ORGO - Earnings call transcript Q3 2021 | Organogenesis Holdings Inc.

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Operator

Good afternoon, ladies and gentlemen, and welcome to the Third Quarter 2021 Earnings Conference Call for Organogenesis Holdings, Incorporated. 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, risk factors on the Company’s most recent annual and quarterly reports.

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 laws. undertakes update result the it applicable so except to from the statements, or securities Although otherwise, information, as new or revise to also principles, that or financial are generally not This call certain with accounting will calculated accepted include references measures in accordance GAAP. as non-GAAP financial refer generally to these We measures. and the of release accordance presented those portion calculated non-GAAP comparable Reconciliations in on press website. relations in to GAAP earnings most available measures investor are of with our measures financial the the now would like Mr. the I call over to to turn Sr., Officer. Gillheeney, Gary and Holdings’ Chief Executive Organogenesis President ahead, Please sir. go

Gary Gillheeney

conference Chief call. by I'm the operator, call Officer, on Financial Today, welcome Thank Organogenesis you, Holdings earnings and joined our Francisco. to everyone Dave third XXXX quarter

pleased and review review of environment. we'll our that press than of release. report questions. expected with a Let cover strong tougher the we'll third strong of with performance open and we of our a quarter for delivered to Beginning me more during I'll team provide performance I'm the revenue that quarter profitability quarter of brief overview a including my our operating in And up in of third this updated with results revenue start our start in-depth agenda That’s you of the guidance XXXX today. Dave financial key then drivers will updated delivered for financial QX. remarks. our third with an remarks what opening despite we growth a the afternoon's the the another performance, call in prepared discussion quarter

also XX% surgical XXX.X a XX% XX% in which reported sale quarter, medicine the driven Advanced the our decrease products. in Care Wound by of revenue we During products, sports of year-over-year growth our had of to growth million

product new lines Surgical XXst on the of May following our for headwinds FDA Sports of renew results period the enforcement ended cell the Medicine year. for As which expected, reflected grace expiration this & our and products, those

Excluding increased to the full included third net revenue net net non-GAAP net earnings in revenue year-over-year revenue adjusted revenue A from these our reconciliation is on products, of basis adjusted an GAAP our our in quarter. XX% release.

QX differentiated reflect strategies, strong our and key physician portfolio leveraging reach. sources in to performance comprehensive that broad growth commercial our against of sites pillars and across our our diversifying Our includes and continues execution products, our leveraging which multiple of revenue specialties care

long-term environment more our drivers provide the revenues third to tougher me quarter. despite Let color of how of these growth each performance contributed operating on in the

antimicrobial, across collagen purified amniotic portfolio, care First, value market proposition our regarding is a continuum the our with substitute products portfolio portfolio with a broad skin the PuraPly through strength of PMA only wound spectrum brand, of on the of broad fresh with only which a the our products for unique and PHMB, and the and have combination our customer DFUs. we VLUs a of amniotic approved membrane

by driven in increased increased our of sale existing of product for customers, the amniotic contribution new in in utilization cell strong PMA quarter. customers were our and loss year-over-year renew from QX. products essentially products expected was third sale sales and lines, the This PuraPly products a in growth and of Our XX% the quarter flat new XX% from excluding the other

long-term into Company sites growth. our for continue expanding we to better sustained multiple to by specialties Second, new position revenue in care diversify of physician the

in customers expand of increased channel customer from products utilization the leverage customers. number and to to Additionally, experiencing solutions continue accounts Organogenesis the office the penetrate physician we a further result, we existing continue our market. and as our of office platform And we're to

softness grow on a and the key Organogenesis. to reach, commercial respect operating our of we direct enhancing representatives our the growth QX, expect overall team believe as and on third for Lastly, expected sales quarter, the trends in we continue With advantage to headwinds. result a that in as XXX we environment of represents experience, seasonality, significant highlighted steady of force a QX investments competitive typically call, on in COVID-related we to make sales improvement although our we to we see measure

