Full Press Release Details
Organogenesis Holdings Inc. Reports Third Quarter and Nine Months 2020 Financial Results
CANTON, Mass. (November 9, 2020) Organogenesis Holdings Inc. (Nasdaq: ORGO), a leading regenerative medicine company focused on the development,
manufacture, and commercialization of product solutions for the Advanced Wound Care and Surgical & Sports Medicine markets, today reported financial results for the three and nine months ended September 30, 2020.
Third Quarter 2020 Financial Results Summary:
Third Quarter 2020 Highlights:
We delivered third quarter revenue growth of 57% year-over-year, which was well ahead of expectations and exceeded the
high-end of our preliminary revenue range announced on October 14th, said Gary S. Gillheeney, Sr., President and Chief Executive Officer of
Organogenesis. During the third quarter, we grew our customer base, drove customer and clinician adoption deeper into existing accounts and leveraged the strong demand for our PuraPly and amniotic products, particularly in the office channel.
The strong execution against our commercial strategy during the third quarter drove not only strong revenue growth, but also, significant improvement in our profitability as well. We also made a strategic acquisition of CPN Biosciences which we
expect will significantly enhance our ability to drive growth in the office channel. CPN s physician office management solution and complementary first-in-line
advanced wound care products further broaden Organogenesis physician offering and accelerates our office strategy.
Mr. Gillheeney, Sr. continued: Despite the challenging operating environment caused by the COVID-19 pandemic, we believe the fundamentals of our business and strategy remain strong and that we are well positioned to deliver strong operating and financial performance over the balance of 2020. We are proud
of Organogenesis resilience in the face of unprecedented challenges, and believe it is a direct result of our team s hard work and commitment to delivering on our mission to provide integrated healing solutions that substantially improve
medical outcomes while lowering the overall cost of care.
Net Revenue Summary:
The following table sets forth net revenue by product grouping for the three months ended September 30, 2020 and September 30, 2019, respectively:
| Three Months Ended September 30, | Change | |||||||||||||||
| 2020 | 2019 | $ | % | |||||||||||||
| (in thousands, except for percentages) | ||||||||||||||||
| Advanced Wound Care | $ | 89,990 | $ | 54,310 | $ | 35,680 | 66 | % | ||||||||
| Surgical & Sports Medicine | 10,809 | 9,955 | 854 | 9 | % | |||||||||||
| Net revenue | $ | 100,799 | $ | 64,265 | $ | 36,534 | 57 | % |
Third Quarter 2020 Results:
Net revenue for the third quarter of 2020 was $100.8 million, compared to $64.3 million for the third quarter of 2019, an increase of
$36.5 million, or 57%. The increase in net revenue was driven by a $35.7 million increase, or 66%, in net revenue of Advanced Wound Care products and a $0.9 million increase, or 9%, in net revenue of Surgical & Sports
Medicine products, compared to the third quarter of 2019. The increase in Advanced Wound Care net revenue was primarily attributable to the expanded sales force, increased sales to existing and new customers and increased adoption of our amniotic
product portfolio, including our Affinity product. The increase in Surgical & Sports Medicine net revenue was primarily attributable to the expanded sales force and penetration of existing and new customer accounts, partially offset by
postponement or cancellation of medical procedures as a result of COVID-19. Net revenue from the sale of PuraPly products for the third quarter of 2020 was $40.9 million, compared to $31.8 million
for the third quarter of 2019, an increase of $9.2 million, or 29%. Net revenue from the sale of PuraPly products represented approximately 41% of net revenue in the third quarter of 2020, as compared to 49% of net revenue in the third quarter
Gross profit for the third quarter of 2020 was $77.8 million, or 77% of net revenue, compared to $45.1 million, or 70% of net revenue,
for the third quarter of 2019, an increase of $32.7 million, or 72%. The increase in gross profit resulted primarily from increased sales volume due to the strength in our Advanced Wound Care and Surgical & Sports Medicine products as
well as a shift in product mix to our higher gross margin products.
