Organogenesis Holdings Inc. Reports Third Quarter and Nine Months 2020 Financial Results
Organogenesis Holdings Inc. (Nasdaq: ORGO) reported Q3 2020 net revenue of $100.8 million, up 57% from $64.3 million in Q3 2019, driven by a 66% increase in Advanced Wound Care products. The company achieved a net income of $20.9 million, a turnaround from a loss of $10.7 million in the prior year. Adjusted EBITDA was $24.6 million. Despite the COVID-19 pandemic, the company reaffirmed its 2020 financial guidance with expected revenues between $311 million and $314 million, representing a 20% year-over-year growth.
- Q3 2020 net revenue increased by 57% year-over-year.
- Net income of $20.9 million in Q3 2020 compared to a net loss in Q3 2019.
- Adjusted EBITDA improved to $24.6 million from a loss in Q3 2019.
- Strong growth in Advanced Wound Care products sales, contributing to overall revenue increase.
- Reaffirmed 2020 financial guidance with expected revenue growth of approximately 20%.
- Increased operating expenses of $54.9 million in Q3 2020, up 3% from the previous year.
- Surgical & Sports Medicine products showed only a 9% revenue increase, indicating slower growth.
CANTON, Mass., Nov. 09, 2020 (GLOBE NEWSWIRE) -- 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:
- Net revenue of
$100.8 million for the third quarter of 2020, up57% compared to net revenue of$64.3 million for the third quarter of 2019. Net revenue is based upon:- Net revenue from Advanced Wound Care products for the third quarter of 2020 of
$90.0 million , an increase of66% from the third quarter of 2019. - Net revenue from Surgical & Sports Medicine products for the third quarter of 2020 of
$10.8 million , an increase of9% from the third quarter of 2019.
- Net revenue from Advanced Wound Care products for the third quarter of 2020 of
- Net revenue from the sale of PuraPly products of
$40.9 million for the third quarter of 2020, an increase of29% from the third quarter of 2019. - Net revenue from the sale of non-PuraPly products of
$59.9 million , an increase of84% from the third quarter of 2019. - Net income of
$20.9 million for the third quarter of 2020, compared to a net loss of$10.7 million for the third quarter of 2019, an increase of$31.7 million . - Adjusted EBITDA of
$24.6 million for the third quarter of 2020, compared to Adjusted EBITDA loss of$4.8 million for the third quarter of 2019, an increase of$29.4 million .
Third Quarter 2020 Highlights:
- 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.
- On August 24, 2020, the Company announced the appointment of Henry Hagopian, the Company’s Vice President of Finance and Treasurer, as interim Chief Financial Officer. The Company initiated a national search process to identify a permanent CFO.
- On September 17, 2020, Organogenesis Holdings Inc. acquired CPN Biosciences for aggregate consideration of
$19.0 million in cash and common stock. The acquisition of CPN Biosciences did not materially impact revenue for the three months ended September 30, 2020.
“We delivered third quarter revenue growth of
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
Gross profit for the third quarter of 2020 was
Operating expenses for the third quarter of 2020 were
Operating income for the third quarter of 2020 was
Total other expenses, net, for the third quarter of 2020 were
Net income for the third quarter of 2020 was
As of September 30, 2020, the Company had
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
Gross profit for the nine months ended September 30, 2020 was
Operating expenses for the nine months ended September 30, 2020 were
Operating income for the nine months ended September 30, 2020 was
Total other expenses for the nine months ended September 30, 2020 were
Net loss for the nine months ended September 30, 2020 was
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:
- Net revenue of between
$311 million and$314 million , representing growth of approximately19% to20% year-over-year, as compared to net revenue of$261 million for the twelve months ended December 31, 2019. - The 2020 net revenue guidance range assumes:
- Net revenue from Advanced Wound Care products of between
$273 million and$275 million , representing growth of approximately24% to25% year-over-year as compared to net revenue of$221 million for the twelve months ended December 31, 2019. - Net revenue from Surgical & Sports Medicine products of between
$38 million and$39 million , representing a decrease of approximately3% to6% year-over-year as compared to net revenue of$40 million for the twelve months ended December 31, 2019. - Net revenue from the sale of PuraPly products of between
$119 million and$121 million , representing a decrease of approximately5% to6% year-over-year, as compared to net revenue of$127 million for the twelve months ended December 31, 2019.
- Net revenue from Advanced Wound Care products of between
- The Company expects to report positive GAAP net income and positive Adjusted EBITDA for the three months ended December 31, 2020.
- The Company expects to report positive GAAP net income and positive Adjusted EBITDA for the full fiscal year 2020 period.
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 | ||||||||
| (unaudited) | ||||||||
| (amounts in thousands, except share and per share data) | ||||||||
| September 30, | December 31, | |||||||
| 2020 | 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, 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 | ||||||||||||||||
| (unaudited) | ||||||||||||||||
| (amounts in 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 | ) | ||||||
| ____________________________ | |
| (1) | The amounts reflect the gain recognized related to the settlement of the deferred acquisition consideration dispute with the sellers of NuTech Medical in February 2020 as well as the settlement of the assumed legacy lawsuit from the sellers of NuTech Medical in October 2020. |
| (2) | The amount reflects the loss recognized on the extinguishment of the Master Lease Agreement upon repayment. |
| (3) | The amount reflects legal, advisory and other professional fees incurred in the quarter ended September 30, 2019 related directly to the warrant exchange transactions in August 2019. |
| (4) | The amount reflects the collection of certain notes receivable from related parties previously reserved. |
| (5) | The amounts reflect the legal, advisory and other professional fees incurred in the three and nine months ended September 30, 2020 related directly to the CPN acquisition. |
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 October 1, 2020; (7) the Company’s ability to maintain compliance with applicable Nasdaq listing standards; (8) changes in applicable laws or regulations; (9) the possibility that the Company may be adversely affected by other economic, business, and/or competitive factors; (10) the Company’s ability to maintain production of Affinity in sufficient quantities to meet demand following its relaunch in the second quarter of 2020; (11) the COVID-19 pandemic and its impact, if any, on the Company’s fiscal condition and results of operations; and (12) other risks and uncertainties described in the Company’s filings with the Securities and Exchange Commission, including Item 1A (Risk Factors) of the Company’s Form 10-K for the year ended December 31, 2019 and its subsequently filed periodic reports. You are cautioned not to place undue reliance upon any forward-looking statements, which speak only as of the date made. Although it may voluntarily do so from time to time, the Company undertakes no commitment to update or revise the forward-looking statements, whether as a result of new information, future events or otherwise, except as required by applicable securities laws.
About Organogenesis Holdings Inc.
Organogenesis Holdings Inc. is a leading regenerative medicine company offering a portfolio of bioactive and acellular biomaterials products in advanced wound care and surgical biologics, including orthopedics and spine. Organogenesis’s comprehensive portfolio is designed to treat a variety of patients with repair and regenerative needs. For more information, visit www.organogenesis.com.
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