the through and to began moved impacts in 'XX, July As early we areas we we of August be in closely. key monitoring will more it the of COVID second country, see and and very half

our country negatively COVID did We procedures. and restrictions really patient tougher-than-expected as which strategy around on treatments a to exposure of the COVID-related resulted have years implemented access, settings, outpatient less our experienced elective consultations, revenue, recent experienced environment a in hotspots has acute specifically greater diversification impacted operating headwinds. in healthcare historically Notably facilities also in commercial at which care QX broader and

quarter, past been third we which the more the a COVID-related in experienced has the in little a However, these office setting, headwinds spillover resilient. of in

third diversifying product focused revenue initiatives and portfolio our operating strategic adjusted the on our and XX% on tougher despite basis leveraging environment. drive to quarter, us in allow strong an Our growth

impacting of headwinds We accounts existing impact encouraged amniotic novel on growth That unexpected the products channel our shortages, ability access our launch sales a challenge Staff for products new engage restrictions the our QX. are ultimately said, of impact full increased on adoption utilization and quarter. in material by technology a the the had customers, customers. office limitations had and with of from our during our COVID commercial on in the the Affinity to and customer in of continued expansion new material

for the Long-term, great towards done million and improve lead sheet. team year operating challenging these cash sales on our outcomes deliver leveraged substantially we We care. experienced. respect products, against in progress strategic $XXX cost executed with the mission quarter. overall launching our As in solutions strong tough continue flow in highly-efficacious to as diverse a Medicare with not a reach difficult highly-innovative published item we had over space, and better-than-expected One successfully the Affinity we despite a to our takeaways we've for in quarter several And Recently, to drove more than well, we've we and having balance initiative. impressive we the and our more quarter, ended our To as generation the quarter performance, strong past, turn reduces the brands. in to the prior call financial healing out PuraPly another provide the to two comparison a fourth cash on that rate of environment of particularly growth, portfolio our result will made I and period. the to I'd integrated before inquiries in have delivered we regarding the And headwinds, like the of David. address

ASP of to we're part grow published QX receive strategy the a Affinity, very As we QX. voluntarily nationwide, for brand this our in ASP pleased of reported and to for year, our

by issued Our which rate quarter. by not the and submission was initially CMS error, having ASP in QX a a ultimately an affinity published incorrect impacted filing rate resulted resulted in for fourth

sheet published David the MACs speculation in by In financial contrary continues and updated we January the like and be However, Affinity turn condition to in to rate confident the over that, guidance. of the all nationally our fourth review financial some in reimbursed are call X, third results that, XXXX. to our will covered to be market, to With balance and contrary I'd to on quarter. reinstated quarter the

David Francisco

over results Gary. basis. on prepared my you, are with Thank review all financial remarks of begin year third our I'll rates year a specified a growth quarter otherwise unless referenced during

environment mentioned, and of as Gary by a year As grew revenue we the we was sales, net pleased loss comparable. as the well the prior XX% revenue of in XXXX were for for Net the XX%. third and growth revenue given adjusted normalizing up with renewal million challenging the strong $XXX.X quarter new quarter

due million the Advanced XXXX Care adoption PuraPly Surgical Revenue XX%, for second by sales by driven quarter for new third of of $XX.X half was Sports quarter line million enforcement XXXX third expanded impact launching increased renew XX%. Our grace our the of up from $XXX.X was force marketing & revenue XXXX. Medicine which quarter and Wound the XXXX and products FDA's our period. XXXX sales driven products, the the for expiration the we $X.X down XX, a of up the Revenue million stopped products after of of PuraPly of May third XX% for extensions sale of was

first performance nine increased As months indicated sales strong the XXXX. Gary earlier, over we pleased the from with continued that of the brand over year XX% year were PuraPly have