Operating expenses for the third quarter of 2020 were $54.9 million, compared to $53.4 million for
the third quarter of 2019, an increase of $1.5 million, or 3%. R&D expense was $3.7 million for the third quarter of 2020, compared to $3.9 million in the third quarter of 2019, a decrease of $0.2 million, or 5%. The decrease
was primarily due to delayed enrollment in trials and limited clinical spending due to the COVID-19. Selling, general and administrative expenses were $51.1 million, compared to $49.5 million in the
third quarter of 2019, an increase of $1.7 million, or 3%. The increase in selling, general and administrative expenses was primarily due to a $6.4 million increase related to additional headcount, primarily in our direct sales force and
increased sales commissions due to increased sales, a $0.6 million increase in other selling expenses, including credit card processing fees and royalties. These increases were partially offset by a $3.3 million decrease related to reduced
travel and marketing programs amid travel restrictions in place due to the COVID-19, a $0.6 million decrease in amortization associated with intangible assets amortized using an accelerated method, a
$0.6 million decrease in legal, consulting fees and other costs associated with the ongoing operations of our business and a $0.8 million decrease in bad debt primarily due to the collection of the previously reserved related party
Operating income for the third quarter of 2020 was $23.0 million, compared to an operating loss of $8.3 million for the third
quarter of 2019, an increase of $31.2 million, primarily due to higher revenue and gross profit compared to the prior year period.
expenses, net, for the third quarter of 2020 were $2.0 million, compared to $2.4 million for the third quarter of 2019, a decrease of $0.5 million, or 19%. The decrease is primarily due to a $1.0 million decrease in legal
accruals related to the settlement of the assumed legacy lawsuit from the sellers of NuTech Medical in October 2020. We assumed the legacy lawsuit as part of the resolution of the deferred acquisition consideration dispute with the sellers of NuTech
Medical in February 2020. The decrease in total other expenses, net, was partially offset by a $0.5 million or 22% increase in interest expense resulting from the increased borrowings under the 2019 Credit Agreement.
Net income for the third quarter of 2020 was $20.9 million, or $0.19 per share, compared to a net loss of $10.7 million, or $0.12 per share, for the
third quarter of 2019, an increase of $31.7 million.
As of September 30, 2020, the Company had $36.5 million in cash and
$114.7 million in debt obligations, of which $15.7 million were capital lease obligations, compared to $60.2 million in cash and $100.6 million in debt obligations, of which $17.5 million were capital lease obligations as of
First Nine Months 2020 Results:
The following table sets forth net revenue by product grouping for the nine months ended September 30, 2020 and September 30, 2019, respectively:
| Nine Months Ended September 30, | Change | |||||||||||||||
| 2020 | 2019 | $ | % | |||||||||||||
| (in thousands, except for percentages) | ||||||||||||||||
| Advanced Wound Care | $ | 201,009 | $ | 157,365 | $ | 43,644 | 28 | % | ||||||||
| Surgical & Sports Medicine | 30,482 | 28,971 | 1,511 | 5 | % | |||||||||||
| Net revenue | $ | 231,491 | $ | 186,336 | $ | 45,155 | 24 | % |
Net revenue for the nine months ended September 30, 2020 was $231.5 million, compared to
$186.3 million for the first nine months of 2019, an increase of $45.2 million, or 24%. The increase in net revenue was driven by a $43.6 million increase, or 28%, in net revenue of Advanced Wound Care products and a $1.5 million
increase, or 5%, in net revenue of Surgical & Sports Medicine products compared to the prior year. Net revenue of PuraPly products for the nine months ended September 30, 2020 were $102.0 million, compared to $86.9 million
for the first nine months of 2019, an increase of $15.1 million, or 17%. Net revenue of PuraPly products represented approximately 44% of net revenue for the nine months ended September 30, 2020, compared to 47% for the first nine months
Gross profit for the nine months ended September 30, 2020 was $169.7 million or 73% of net revenue, compared to $130.8 million,
or 70% of net revenue, for the first nine months of 2019, an increase of $38.9 million, or 30%. The increase in gross profit resulted primarily from increased sales volume due to the strength in our Advanced Wound Care and Surgical &
Sports Medicine products as well as a shift in product mix to our higher gross margin products.
