ORGO - Earnings call transcript Q3 2020 | Organogenesis Holdings Inc.

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Operator

Good afternoon, ladies and gentlemen, and welcome to the Third Quarter 2020 Earnings Conference Call for Organogenesis Holdings Inc. At this time, all participants have been placed in a listen-only mode. Please note that this conference call is being recorded and that the recording will be available on the Company's website for replay shortly.

Before we begin, I would like to remind everyone that our remarks today may contain forward-looking statements that are based on the current expectations of management and involve inherent risks and uncertainties that could cause actual results to differ materially from those indicated, including the risks and uncertainties described in the Company's filings with the Securities and Exchange Commission including Item 1A of the Company's most recent annual and quarterly report.

You are cautioned not to place undue reliance upon any forward-looking statements, which speak only as of the date made.

of do commitment time the required to whether a voluntarily Company time, forward-looking by may events as no future undertakes update result applicable it securities so except to from the statements, or laws. Although otherwise, information, as new or revise measures generally call principles, accepted This financial or also calculated not GAAP. references include are will accounting in certain to that accordance with non-GAAP We financial to generally as measures. this refer presented in most on Reconciliations and of of comparable measures in available the non-GAAP the portion release with those measures accordance the financial to Relations our press are website. GAAP calculated earnings Investor would turn I the to Mr. to like call now over S. Gary Holdings' and Gillheeney, Executive Officer. President Sr., Organogenesis Chief Please go sir. ahead,

Gary Gillheeney

today Chief Organogenesis Hagopian, everyone and Thank on third Financial you, call joined to Holdings our by Officer. Henry XXXX earnings Interim quarter welcome, the conference I'm call.

operating will with with of that cover more will start financial release, sheet up Now business quarter extremely areas during the brief let financial as business during with provide of open the review summary revenue and today. our quarter, remarks, well opening the we performed me experienced a the our a of we quarterly an third performance environment. remarks condition. challenging our start formal what agenda balance the the including I'll our will of results we and despite of this you have our financial overview call trends a prepared the improving in afternoon's we press my in-depth and And guidance After in Henry for included questions. well then, as

in the third Advanced Surgical year. revenue of performance. & prior Medicine by growth quarter with compared XX% products growth review year-over-year products Sports our our our of Let revenue total the the third growth Care X% in We to driven XX% and in Wound reported me quarter begin

XXth. on revenue our Our the exceeded high revenue of announced above well were range end October results preliminary expectations and

Care our channel which XX growth sales Wound the products for remain the are this by driven our across year-over-year, quarter while about on focus in comprehensive the of all strategy improved The commercial need we of the loyalty. adding key Advanced period. please recent of address strong portfolio and months growth in our office about customers, our reported only office, strong strategy Advanced sales third new our of product, sales benefits leveraging reported focus Advanced driven of execution we've differentiated our XXXX. and office customers channels, drivers in of the been growth earnings on in our customers we strong of quarter and competitive Wound demand during overall calls to in we've continued stages investment reflects This the call a in products products strong throughout new of our Advanced broad result call. the Our expand QX our quarter also commercial Care third strategic the amniotic our environment to brand healing strong the treat existing was sales the started by talking the and and has continuation years, each and total in force of of talked the our the our performance portfolio And execution growth we've that XX% made multiple Care that in our prior ago. products channel strategy advantages wounds Wound to over this Care channel, direct not We introductions on for Wound were from and but demand, notable during and key office contributions see in solutions increase differentiator us, the from a patients from

extremely our customers fresh the membrane were in to product product third the positive in differentiated in value was our accounts sales driven also features introduction that the to the sizes XT is of amniotic are utilizing of accessed clinical QX, again by also part the extension, us and introduction important our strategic to the franchise, want and by discuss new increased performance that selling PuraPly, of well. We was the Clinicians which I completed office line an very October clinical contributor aided we it Our that during strategy. press channel. on Biosciences XX% continue quarter our see quarter growth to The we enhances value largest in acquisition year-over-year important in quarter. third PuraPly release the the limitary Affinity an as office reimbursement transaction of in CPN third the and XXth. where value growth number encouraged results of by our continue announced product's we and the one

and channel. office exciting this Specifically growth physician our accelerates CPN's offering first-in-line Wound in management Care complimentary broadens opportunity solution physician Advanced Products our further and