million or compared profits footprint, quarter revenue commercial achieve our $XXX.X goal we reps year. for $XX.X direct selling, with ending $XX marketing of the and expenses our The increase to driven third travel XX%. $X.X year XXX increased commissions expenses sales. sales expenses development with third were compared travel in third of increase costs was that million due million of increase in administrative ended of and on and an December prior quarter force, was to the related the The a direct in Regarding million in expenses quarter by million the prior head and were compared year XX, a XXXX. XXX and increase of in compared in to restrictions the of XX% XXXX quarter to XXX $XX.X as of direct XX% last research $XX operating The due $X.X last Gross of increase million compared to low our to primarily in third administrative or related the expense year-over-year period. XXXX general year the expect sales representatives in XXXX. count increase approximately COVID year, an increase Operating additional primarily mid and an comparable quarter to general million to selling, million to the increased $X.X

income to liability fair CPN increase the earn-out the of write-off of year the Operating million benefit A $X.X in impact Road administrative of restructuring value capitalized products. work not in of clinical of approvals $X.X in and necessary XX%. $XX.X $X.X and three the million did the related last a of Dan XXXX non-cash our our primarily fees driven to our costs design unfinished with expense costs and the was year, related associate also regulatory the of selling, previously for million million the of and income operating XXX was was Third million for Building, Jolla change an $XX.X an by prior in R&D with third La the the Year-over-year to on compared items facility, acquisition. certain XXXX quarter million $X expense closing to included certain connection that related study general results. or consulting quarter seek the decrease increase

the And change our revenue or of decrease GAAP costs share. quarter the $X.X XX.X million million of operating million to third the of adjusted compared net share, the of of a repayment million million during other were XXXX XX.X per million restructuring period. $X expenses revenue, of quarter an was net liability net write-off EBITDA of to to XX.X of third XXXX income loss million of compared third $X.XX or operating XX.X% XX% the fair a for X.X aforementioned Net or million. Adjusted third margin share, net a XX% value of last was of in the of earn-out or the was or of for cents related $X.XX driven expenses. Third X compared agreement for year, margin excluding last in capitalized EBITDA $X.XX quarter of primarily of previously $X.X XX.X the the or XX% quarter year, extinguishment per XX.X% debt increase XXXX. million a income quarter revenue, million credit was by on decrease XXXX Total XXXX $X.X to construction of

release have full our a afternoon. earnings We adjusted of in provided results EBITDA this our reconciliation issued

million in to capital lease of capitalized balance the million million were Company in X.X This obligations XX.X of cash XX, restricted lease in and the had December obligations cash obligations. as a obligations XXXX. million sheet cash to of million compared in debt and XXXX, September XX, XX.X were cash, restricted XX.X XX.X debt which XXX.X Turning and million as which of

and reduces related enhances our along our on generation facility has to flexibility, in continue loan growth profile improving provides to quarter, $XXX which of The for mentioned agreement secured new $XX million in financial and our The term to a facility new borrowing revolving flow costs amount As execute strategic positioned last credit us the of facility. the aggregate a in credit we profitability agreement million our credit consisting XXX and with years cash million initiatives come. well early August.

Turning to a which our review or press a this XXXX updated we in release revenue guidance, afternoon.

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

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

full amniotic timing revenue First, midpoint our of approximately year to XX% of guidance company will of in net range our our amniotic full our commercial at be products, midpoint range, the prior total year-over-year XXXX sales of of and which that now the the fiscal the XX% year-over-year largest total of growth of to This assumes contributor which our revenue our reflects compares XXXX. year expectations assumed launch approximately updated Affinity. for

XX% the collectively the approximately This other performance XXXX. our than range sales remaining quarter. formed assumed reflecting prior at which compares third to which non-PuraPly, we at year-over-year, of the of year-over-year mid-point called our group at Second, increase expect the non-amniotic PMA to products, in approximately of better midpoint the range, guidance expected in growth XX%

expect to through modest headwinds in as the COVID-related move we fourth only Third, see improvement we quarter.

