Full Press Release Details
AxoGen, Inc. Reports
2017 Second Quarter Financial Results
Record Q2 Revenue of $15.2 million, representing 46% growth over prior year
ALACHUA, FL August 2, 2017 AxoGen, Inc. (NASDAQ: AXGN), a global leader in developing and marketing innovative surgical solutions for peripheral nerve injuries, today reported financial results and business highlights for the second quarter ended June 30, 2017.
Second Quarter 2017 Financial Results and Recent Business Highlights
Our continued growth reflects our focus on execution, said Karen Zaderej, President and Chief Executive Officer. We are building the peripheral nerve repair market and increasing confidence in our portfolio of products, as illustrated by OMF surgeons' expanding use of our products in nerve repair during mandible reconstruction.
Additional Second Quarter and Recent Operational Highlights
We're pleased with our results through the first half of 2017, added Zaderej. We continue to increase our capabilities across the company, and will continue to develop new nerve repair applications and expand our portfolio of products where we believe we can bring meaningful solutions to current clinical challenges.
2017 Financial Guidance
Management reiterates 2017 annual revenue will grow at least 40% over 2016 revenue and gross margins will remain above 80%.
Members of the AxoGen management team will participate at the following upcoming conferences and events:
The Company is also announcing that it will be conducting its second analyst and investor day on Monday, November 20 in New York City. This event will provide an additional opportunity to educate the investment community about the Company, as well as a more detailed review of our current market and expansion opportunities.
The Company will host a conference call and webcast for the investment community today at 4:30 p.m. ET. Investors interested in participating by phone are invited to call toll free at 1 877 407 0993 or use the direct dial-in number 1 201 689 8795. Those interested in listening to the conference call live via the Internet can do so by visiting the Investors page of the Company's website at www.axogeninc.com and clicking on the webcast link on the Investors home page.
Following the conference call, a replay will be available on the Company's website at www.axogeninc.com under Investors.
AxoGen (AXGN) is a global leader in innovative surgical solutions for peripheral nerve injuries. AxoGen is the only company focused specifically on the science, development and commercialization of technologies for peripheral nerve regeneration and repair. We are passionate about restoring nerve function and quality of life to patients with peripheral nerve injuries by providing innovative, clinically proven and economically effective repair solutions for surgeons and health care providers. Peripheral nerves provide the pathways for both motor and sensory signals throughout the body. Every day, people suffer traumatic injuries or undergo surgical procedures that impact the function of their peripheral nerves. Damage to a peripheral nerve can result in the loss of muscle or organ function, the loss of sensory feeling, or the initiation of pain.
AxoGen's portfolio of products includes Avance Nerve Graft, an off-the-shelf processed human nerve allograft for bridging severed nerves without the comorbidities associated with a second surgical site, AxoGuard Nerve Connector, a porcine submucosa extracellular matrix (ECM) coaptation aid for tensionless repair of severed nerves, AxoGuard Nerve Protector, a porcine submucosa ECM product used to wrap and protect injured peripheral nerves and reinforce the nerve reconstruction while preventing soft tissue attachments, and Avive Soft Tissue Membrane, a minimally processed human umbilical cord membrane that may be used as a resorbable soft tissue covering to separate tissue layers and modulate inflammation in the surgical bed. Along with these core surgical products, AxoGen also offers AcroVal Neurosensory & Motor Testing System and AxoTouch Two-Point Discriminator. These evaluation and measurement tools assist health care professionals in detecting changes in sensation, assessing return of sensory, grip, and pinch function, evaluating effective treatment interventions, and providing feedback to patients on nerve function. The AxoGen portfolio of products is available in the United States, Canada, the United Kingdom, and several other European and international countries.
Cautionary Statements Concerning Forward-Looking Statements
This Press Release contains "forward-looking" statements as defined in the Private Securities Litigation Reform Act of 1995. These statements are based on management's current expectations or predictions of future conditions, events, or results based on various assumptions and management's estimates of trends and economic factors in the markets in which we are active, as well as our business plans. Words such as "expects," "anticipates," "intends," "plans," "believes," "seeks," "estimates," "projects," "forecasts," "continue," "may," "should," "will," and variations of such words and similar expressions are intended to identify such forward-looking statements. The forward-looking statements may include, without limitation, statements regarding our assessment on our internal control over financial reporting, our growth, our 2017 guidance, product development, product potential, financial performance, sales growth, product adoption, market awareness of our products, data validation, our visibility at and sponsorship of conferences and educational events. The forward-looking statements are subject to risks and uncertainties, which may cause results to differ materially from those set forth in the statements. Forward-looking statements in this release should be evaluated together with the many uncertainties that affect AxoGen's business and its market, particularly those discussed in the risk factors and cautionary statements in AxoGen's filings with the Securities and Exchange Commission. Forward-looking statements are not guarantees of future performance, and actual results may differ materially from those projected. The forward-looking statements are representative only as of the date they are made and, except as required by law, AxoGen assumes no responsibility to update any forward-looking statements, whether as a result of new information, future events, or otherwise.