financial about we in dedication growth While the and have milestone expect this growth acquisition reflecting our expect believe our will term in they financial community the of we of direct and several with targets also financial contribute quarter the revenue performance, result period advance XXXX. our income our third we is operating generate to the important positive our achievement are XX% for of interim for the execution It our performance be year-over-year. over which and positioned materially fundamentals strategy longer revenue and our the reaffirmed In of to to of net a our operating proud employees years. XX% serve. we're of in In financial we remains XXXX. and stated, a of guidance last we and the to the expectation excited year Simply this we performance financial not customers we discussed of presents, the adjusted Organogenesis. XXXX, total well full patients profitability strong EBITDA XXXX, positive strategy stated profitability the an over of represents our to well the of opportunity to business opportunity summary, deliver Accordingly, are strong, and strong balance growth

strong of of results integrated are And optimistic, substantially to as we to as continued execution the our solutions in our products and in recovery look growth forward we performance guidance. deliver United execution, while While improving care. thoughtful to healing months the the turn with Chief the Henry, in it financial We result of we States, is have first cost lowering and discuss which outcomes, we have. why that that, medical to a overall and continued remain for to the to Interim team improve are strategy, the with drivers continue, the reported we relates confident I'll nine success COVID-XX of differentiated expect Henry? certain the our financial our we expectation mission portfolio in And these impressive provide our Officer markets growth that quarter. performance it implied cautiously by for Financial profitability over on the

Henry Hagopian

quarter will to a of for an Thank a increase specified, XXXX XXXX, all financial with third was million, million you, on I compared my XX.X Net review the referenced remarks basis. quarter our of growth are third third revenue of results. prepared of in year-over-year quarter begin for Gary. the rates XXX XX.X or million Unless otherwise XX%.

October was the increase in the Care the million Revenue XXXX, XX% & of XXXX, third XX.X range of Care of an to provided of X.X of of revenue or of an revenue XXXX for in million compared quarter from quarter PuraPly products above X%. results end revenue the Advanced for quarter XX%. to of XX XX.X million million from XX.X was revenue quarter Revenue of total PuraPly quarter Revenue XX% Revenue in of Sports million, of the XX.X from represented preliminary of in total quarter the of of compared compared quarter products Surgical represented total of for XX of in million, the Wound for of products XXth. X.X compared year & the revenue revenue Revenue XXXX, high revenue total revenue XXXX. increase from the approximately third XX% Surgical XX%. quarter third quarter or total Sports Medicine million, third revenue period. the of was prior third XXXX compared on year in Advanced to XX.X quarter Third third from Wound the XXXX or represented million third for products the compared of XX% third XXXX the total to XXXX, products XXXX, third prior the Revenue products in to period. XX% XX% an million of for from increase third in Medicine of quarter came

considerations sales as travel the to others These year-end for an third to compared to third of of card due XXXX and in costs administrative The due third increase a increase to to the including third delayed quarter the a as enrollment consulting expenses were of associated and R&D compared third of direct in quarter quarter a XX.X Total Medicine as XXXX, were or increases related XXXX, XXXX, loss year-end bad of for & for XXXX, XX.X increase the Surgical the the volume XXXX and X.X commissions decrease profit which our business decrease third a sellers approximately the in to of the X.X primarily the XX.X Wound travel per XX.X due million was selling, or increased well expense increase for associated the for by partially was profit in XX.X third an related of to third loss XXXX, a of expenses amortization Medical quarter gross offset of X.X and million. accruals third share the compared for XX, the as third related due partially million a debt third X.X under in direct million, of million, strength was of approximately a decrease or an primarily credit decrease in was for a XXXX the or due XXXX, dispute million million increase sales an compared $X.XX XX.X due of selling, of million XX a was decrease quarter income operations was with Gross from sales. million XX.X quarter in third XXXX the X million spending to legal third net Advanced fees interest compared was shift and acquisition Sports from in independent the in X%. NuTech increase in XXXX, the million. of and representatives, million selling using expenses our resulted of quarter for general for with operating million related quarter $X.XX legacy EBITDA million an method, X.X of operating higher million. million million of of for offset general the assets X.X primarily place increase driven $X.X XXXX increase decrease Care to X.X the resolution million, to XX.X to third XXXX to to products, assumed agreement. expense, increase increased million, a fees increased The XXXX, at of headcount of legal, Gross September quarter or of million, force higher agencies, the of of ongoing in in $X.X October million the marketing the royalties. X trials income XXX primarily XXX we of part to in amortized XXXX. of million our gross COVID-XX, in processing settlement increase XX.X and to sales an EBITDA Medical in quarter intangible other Adjusted XX% million clinical third to million expenses million, quarter to X.X to XX.X previously $X.X million XX% decrease to party reduced XXXX As XXXX of due of amid and $X.X X.X margin margin lawsuit $X.X XX.X for XXX receivables. of to XXXX. in was for NuTech reserved the The sales X%. an We for million XX.X quarter our quarter other increase administrative in revenue, per of XX.X programs the to quarter or increase lawsuit in quarter the of of million costs of The expenses increase XX%. the is an X.X the collection limited quarter profit the Operating XXX the X%. loss assumed total compared had February the sellers due at decrease XX%. mix quarter an third borrowings to accelerated of by or net expenses to million XXXX The of third XXXX. products. product of Operating third compared Net $X.X primarily of additional the legacy third XXXX, the to deferred million compared to million of COVID-XX. of other XXXX of compared The in credit and for from adjusted compared XXXX. primarily resulting million a with decrease XXXX, for compared decrease compared restrictions share and the or XXXX, by is XX% quarter quarter of were primarily The increased