Operating expenses for the nine months ended
September 30, 2020 were $164.0 million, compared to $158.5 million for the first nine months of 2019, an increase of $5.6 million, or 4%. The increase in operating expenses in 2020 was driven primarily by higher selling, general
and administrative expenses which increased to $150.3 million, compared to $147.3 million for the first nine months of 2019, an increase of $2.9 million, or 2% and, to a lesser extent, higher R&D expense which was
$13.8 million, compared to $11.2 million for the first nine months of 2019, an increase of $2.6 million, or 24%. The increase in selling, general and administrative expenses was primarily due to a $10.5 million increase related
to additional headcount, primarily in our direct sales force and increased sales commissions due to increased sales, a $2.0 million cancellation fee for certain product development and consulting agreements, and a $0.9 million increase in
credit card processing fees due to increased collection. These increases were partially offset by a $6.4 million decrease related to reduced travel and marketing programs amid travel restrictions in place due to the COVID-19, a $1.4 million decrease in legal, consulting fees and other costs associated with the ongoing operations of our business, a $2.0 decrease in amortization associated with the intangible assets
amortized using an accelerated method and a $0.8 million decrease in bad debt primarily due to the collection of the previously reserved related party receivables. The increase in research and development expenses was primarily due to an
increase in process development costs associated with a new contract manufacturer, increased headcount associated with our existing Advanced Wound Care and Surgical & Sports Medicine products, an increase in product costs associated with
our pipeline products not yet commercialized and an increase in costs to move products through the regulatory pathway (e.g., seek BLA approval). The increase was partially offset by a decrease due to delayed enrollment in trials and limited clinical
spending due to the COVID-19.
Operating income for the nine months ended September 30, 2020 was
$5.6 million, compared to an operating loss of $27.7 million for the first nine months of 2019, an increase of $33.3 million.
expenses for the nine months ended September 30, 2020 were $6.1 million, compared to $8.2 million for the first nine months of 2019, a decrease of $2.2 million, or 27%. The decrease in total other expenses for the nine months
ended September 30, 2020 was driven primarily by a gain of $2.2 million on the settlement of deferred acquisition consideration for the nine months ended September 30, 2020, and a $1.9 million
non-cash loss on the extinguishment of debt related to the write-off of unamortized debt discount upon repayment of the master lease agreement as well as early payment
penalties for the nine months ended September 2019, which did not impact results in the current period. The decrease in total other expenses for the nine months ended September 30, 2020 was partially offset by an increase in interest expense of
$2.0 million related to increased borrowings compared to the prior year period.
Net loss for the nine months ended September 30, 2020 was $0.5 million, or $0.01 per share,
compared to a net loss of $36.1 million, or $0.40 per share, for the first nine months of 2019.
Fiscal Year 2020 Financial Guidance:
The Company is reaffirming the financial guidance provided on October 14, 2020. For the twelve months ending December 31, 2020, the
Company continues to expect:
Third Quarter 2020 Earnings Conference Call:
Financial results for the third fiscal quarter of 2020 will be reported after the market closes on Monday, November 9, 2020. Management will host a
conference call at 5:00 p.m. Eastern Time on November 9 to discuss the results of the quarter and provide a corporate update with a question and answer session. Those who would like to participate may dial 866-795-3142 (409-937-8908 for international callers) and provide access code 9668716. A live webcast of the call will also be
provided on the investor relations section of the Company s website at investors.organogenesis.com.
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 9668716. The webcast will be archived at investors.organogenesis.com.
ORGANOGENESIS HOLDINGS INC.