About Non-GAAP Financial Measures
To supplement our consolidated financial statements, we use the non-GAAP financial measures of EBITDA, which measures earnings before interest, income taxes, depreciation and amortization, and Adjusted EBITDA which further excludes non-cash stock compensation expense. These non-GAAP measures are not based on any comprehensive set of accounting rules or principles and should not be considered a substitute for, or superior to, financial measures calculated in accordance with GAAP, and may be different from non-GAAP measures used by other companies. In addition, these non-GAAP measures should be read in conjunction with our financial statements prepared in accordance with GAAP. The reconciliations of AxoGen's GAAP financial measures to the corresponding non-GAAP measures should be carefully evaluated.
We use these non-GAAP financial measures for financial and operational decision-making and as a means to evaluate period-to-period comparisons. We believe that these non-GAAP financial measures provide
meaningful supplemental information regarding our performance and liquidity and that both management and investors benefit from referring these non-GAAP financial measures in assessing our performance and when planning, forecasting, and analyzing future periods. We believe these non-GAAP financial measures are useful to investors because (1) they allow for greater transparency with respect to key metrics used by management in its financial and operational decision-making and (2) they are used by our institutional investors and the analyst community to help them analyze the performance of our business.
| Contacts: |
| AxoGen, Inc. |
| Peter J. Mariani, Chief Financial Officer |
| InvestorRelations@AxoGenInc.com |
| The Trout Group Investor Relations |
| Brian Korb |
| 646.378.2923 |
| bkorb@troutgroup.com |
CONDENSED CONSOLIDATED BALANCE SHEETS
| June 30, | ||||||
| 2017 | December 31, | |||||
| (unaudited) | 2016 | |||||
| Assets | ||||||
| Current assets: | ||||||
| Cash and cash equivalents | $ | 23,870,200 | $ | 30,014,405 | ||
| Accounts receivable, net | 9,422,467 | 8,052,203 | ||||
| Inventory | 6,304,097 | 5,458,840 | ||||
| Prepaid expenses and other | 585,090 | 511,804 | ||||
| Total current assets | 40,181,854 | 44,037,252 | ||||
| Property and equipment, net | 1,643,257 | 1,494,247 | ||||
| Intangible assets | 940,594 | 828,979 | ||||
| $ | 42,765,705 | $ | 46,360,478 | |||
| Liabilities and Shareholders' Equity (Deficit) | ||||||
| Current liabilities: | ||||||
| Borrowings under revolving loan agreement | $ | 3,829,765 | $ | 4,025,023 | ||
| Accounts payable and accrued expenses | 7,057,831 | 7,002,165 | ||||
| Current maturities of long term obligations | 24,947 | 20,899 | ||||
| Deferred revenue, current | 39,399 | 33,282 | ||||
| Total current liabilities | 10,951,942 | 11,081,369 | ||||
| Long Term Obligations, net of current maturities and deferred financing fees | 20,314,254 | 20,265,745 | ||||
| Deferred lease | 109,332 | -- | ||||
| Deferred revenue | 81,423 | 92,215 | ||||
| Total liabilities | 31,456,951 | 31,439,329 | ||||
| Shareholders' equity (deficit): | ||||||
| Common stock, $.01 par value; 50,000,000 shares authorized; 33,184,710 and 33,008,865 shares issued and outstanding | 331,847 | 330,088 | ||||
| Additional paid-in capital | 134,682,934 | 132,474,884 | ||||
| Accumulated deficit | (123,706,027) | (117,883,823) | ||||
| Total shareholders' equity | 11,308,754 | 14,921,149 | ||||
| $ | 42,765,705 | $ | 46,360,478 |
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
Three and Six Months ended June 30, 2017 and 2016
| Three Months Ended | Six Months Ended | |||||||||||
| June 30, | June 30, | June 30, | June 30, | |||||||||
| 2017 | 2016 | 2017 | 2016 | |||||||||
| Revenues | $ | 15,168,064 | $ | 10,381,883 | $ | 27,409,137 | $ | 18,493,642 | ||||
| Cost of goods sold | 2,277,201 | 1,534,412 | 4,192,849 | 2,940,003 | ||||||||
| Gross profit | 12,890,863 | 8,847,471 | 23,216,288 | 15,553,639 | ||||||||
| Costs and expenses: | ||||||||||||
| Sales and marketing | 9,438,288 | 6,780,363 | 18,048,770 | 12,986,238 | ||||||||