adjusted provided with were afternoon. reconciliation have EBITDA XX-Q, Form in filed We the this X-K of a and SEC earnings of all our release which Form full results

million. consolidated of as XX September The October closing, acquisition in consideration press was fair subject assumed the a XX offsetting date, as disclosed certain indemnification consideration against X.X As Biosciences consisted consideration aggregated preliminary our CPN. X,XXX,XXX have million of acquired quarter in XXXX, accurate of date. and held cash been XX, X,XXX,XXX release The was and statements X.X on and to of stock XXXX. amounted were expenses claims class remaining and paid liabilities our which X.X issued A CPN in applicable of CPN since to million common beginning financial material. acquisition a we million million contingent of our X.X of our not third the in any stock. fair shares cash CPN value XXXX The on on will date months paid be after issued of back we shares results operations the and common or At date, closing acquisition the certain Revenue included of assets of a value the with of XX,

nine results of for million to nine XX% of revenue brief million for September September in XXXX, ended for the Advanced increase Sports PuraPly an the products first of an X% months and net the operating nine net XX, XX review XX, months net & a million driven XX%. to The September the of $X.X September of compared to the XX% of the XX% Turning was Gross XXXX, million revenue was increase $X.X compared XX% million, an months for XX, of $XX.X of nine ended nine million million net XXXX. prior for months the share months of XXXX, XXXX. million of million, months $XX.X per compared revenue net XX XXXX, an per compared of or ending or the increase XXXX increase loss XX%. first for $XX.X revenue an of of compared was or million year. Wound months to of products first for nine in products Net an an PuraPly months $XXX.X for Net or for financial our Surgical or months first for million first to Care or months share $XXX.X of XX of September Operating revenue, million net for $XXX.X or of of $X.XX Net Medicine increase nine of increase XXXX compared or the $X.X $XX.X revenue September nine ended to increase or of the loss to $XXX.X revenue XXXX for compared the income September XX% loss first months for nine XX XXXX, the ended $XX.X ended $XX.X revenue approximately XXXX. million $XXX.X $XX.X by nine products nine the $XX.X revenue XXXX, million, in of nine months million net Net ended months represented the to profit nine $X.XX was of XXXX XX%. were million.

partially The inventory such increase support by to continued sales, and in CPN by of in acquisition The in receivable, increase financing as by support the is depreciation offset of $XX.X September million future compared cash the obligations to related cash $XXX.X $XX.X the which million capital in a as offset used of XX, non-cash sales XX, $XXX.X of in activities, operating nine of the used $XX.X Company balance obligations cash principally debt ended to activities drivers as due period. to activities investment activities net growth. in $XX.X XX, cash the the had lease to sheet which to of was were driven as obligations, $XX.X change investing million obligations, debt of cash and September $XX.X the XXXX December turning by in million in our lease investing well infrastructure in of cash million which provided substantial million were The $XX.X XXXX, million built and during a months cash as million expenses for our $XX.X activities in in use operating in accounts capital flows of increase Now amortization. million was million cash XXXX. is principal approximately and $XX of in directly using million

credit agreement end, in borrowings XX, the loan of the we're September quarter under million covenants we outstanding $XX.X of borrowings have SVB. financial term and XXXX, At with with under the compliance million under facility $XX.X of As revolver.

