

 

 

241,335

 

Total liabilities and stockholders’ equity

 

$

457,272

 

 

$

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
September 30,

 

 

Nine Months Ended
September 30,

 

 

 

2022

 

 

2021

 

 

2022

 

 

2021

 

Net revenue

 

$

116,859

 

 

$

113,753

 

 

$

335,377

 

 

$

339,501

 

Cost of goods sold

 

 

26,177

 

 

 

26,167

 

 

 

77,909

 

 

 

81,602

 

Gross profit

 

 

90,682

 

 

 

87,586

 

 

 

257,468

 

 

 

257,899

 

Operating expenses:

 

 

 

 

 

 

 

 

 

 

 

 

Selling, general and administrative

 

 

79,328

 

 

 

62,369

 

 

 

215,515

 

 

 

182,950

 

Research and development

 

 

9,575

 

 

 

8,953

 

 

 

28,367

 

 

 

22,482

 

Total operating expenses

 

 

88,903

 

 

 

71,322

 

 

 

243,882

 

 

 

205,432

 

Income from operations

 

 

1,779

 

 

 

16,264

 

 

 

13,586

 

 

 

52,467

 

Other expense, net:

 

 

 

 

 

 

 

 

 

 

 

 

Interest expense

 

 

(572

)

 

 

(1,482

)

 

 

(2,039

)

 

 

(6,383

)

Loss on extinguishment of debt

 

 

-

 

 

 

(1,883

)

 

 

-

 

 

 

(1,883

)

Other income (expense), net

 

 

5

 

 

 

(19

)

 

 

(19

)

 

 

(4

)

Total other expense, net

 

 

(567

)

 

 

(3,384

)

 

 

(2,058

)

 

 

(8,270

)

Net income before income taxes

 

 

1,212

 

 

 

12,880

 

 

 

11,528

 

 

 

44,197

 

Income tax expense

 

 

(997

)

 

 

(303

)

 

 

(3,482

)

 

 

(990

)

Net income

 

$

215

 

 

$

12,577

 

 

$

8,046

 

 

$

43,207

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income, per share:

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

$

0.00

 

 

$

0.10

 

 

$

0.06

 

 

$

0.34

 

Diluted

 

$

0.00

 

 

$

0.09

 

 

$

0.06

 

 

$

0.32

 

Weighted-average common shares outstanding

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

 

130,903,160

 

 

 

128,546,301

 

 

 

129,784,890

 

 

 

128,219,674

 

Diluted

 

 

132,232,954

 

 

 

133,850,216

 

 

 

132,555,265

 

 

 

133,766,004

 

 

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 Nine Months Ended September 30, 2022

 

 

 

 

 

 

 

 

 

Additional

 

 

 

 

 

 

 

 

 

Common Stock

 

 

Paid-in

 

 

Accumulated

 

 

Total

 

 

 

Shares

 

 

Amount

 

 

Capital

 

 

Deficit

 

 

Stockholders’ Equity

 

Balance as of June 30, 2022

 

 

130,885,369

 

 

 

13

 

 

 

307,374

 

 

 

(53,002

)

 

 

254,385

 

Exercise of stock options

 

 

19,064

 

 

 

-

 

 

 

28

 

 

 

-

 

 

 

28

 

Vesting of RSUs, net of shares surrendered to pay taxes

 

 

10,666

 

 

 

-

 

 

 

(2

)

 

 

-

 

 

 

(2

)

Stock-based compensation expense

 

 

-

 

 

 

-

 

 

 

1,702

 

 

 

-

 

 

 

1,702

 

Net income

 

 

-

 

 

 

-

 

 

 

-

 

 

 

215

 

 

 

215

 

Balance as of September 30, 2022

 

 

130,915,099

 

 

$

13

 

 

$

309,102

 

 

$

(52,787

)

 

$

256,328

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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

 

 

1,864,961

 

 

 

-

 

 

 

2,070

 

 

 

-

 

 

 

2,070

 

Vesting of RSUs, net of shares surrendered to pay taxes

 

 

166,461

 

 

 

-

 

 

 