CONSOLIDATED BALANCE SHEETS
thousands, except share and per share data)
| September 30, 2020 | December 31, 2019 | |||||||
| Assets | ||||||||
| Current assets: | ||||||||
| Cash | $ | 36,512 | $ | 60,174 | ||||
| Restricted cash | 374 | 196 | ||||||
| Accounts receivable, net | 56,915 | 39,359 | ||||||
| Inventory | 29,882 | 22,918 | ||||||
| Prepaid expenses and other current assets | 5,327 | 2,953 | ||||||
| Total current assets | 129,010 | 125,600 | ||||||
| Property and equipment, net | 55,937 | 47,184 | ||||||
| Notes receivable from related parties | 556 | |||||||
| Intangible assets, net | 31,849 | 20,797 | ||||||
| Goodwill | 28,916 | 25,539 | ||||||
| Deferred tax asset | 16 | 127 | ||||||
| Other assets | 700 | 884 | ||||||
| Total assets | $ | 246,428 | $ | 220,687 | ||||
| Liabilities and Stockholders Equity | ||||||||
| Current liabilities: | ||||||||
| Deferred acquisition consideration | $ | 966 | $ | 5,000 | ||||
| Current portion of term loan | 11,667 | |||||||
| Current portion of capital lease obligations | 3,473 | 3,057 | ||||||
| Accounts payable | 24,007 | 28,387 | ||||||
| Accrued expenses and other current liabilities | 26,132 | 23,450 | ||||||
| Total current liabilities | 66,245 | 59,894 | ||||||
| Line of credit | 39,353 | 33,484 | ||||||
| Term loan, net of current portion | 47,999 | 49,634 | ||||||
| Deferred acquisition consideration, net of current portion | 1,436 | |||||||
| Earnout liability | 3,782 | |||||||
| Deferred rent | 1,098 | 1,012 | ||||||
| Capital lease obligations, net of current portion | 12,239 | 14,431 | ||||||
| Other liabilities | 8,802 | 6,649 | ||||||
| Total liabilities | 180,954 | 165,104 | ||||||
| Commitments and contingencies (Note 13) | ||||||||
| Stockholders equity: | ||||||||
| Common stock, $0.0001 par value; 400,000,000 shares authorized; 108,185,702 and 105,599,434 shares issued; 107,457,154 and 104,870,886 shares outstanding at September 30, 2020 and December 31, 2019, respectively | 11 | 10 | ||||||
| Additional paid-in capital | 237,015 | 226,580 | ||||||
| Accumulated deficit | (171,552 | ) | (171,007 | ) | ||||
| Total stockholders equity | 65,474 | 55,583 | ||||||
| Total liabilities and stockholders equity | $ | 246,428 | $ | 220,687 |
ORGANOGENESIS HOLDINGS INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
thousands, except share and per share data)
| Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||
| 2020 | 2019 | 2020 | 2019 | |||||||||||||
| Net revenue | $ | 100,799 | $ | 64,265 | $ | 231,491 | $ | 186,336 | ||||||||
| Cost of goods sold | 22,964 | 19,131 | 61,799 | 55,557 | ||||||||||||
| Gross profit | 77,835 | 45,134 | 169,692 | 130,779 | ||||||||||||
| Operating expenses: | ||||||||||||||||
| Selling, general and administrative | 51,146 | 49,475 | 150,261 | 147,325 | ||||||||||||
| Research and development | 3,709 | 3,924 | 13,787 | 11,159 | ||||||||||||
| Total operating expenses | 54,855 | 53,399 | 164,048 | 158,484 | ||||||||||||
| Income (loss) from operations | 22,980 | (8,265 | ) | 5,644 | (27,705 | ) | ||||||||||
| Other expense, net: | ||||||||||||||||
| Interest expense, net | (2,969 | ) | (2,427 | ) | (8,391 | ) | (6,392 | ) | ||||||||
| Loss on the extinguishment of debt | (1,862 | ) | ||||||||||||||
| Gain on settlement of deferred acquisition consideration | 951 | 2,246 | ||||||||||||||
| Other income (expense), net | 44 | (1 | ) | 90 | 11 | |||||||||||