on expect cash requirements, at months and XXXX, payments for days. service debt of following our hand fund flows XX, our and expenses, XX operating from September We sufficient the XX-Q to product expenditure cash as capital least that will be filing sales our

our Turning through a revenue review XXXX guidance. of

guidance in press on XXXX year detailed our October release are fiscal this XX we issued revenue reaffirming afternoon, As XXXX. our originally

Net million, the XXXX. approximately of Surgical revenue and of of ended of Net XX December to XX revenue compared to XXXX the December XX XX approximately December revenue year-over-year the XXX revenue The between XX XXX guidance products to ended Wound & December X% growth compared XXX XXX between XXXX. X% Sports decrease XX net million revenue revenue million, a of range sale year-over-year, XX months approximately For the expects growth year-over-year to approximately XX% to representing and XX, XXX million net revenue XXXX, million as PuraPly ended XXXX. XX% as products net representing representing compared decrease months million, of of of products XX net of representing XX XXX Advanced XX XX% for assumes months XX% the as XXX XXX year-over-year months from December Company of million net from from million and ending net ended the X% million, for a million months between the XX, million million of XX revenue Care of as compared now of X% Medicine XXXX. to and XXX for revenue between to to for net

expect to period. for positive income report GAAP net fourth and also EBITDA quarter and year XXXX positive We fiscal adjusted full the

provide assumptions additional few the expectations This growth also evaluating formal fiscal better supporting help the is we to revenue when XXXX. to a for for addition intended the color considerations our would revenue XXXX. additional expectations investment our In community understand to like guidance, year

earnings of company amniotic to XXXX. our or range supporting year-over-year First, our fiscal range XXX% will at midpoint the year-over-year, compares QX revenue call. year products, be XXXX year guidance which approximately growth assumption This amniotic largest we contributor in the net our prior our growth to of which full XX% the in discussed total on approximately growth assumes sales of

our collectively formed decrease other and the our to Second, a year-over-year assumption midpoint we group unchanged and range the XXXX. non-PuraPly of from PMA which sales or X% is expectation expect approximately discussed prior we called products, This guidance QX earnings remaining supporting on range, non-amniotic the call. which at in

our sales our in PuraPly of slight expectations PuraPly approximately decline guidance was PuraPly Third, sales sales of than from stronger compared implies approximately specifically to the year revenue the will partially XX% quarter, for midpoint to change X% assume The XXXX. fourth offset the the PuraPly by approximately fiscal XX% which net sales performance year-over-year, sales driven guidance our called XXXX year-over-year. prior for decrease decrease of in guidance by decrease a quarter by in expected year-over-year in fourth QX, guidance

said, cost to transition to call bundle that, turn I'll trends which XX% the prior to are sales high begin year-over-year. quarter in the call October PuraPly Following encouraging. decrease for PuraPly X, XX% With compared expectations, early operator, to back the XXXX, you. to That approximately the

Operator

Matt Miksic Thank Instructions] question come from And [Operator Suisse. first you. Credit will with our

You proceed your with question. may

Vik Malhotra

filling for taking two the Thanks is Vik so in question. much have questions. for I This Matt.

I one any office The a couple the throughout last rising Again, weeks? sort position is COVID follow cases up. strategy see guess I'd in the U.S. your impact and can the first in then of of channel you that

Gary Gillheeney

This is Vik. Gary. Hi,

all We -- Though contact a at has centers did decline of virtual at the Center. we on setting. either a slight the trend outpatient seen outpatient at QX, haven't to some but maintain this our an all in customers, outpatient point, we starting in limit have the we see haven't decline There office sales access. know Wound to consensus with Care impact setting, a seen been end of we seen the access in

Vik Malhotra

guess could. I if up, I follow one And

far? that with larger about was was of thus you couple could help the You for Thanks if weeks expiration to trends your past-through what kind the quarter. PuraPly seen learn you've impacting us I in product of And wondering, of expired? much. how spoke just sizes past past-through the having

Gary Gillheeney

in in past. is we see decline revenue the We tell, did we just see see decline. We're little see would to what seven seen QX, a of early had still that Sure. not decline. didn't is, we in the a but did pass-through to prior that to weeks the we expiration PuraPly There six

we've encouraging. that accelerated some So was We with and did our sizes strategy also PuraPly. and growth important office new introduce PuraPly of

both those So, are doing well. of PuraPly office sale The well. of strategy doing is

Our of is extension office well. bundle sizes introducing in the those under some that wounds to are XT line doing the larger absorb And extremely the new we're also doing well.