| Research and development | 1,521,123 | 936,823 | 2,932,259 | 1,915,163 | ||||||||
| General and administrative | 3,377,105 | 2,736,255 | 6,881,144 | 4,881,012 | ||||||||
| Total costs and expenses | 14,336,516 | 10,453,441 | 27,862,173 | 19,782,413 | ||||||||
| Loss from operations | (1,445,653) | (1,605,970) | (4,645,885) | (4,228,774) | ||||||||
| Other expense: | ||||||||||||
| Interest expense | (554,384) | (1,163,413) | (1,061,933) | (2,166,440) | ||||||||
| Interest expense deferred financing costs | (46,110) | (32,696) | (90,601) | (63,506) | ||||||||
| Other expense | (14,032) | (617) | (23,785) | (20,067) | ||||||||
| Total other expense | (614,526) | (1,196,726) | (1,176,319) | (2,250,013) | ||||||||
| Net loss | $ | (2,060,179) | $ | (2,802,696) | $ | (5,822,204) | $ | (6,478,787) | ||||
| Weighted Average Common Shares outstanding basic and diluted | 33,124,139 | 30,079,960 | 33,075,555 | 30,037,013 | ||||||||
| Loss Per Common share basic and diluted | $ | (0.06) | $ | (0.09) | $ | (0.18) | $ | (0.22) |
RECONCILIATION OF GAAP FINANCIAL MEASURES TO NON-GAAP FINANCIAL MEASURES
Three and Six Months ended June 30, 2017 and 2016
| Three Months Ended | Six Months Ended | |||||||||||
| June 30, | June 30, | June 30, | June 30, | |||||||||
| 2017 | 2016 | 2017 | 2016 | |||||||||
| Net loss | $ | (2,060,179) | $ | (2,802,696) | $ | (5,822,204) | $ | (6,478,787) | ||||
| Depreciation and amortization expense | 109,517 | 88,734 | 217,876 | 167,590 | ||||||||
| Amortization expense of intangible assets | 18,517 | 16,017 | 41,706 | 32,033 | ||||||||
| Income Taxes | 14,173 | -- | 23,974 | 21,427 | ||||||||
| Interest expense | 554,384 | 1,163,413 | 1,061,933 | 2,166,440 | ||||||||
| Interest expense - deferred financing costs | 46,110 | 32,696 | 90,601 | 63,506 | ||||||||
| EBITDA - non GAAP | $ | (1,317,478) | $ | (1,501,836) | $ | (4,386,114) | $ | (4,027,791) | ||||
| Non Cash Stock Compensation Expense | 724,377 | 569,834 | 1,572,966 | 752,789 | ||||||||
| Adjusted EBITDA - non GAAP | $ | (593,101) | $ | (932,002) | $ | (2,813,148) | $ | (3,275,002) |
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
Six Months ended June 30, 2017 and 2016
| 2017 | 2016 | |||||
| Cash flows from operating activities: | ||||||
| Net loss | $ | (5,822,204) | $ | (6,478,787) | ||
| Adjustments to reconcile net loss to net cash used for operating activities: | ||||||
| Depreciation | 217,876 | 167,590 | ||||
| Amortization of intangible assets | 41,706 | 32,033 | ||||
| Amortization of deferred financing costs | 90,601 | 63,506 | ||||
| Provision for bad debt | 99,834 | 48,600 | ||||
| Share-based compensation | 1,572,966 | 752,789 | ||||
| Interest added to note payable | -- | 187,002 | ||||
| Change in assets and liabilities: | ||||||
| Accounts receivable | (1,470,098) | (1,337,732) | ||||
| Inventory | (845,257) | (852,362) | ||||
| Prepaid expenses and other | (73,286) | (190,586) | ||||
| Accounts payable and accrued expenses | 55,666 | 198,707 | ||||
| Deferred liabilities | 104,657 | 3,684 | ||||
| Net cash used for operating activities | (6,027,539) | (7,405,556) | ||||
| Cash flows from investing activities: | ||||||
| Purchase of property and equipment | (366,886) | (456,910) | ||||
| Acquisition of intangible assets | (153,321) | (97,341) | ||||
| Net cash used for investing activities | (520,207) | (554,251) | ||||
| Cash flows from financing activities: | ||||||
| Borrowing on revolving loan | 26,119,539 | -- | ||||
| Payments on revolving loan | (26,314,797) | -- | ||||
| Repayments of long term debt | (8,572) | -- | ||||
| Debt issuance costs | (29,472) | -- | ||||
| Proceeds from exercise of stock options | 636,843 | 323,510 | ||||
| Net cash provided by financing activities | 403,541 | 323,510 | ||||
| Net decrease in cash and cash equivalents | (6,144,205) | (7,636,297) | ||||
| Cash and cash equivalents, beginning of year | 30,014,405 | 25,909,500 | ||||
| Cash and cash equivalents, end of period | $ | 23,870,200 | $ | 18,273,203 | ||
| Supplemental disclosures of cash flow activity: | ||||||
| Cash paid for interest | $ | 1,058,599 | $ | 1,964,256 |