more challenging our guidance Our guidance now a operating assumed. versus environment reflects as prior

despite strong to million in of second COVID-related our of remains guidance growth range and of our of at guidance XX% reflects However, $XXX the or half the XXXX, midpoint headwinds the XX% full year XX%. the previous

the the priorities our As calls our compared detailed half reflect year, of also year. of lower continues to to guidance expectation this on the year-over-your second prior growth XXXX in

previous As two driven highlighted call, earnings this expectation on is early factors. primarily by

First, we the of Care in trends in we XX% of XXXX growth from this business performance lapped growth second the the Advanced the of of half XXXX, moderate to second year-over-year Wound expect second XXXX. half half strong as the

X, XXXX, report XXXX, positive from beginning XXXX. our expectations expect related With June of XXXX. continue headwind to net financial new income in positive the market, an months of and we removal to EBITDA of renew performance to Second, sale for million estimated fiscal $XX to seven GAAP to year and adjusted growth for the last over the respect

to our for formal modeling In consideration financial providing we addition purposes. are guidance some XXXX, for

$X which La For two-thirds stack the restructuring initiatives. XX%. full XXXX GAAP $X.X gross year and increase year-over-year, expenses Jolla, margins XX% expect quarters to GAAP facility, include million period, now approximately comp in note, G&A million of approximately average of XXXX first expect And approximately million of of to of which XXXX related the operating we to Total related year approximately expenses shares operating diluted million. of XXXX. $XX $XXX approximately our gross expenses approximately occurred million, approximately $X.X our of of growth million, is non-cash margin of Non-cash CapEx full improvement three we $XX approximately weighted of California

cost offset to third total as With expect call associated the over of in turn lower that XXXX. facilities approximately million the you. back we $X.X in operator, of I'll by costs Finally, partially expenses interest exit other the the refinance borrowing with quarter expense

Operator

BTIG. question our Ryan [Operator from And from Instructions] come Zimmerman will first

now Your line open. is

Ryan Zimmerman

on the color due the both to sales, of the recovery as Affinity's going some you quarter, fourth kind specifically all with you gave we CMS. you of guys, for up starting of the PuraPly into appreciate have and commentary guidance about I guess, on I today guidance delay. offsetting amniotic think

the stronger you. And kind why slower is so, Sports of amniotics? Medicine just PuraPly offsetting or help some fourth understand Thank us the market of in to expect like wound maybe the see Surgical a how And recovering should areas we other quarter? sales, &

Gary Gillheeney

Sure.

environment the improving mean, I really is not dramatically. So

impact of see COVID. the We continue to

really products, able product customers we're brand selling have the sales PuraPly of more and accounts, it's a think of specialties, our our product, we that for focus and I on that's brand we one more force large because the is, established physician its areas because the helped to have. more equity of

drive little those accounts. been we've and So, within to extra existing accounts additional some able growth a

of product really the that have different if the had So, Dave, a really impact. our force. sales an of it We've in the it's the and focus you utility and done past

David Francisco

No, I the lot be said, of I think just in see good continue clinical find to growth you that’s continues well-established right. to a utility that as brand line. a we something that And in. product it's customers it’s mean

Ryan Zimmerman

just or then I are to to of want potentially on a it usage, that offsetting the usage and And Garry, you I I you of just digging are follow other are portfolio And your a products -- little in given ask offsetting follow-up. of Affinity. have just relative products guess, on some But others? other that further PuraPly in focus one seeing your seeing

Gary Gillheeney

Sure.

the a very of PuraPly point is get healing. ultimately, to different mean, So, product. all products I