So, to. those that had are trends the positive Henry alluded

Operator

Thank you.

Our next question comes BTIG. with from Ryan Zimmerman

Ryan Zimmerman

to it that on the CPN have areas component that Gary, for just about we longer-term previously acquisition? just Biosciences around get talk Or offer you the you rationale physician and acquisition, is some aspects Maybe your in? business? thoughts there also that can maybe that the start is the weren't And products it on And expanding of can management I follow-up.

Gary Gillheeney

we a even Sure, really office, to ability reach to and of beyond eventually, moving. access us see way the more the additional of the the all lot where the for wounds accounts it's home the

product line, some So, have. And also products more opportunity that Wound additional access of sales. for generates they it's so we access don't that have us Advanced Care first an in

introduction patients, sell which gives our to will So products. our also us other enhance that ability an earlier to

and channel. daily that, that cell for to will a does there's pushed within also share to on that ability in basis, those to that So, voice be their in well channel we through Organogenesis a products it's the the offer a channel. until our customers it of us as communicate expect stay the And office more way efficient products greater as connected

Ryan Zimmerman

really like and for fourth I that's helpful, then Okay, would guidance continue. performance that you. quarter, just suggest margin served this on for and seems based your it Henry, very maybe, -- strong that's the showed quarter, Amniotic

help as can longer about think think amniotic about margin improved you. we Thank are maybe you performance? of as and you is takes left. such puts kind and the If us PuraPly dynamics the can How especially margins with past driving as just left margins, term, there

Henry Hagopian

product, our we here on trends by but margin confident don't we We feel will very have guide the in continue. that QX experienced

Ryan Zimmerman

you. Understood, thank

Gary Gillheeney

But for the PuraPly set. Ryan, implications extensions So in off clearly of our office, for have those in the our to naturally help has we a our you bundle for amniotic that margin will coming would But maybe point, and ASP your some there. bit color, define of So through largest little that a pieces technology pass little margin, products bundle. other the more line PuraPly offset the get a

Ryan Zimmerman

Okay, that's color. Thank helpful you, Gary.

Gary Gillheeney

Sure.

Operator

Instructions] Our Lichtman Oppenheimer from Company. Steven [Operator next question comes & with

may your question. proceed You with

Steven Lichtman

And particular. color base Hi, what that extraordinary been that being you. Thank that guys. sort near and pent able with to customers? Care prior new demand, is Affinity, expansion in given in seeing just up the the the wanted of you talked runway as expansion in we're customers the just Advanced you're like can re-launch amnions growth to what Wound the of about this Gary, has of on touch to much seeing in on new an you channel? in first into half Any of see sort you provide year versus how office term some

Gary Gillheeney

Sure.

product QX existing in customers the growth because back of and the that customers some there -- But the majority for up used XXXX. from in yes, we the have base. did from the pent had So, the demand is expansion some of our customer was not existing growth, Affinity

really not is in and our the all office, Affinity. we're just advantages amnion. growing are the that market, So expanding offices, one technology also with of in amniotic brands what experienced the we've our doing the But of we're

that the advanced have that modalities that are confidence customers we now. us and perhaps We're expanding gives some by that of doing So, adding we the market. folks use who haven't

Steven Lichtman

talk business? you a further on to how can NovaCor, add Got then timing think in that the follow-up move launch? about the And Thank it. you. will that amnion And that just your little a momentum bit you of

Gary Gillheeney

would launched year. QX NovaCor, is sometime expectation next of be our So, in

of the same us, takes up challenges each of to execution some the of with the is manufacturer number NovaCor. on of continuing of know, one the also it our ramp quarter. said, we Affinity one Affinity. launching for we're you manufacturing capacity but NovaCor manufactures So, ahead have It's we have calls, up that as a challenges I And

really is we're QX significant at growing, Affinity the grow it it be for in growth expect Company we So, right projecting long continues depends on to now of but the how do pace for to future. a the driver that the launch, and 'XX

Operator

today. Thank queue, conclude our participation. questions are we in does showing no at we Thank showing time, for this participants currently the time. you. the no remaining remaining At your currently in are conference queue this you and That for

Gary Gillheeney

much. very you Thank

Organogenesis (ORGO) 9 Nov 202020 Q3 Earnings call transcript