| Total other expense, net | (1,974 | ) | (2,428 | ) | (6,055 | ) | (8,243 | ) | ||||||||
| Net income (loss) before income taxes | 21,006 | (10,693 | ) | (411 | ) | (35,948 | ) | |||||||||
| Income tax expense | (72 | ) | (48 | ) | (134 | ) | (108 | ) | ||||||||
| Net income (loss) | 20,934 | (10,741 | ) | (545 | ) | (36,056 | ) | |||||||||
| Non-cash deemed dividend to warrant holders | (645 | ) | (645 | ) | ||||||||||||
| Net income (loss) attributed to common shareholders | $ | 20,934 | $ | (11,386 | ) | $ | (545 | ) | $ | (36,701 | ) | |||||
| Net income (loss) attributed to common shareholders, per share: | ||||||||||||||||
| Basic | $ | 0.20 | $ | (0.12 | ) | $ | (0.01 | ) | $ | (0.40 | ) | |||||
| Diluted | $ | 0.19 | $ | (0.12 | ) | $ | (0.01 | ) | $ | (0.40 | ) | |||||
| Weighted-average common shares outstanding basic and diluted | ||||||||||||||||
| Basic | 105,040,035 | 92,276,858 | 104,748,297 | 91,182,233 | ||||||||||||
| Diluted | 108,489,768 | 92,276,858 | 104,748,297 | 91,182,233 |
EBITDA and Adjusted EBITDA
Our management uses financial measures that are not in accordance with generally accepted accounting principles in the United States, or GAAP,
in addition to financial measures in accordance with GAAP to evaluate our operating results. These non-GAAP financial measures should be considered supplemental to, and not a substitute for, our
reported financial results prepared in accordance with GAAP. Our management uses Adjusted EBITDA to evaluate our operating performance and trends and make planning decisions. Our management believes Adjusted EBITDA helps identify underlying trends
in our business that could otherwise be masked by the effect of the items that we exclude. Accordingly, we believe that Adjusted EBITDA provides useful information to investors and others in understanding and evaluating our operating results,
enhancing the overall understanding of our past performance and future prospects, and allowing for greater transparency with respect to key financial metrics used by our management in its financial and operational decision-making.
The following is a reconciliation of GAAP net income (loss) to non-GAAP EBITDA and non-GAAP Adjusted EBITDA for each of the periods presented:
| Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||
| 2020 | 2019 | 2020 | 2019 | |||||||||||||
| (in thousands) | (in thousands) | |||||||||||||||
| Net income (loss) | $ | 20,934 | $ | (10,741 | ) | $ | (545 | ) | $ | (36,056 | ) | |||||
| Interest expense, net | 2,969 | 2,427 | 8,391 | 6,392 | ||||||||||||
| Income tax expense | 72 | 48 | 134 | 108 | ||||||||||||
| Depreciation | 956 | 792 | 2,749 | 2,553 | ||||||||||||
| Amortization | 885 | 1,529 | 2,518 | 4,526 | ||||||||||||
| EBITDA | 25,816 | (5,945 | ) | 13,247 | (22,477 | ) | ||||||||||
| Stock-based compensation expense | 486 | 242 | 1,164 | 700 | ||||||||||||
| Gain on settlement of deferred acquisition consideration (1) | (951 | ) | (2,246 | ) | ||||||||||||
| Loss on extinguishment of debt (2) | 1,862 | |||||||||||||||
| Exchange offer transaction costs (3) | 916 | 916 | ||||||||||||||
| Recovery of certain notes receivable from related parties (4) | (1,111 | ) | (1,111 | ) | ||||||||||||
| Other costs and expenses (5) | 361 | 929 | ||||||||||||||
| Adjusted EBITDA | $ | 24,601 | $ | (4,787 | ) | $ | 11,983 | $ | (18,999 | ) |
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