It's patient. Affinity is, process It's you're the of care. of earlier on a focus. and selling layering in process a different the me, different where a our more a recalcitrant it's -- excuse when Affinity is patient So, different a wound, PuraPly focus site it's

focus reps where dermatologist So, then a office, wouldn't plastic where will on that with Affinity. surgeon be sales our you utilized or product PuraPly a can

expand really the patient are can of the is different. it some So, because of bit care heal of be but the They little sites and type wound, does the product. the the objective a ultimately, use to

expect across we significant cannibalization a amount of So, tissues. don't

Ryan Zimmerman

this And investor Affinity, then, quarter. think about a subject just mean, me, as it's we discussion been lastly, obviously for I of

quarter the you that's Affinity And so, delay what have to rollout that factors? kind much much from out? what you the the about think the forward fourth error -- provide And do MAC with CMS' utilization? color or maybe of or due going terms impact the what can in you've how And in How of be laid appreciated? their expectation that and impact of plan in guidance said on they've you versus would maybe seen indicated any other

Gary Gillheeney

any discuss has but with CMS any to So, wouldn't as do color. get rate the provided we have expect discussions not reestablished them, We mentioned. we I

we when you considered have guidance other and will a to filed to you ASP. ASP, with our in that's that when for published move published happen moved So changes a is and benefit related to product. the published verifications ASP, you a that when that pause pause And

those have of you'll impacts. types So,

selling product, for the build rest the where strategy which You entire you more of growth. the and country a brand also broadly base sell build have is and the long-term opportunity to the to the where have the here country, not

public in the is, which to a again, that and the So, interest is we of there growth we long-term when believe clearly best for product. something dynamics you are ASP, filed the move for changing

has where get all a haven't enormous those to able being regions new in those out customers had not clearly sold really an impact. we at product So,

Dave, of a end new place. able benefit impact in and additional That's the on some those may on but have you to get better existing customers. regions a loss get that. those you you out would get you weren't But we for Affinity comment up overall, at regions, and the regions, So, quarter. at those major

David Francisco

technology. it's agree a new about I of all kind and adopting access

was really in the So, it period. challenging

Operator

Your with from comes Matt Suisse. next Miksic question Credit

Your line is open.

Matt Miksic

environment. congrats on I Maybe for and just guys around question, missed and I because Gary, strong Affinity and questions the of focus it, a taking quarter PuraPly. thanks apologize and really a Hi, reimbursement if the tough around but

are provided color the I fourth stable? And the you to the could expecting what have maybe if Just whether things growth, quarter, on you remained willing up. of wondering, follow any second cadence trajectory Just in like provide if share you'd anything just growth, quarter? by guide and improve your the but to -- be of that, third would like understanding products be And you're one expectations or helpful.

Gary Gillheeney

Sure.

to of loss of certainly in again approve be in even pause ASP. we Affinity sales with published QX October. So There expect will the a

benefit are we're see to So, see pick facility we now verifications and see And that the and folks that and did up product that. the to we understand expect reimbursed. done product starting back once

grow So, like we there slight in the improvement that a will feel in QX. be will product

to a your would published expect January. as then be which pause different. We in again change a in happens which deductibles process, There'll have our reset you for QX, fabrication we re-launch and product published January, when benefit And the customers. ASP you is normally ASP, have in a we have and now anyway again ASP expect in will a

into Affinity a growth forward. to driver be we do for pause but to we some expect there'll So, be that continue QX, Company going going ultimately expect the

Matt Miksic

of the past be Company might the array feedback products the diligence just calls know and thought understand our value early covering time Okay. spent on we the amount product. clinicians of propose the helpful are making need out to And positive, the product that out years. but just And I a over understand, fair amniotic I to in of to that the been certainly about several is there. it given

any at use seek on points? use Just dehydrated and would or not a maybe really you used this it clinicians in guess little I more and particularly where tissue amnion only is it remind that it channel color physician a us where about just this

Gary Gillheeney

Correct.

amnion So in It is it the unique. the space. only fresh is

we product, other the our of living to active living who similar in products. cells as are That's many So, technology. part it of has

That's it four an wound, the through and is really challenged meaning a recalcitrant, difficult. when question needed help the Affinity And would that wound really So, is like It's is product. living feels than closed to the more jumpstart wound. active product Again, XX% what's weeks. wound clinician that's active hasn't really in they that proliferative the value have healing the phase ultimately when technology to the to of really an you type healing. feel

Operator

question Steve Oppenheimer. comes from Next with Lichtman

Your line is open.