(648

)

 

 

-

 

 

 

(648

)

Issuance of common stock associated with business acquisition

 

 

203,485

 

 

 

-

 

 

 

828

 

 

 

-

 

 

 

828

 

Stock-based compensation expense

 

 

-

 

 

 

-

 

 

 

4,697

 

 

 

-

 

 

 

4,697

 

Net income

 

 

-

 

 

 

-

 

 

 

-

 

 

 

8,046

 

 

 

8,046

 

Balance as of September 30, 2022

 

 

130,915,099

 

 

$

13

 

 

$

309,102

 

 

$

(52,787

)

 

$

256,328

 

 

 

 

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

Three and Nine Months Ended September 30, 2021

 

 

 

 

 

 

 

 

 

Additional

 

 

 

 

 

 

 

 

 

Common Stock

 

 

Paid-in

 

 

Accumulated

 

 

Total

 

 

 

Shares

 

 

Amount

 

 

Capital

 

 

Deficit

 

 

Stockholders’ Equity

 

Balance as of June 30, 2021

 

 

128,283,241

 

 

$

13

 

 

$

299,038

 

 

$

(124,405

)

 

$

174,646

 

Exercise of stock options

 

 

353,420

 

 

 

-

 

 

 

910

 

 

 

-

 

 

 

910

 

Stock-based compensation expense

 

 

-

 

 

 

-

 

 

 

1,041

 

 

 

-

 

 

 

1,041

 

Net income

 

 

-

 

 

 

-

 

 

 

-

 

 

 

12,577

 

 

 

12,577

 

Balance as of September 30, 2021

 

 

128,636,661

 

 

$

13

 

 

$

300,989

 

 

$

(111,828

)

 

$

189,174

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance as of December 31, 2020

 

 

127,731,833

 

 

 

13

 

 

 

296,830

 

 

 

(155,035

)

 

 

141,808

 

Exercise of stock options

 

 

716,927

 

 

 

-

 

 

 

2,115

 

 

 

-

 

 

 

2,115

 

Vesting of RSUs, net of shares surrendered to pay taxes

 

 

187,901

 

 

 

-

 

 

 

(737

)

 

 

-

 

 

 

(737

)

Stock-based compensation expense

 

 

-

 

 

 

-

 

 

 

2,781

 

 

 

-

 

 

 

2,781

 

Net income

 

 

-

 

 

 

-

 

 

 

-

 

 

 

43,207

 

 

 

43,207

 

Balance as of September 30, 2021

 

 

128,636,661

 

 

$

13

 

 

$

300,989

 

 

$

(111,828

)

 

$

189,174

 

 

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)

 

 

 

Nine Months Ended
September 30,

 

 

 

2022

 

 

2021

 

Cash flows from operating activities:

 

 

 

 

 

 

Net income

 

$

8,046

 

 

$

43,207

 

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

 

 

 

 

 

 

Depreciation

 

 

4,331

 

 

 

4,010

 

Amortization of intangible assets

 

 

3,662

 

 

 

3,726

 

Amortization of operating lease right-of-use assets

 

 

5,483

 

 

 

4,117

 

Non-cash interest expense

 

 

326

 

 

 

236

 

Deferred interest expense

 

 

428

 

 

 

1,331

 

Provision recorded for doubtful accounts

 

 

855

 

 

 

2,367

 

Loss on disposal of property and equipment

 

 

4,412

 

 

 

1,397

 

Adjustment for excess and obsolete inventories

 

 

7,621

 

 

 

8,045

 

Stock-based compensation

 

 

4,697

 

 

 

2,781

 

Change in fair value of Earnout liability

 

 

-

 

 

 

(3,985

)

Loss on extinguishment of debt

 

 

-

 

 

 

1,883

 

Changes in operating assets and liabilities:

 

 

 

 

 

 

Accounts receivable

 

 

(11,510

)

 

 

(20,147

)

Inventory

 

 

(7,282

)

 

 

(9,741

)

Prepaid expenses and other current assets

 

 

1

 

 

 

(98

)

Operating leases

 

 

(5,250