Steve Lichtman

wanting to for on CMS, Thank you. give Gary, mentioned to any next guys. guys list? or Hi the confidence you for or the fourth I the situations outside quarter, you -- to January ASP the have relative just that, but about looked with update not be conversations confidence? excuse me. anything consultants on you gives any What talk anything will you that know prior it at

Gary Gillheeney

Well, outside consultants, of happen. confidence sure. of us We lot a certainly that, given have lot a would that

get I'm It published think the We incorrect corrected. process the re-established. for didn't we able quarter. the ASP and note was trying I a and timelines to it's received to weren't get the just an important ASP, that, ASP in it of to meet

get a often. and re-file reimburse told is was are re-established it'll and the so being happens again. we've you this error, And we accurate, then our seeing and typically that's it. it match by correctly ended up filing been consultants will So, that, What

we reason to be believe to no point. So, believe that, reestablished reason it this or have any at wouldn't

Steve Lichtman

what mentioned, of relative all. It if seeing little quarter. seeing COVID, what you're more on business there. would then to out more your in I what's there you a point seeing And a what just and sounds versus color like you're put it. out impacted diversified saw As lot, could impact to pretty see not you're finer you talk certainly steady part And an specifically a of But, third you've the of what Okay, environment bit wanted got you so others? today? versus

Gary Gillheeney

multiple What's you you really new is with because mean, benefits through when I meetings, product. entire you're challenging launching it's Affinity, then and trial our access need verification So, business technology period goes training, troubling impacted. replenishing a have you don't and obviously, need like the has typically a

that's So, there a of is access lot required.

more or anything customers challenged. are So, new new that's

Our That's when new brand great we we're this you have specialties existing go to sell branching out don't and PuraPly have really quarter. accounts new technologies, able helped relationships, deeper accounts which little where access. or with the equity, have new to and great challenge a is past continue physician we

Operator

From Next Instructions] question Leerink. SVB Antalffy with Danielle [Operator

is Your line open.

Unidentified Analyst

Danielle. Hi. so Erin for taking questions. for on Thanks This is our much

So congrats on the to that little a challenge. I shortages just into quarter. you know staffing of deeper is dive that, wanted bit mentioned just if larger that was way is looks there this hoping any COVID I It like to what see, is linger. quantify seems potentially a creating kind to that kind just a headwind. in the that XQ? I impact like could of headwind

a may impact this sense growth So to of forward? going get of kind just how wanted

David Francisco

to estimated $X million. be we impact, quarter third about So,

into tease bit related. with It's this change that bit COVID because access. a the difficult to just is it little how Gary challenging you had much said in I in more out, think, it's out. of is This specific move little tease components QX, more about to as a associated dynamics and a launch the the

Gary Gillheeney

third saying. But clearly about on is. in and based as we're But our it half Yes, that quarter. well could $X next is our we're with first you going we think think we exist there's And of the battling what and -- think we customers. leap navigating QX, view also portfolio we to into year that headwind it million it the

as seeing So, that I think well.

Unidentified Analyst

how the And And some into I for sense a the of the all the COVID-headwinds. color. left runway potentially just diversification has channel, penetrated the just you wanted how of channel? Thanks power obviously, on office then through of in is helped this you accounts? get are to care much potential setting

David Francisco

the XX,XXX about before how and offices, underpenetrated. said near don't there's X,XXX significantly penetrating that but about So, -- offices. we large, potential it's is we really anywhere I've channel many what provide is not channel accounts, We're high

Operator

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

David Francisco

Thank you.

Organogenesis (ORGO) 10 Nov 212021 Q3 Earnings call transcript