- Earnings call transcript Q3 2022

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Operator

Good afternoon, ladies and gentlemen, and welcome to the Third Quarter 2022 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 risk factors of the company's most recent annual report and its subsequently files quarterly report.

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

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

Gary Gillheeney

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

opening remarks, quarter financial After third with of operating in and increase an advanced driven me quarter in a condition increase and balance with increase surgical of a net care sheet during sales quarter for sale reported then of revenue the that press third of in-depth our prepared our remarks. products. a with we guidance up agenda sports in for our at million, products and our David high-level of Beginning we release. updated results $XXX.X start what revenue I'll today's the XXXX year-over-year, financial more our a and we third And our of questions. the it X% wound you X% my review medicine start end Let the a open of review results, and of quarter, recent with XX% of review highlights. I'll third will provide will the cover brief some a by

the softer wound we primarily Third in guidance quarter on expected quarter second driven than results advanced care in provided products. by call our range growth below came sales our

week with line have this roughly Florida wound that of range. quarter. care third We advanced of sports hurricane the results that our surgical demand end the within believe medicine our would lower quarter last in of disruption, products hurricane and sales estimate Ian the we delivered prior We While in were our business impacted guidance expectations. sale related in excluding

As in expected, we experienced three, headwinds setting. continued with quarter challenges, continuing patient particularly improved customers in physician customers to the COVID-related as are in improvement staffing visits but struggle office

experienced physician While our in in previous pleased versus we assumed see the these had environment measured we were we guidance. challenging office headwinds the to operating show improvement, setting more what

challenges we of team against product competitive new the and unexpected the our our positioning sales force. in our well strategy and multiple in portfolio comprehensive The the sales despite benefits performed channels expanded leveraging as of including quarter, brand Importantly, execute strength our continue loyalty. including introduction, our leverage to growth

me update on progress each you in of Let the QX. of these

the awareness team to strength XX% force across country for XXX penetration benefits grown team continues up and and to a advantage of team First, commercial of of we believe Organogenesis. our has continued technologies. enables commercial our year-over-year, our competitive The as the sales our represent our key deeper advanced direct increases expansion representatives

our these key across progress continue in in growth and revenue of make Second, drive diversifying product to physician by care our strategies specialties to sites we commercial targeting channels. in development

accounts outpatient team compared hospital year. to both the low delivered served number the setting growth office and ReNu Excluding NuCel of the and setting the physician in double-digit prior in and Dermagraft,

demand for line long-term enabled continued care sites new portfolio physician to products of PuraPly strong products extensions differentiated brand. key new of products well-established multiple introduce strategy XX% access for company. and have Third, continues and this be a the highly and specialties a increased advantage PuraPly Sales a including of highly broad our to year-over-year, differentiated to drive to

portfolio of properties surgeons XXXk form the market of received option a an complex a growth powdered micronized we extension a clearance of PuraPly And in PuraPly surgical or wounds. of PuraPly it for technology PuraPly the expect as to driver strategy MZ, Technologies with of QX continuation XXXX. our when into representing we leverages QX enters to material product medicine sports our the PuraPly brand and innovative MZ Our engineered of provide for PuraPly MZ be surgical full in grouping expanded product portfolio. in

decline by products decline X% in -- in to products The year-over-year PMA and other strong growth While adoption to which prior sale to a included other by offset the PMA and sale and partially from net of our pleased of in related quarter products compared non the products directly in year was low mid-single amniotic of see X% excluding of the increased the which our year. increase products, in year-over-year driven digits, other continued for sales Sales sales PuraPly The revenue of the QX. low-single Dermagraft digits our year-over-year suspended versus period. the by was Dermagraft sales, PuraPly decline amniotic in of utilization declined second we're in increased and comparison of impact QX. portfolio XX% non-PuraPly products a PMA double-digit XXXX. was prior in expectation

basis, of continued amniotic and our adoption with our our amniotic a of share QX, voice year-over-year on technologies slowed basis in were our which challenged results pressure a channel, sales competitive office of sales customers. the in impacted quarter-over-quarter amniotic new While and both products increased, by

strategies. and the sales small more the this accounts increased challenging nine products revenue in of impressive pricing brand, a our result CMS first also products. which both delivered now impacts calls Simply -- the setting, of for which same growth our our decline one care nine products, aggressive of demand including published been year strategies year-over-year XXXX. [HOBD] the year-over-year ASPs net developed PuraPly amniotic during XX% navigating to year-over-year our our basis. channel, paced have Despite full our our approximately this unexpected guidance diverse successfully office to of We've in our of XXXX from an speaks and against see our basis, and midpoint revenue growth an of which XXXX fueled We of and months a essentially diversified success nine are skin of drove team's million XXXX PuraPly a our of has wound in environment have products the months for adjusted lack we on key executing a million, with long-term continue products office in to and at customer updated and leveraging leveraging in on flat circumstances headwinds again on growth QX. represents substitute first the for while expanded physician the growth XXX the months for sales the of our portfolio existing have from portfolio brand by considering X% the the stated we of over reported strong first of range success leveraged unexpected number in year, using we challenges And our by year-over-year [ph] key growth markets the XXX we amniotic players, as of advanced one

a in prior to the guidance revenue what XXXX environment fourth year setting operating reflects our challenging office guidance full quarter assumed. had in now physician compared Our more the

year. setting driven physician this of sales by smaller skin impacted in products and from disruption for substitute to overall expect we competitive the antibiotic publishing Specifically, be reimbursement uncertainty pressure the office ASPs related to players continuing market by CMS’s

broad That Importantly, we this revenue of customer value publishing across said, that the specialties, CMS we of believe competitive care, we commercial continue until and across with from believe broad to products continuum plays amniotic proposition wound a positioned are our well ASPs. physician reach. and will pressure of continue multiple offering care with sites diversified sources moves forward portfolio unique our

healing wound facing cost year, space advanced launching be well our while While continue we lowering in across as provide position we care. continue States. channel on highly in setting, outcomes integrated by care deliver that base improved overall and to innovative, wound care we will as mission as solutions United to challenges the efficacious to highly this leader a of products, our customer the the our substantially leadership Long-term, build grow the the office is on centers in office

items the Before I David, note. call operational turn over of to two provide to I you wanted

to as of disclosed construction the costs XX-Q recent evening, the our this this in of one increase manufacturing investment years. response for facility material the the facilities. with to in First, Massachusetts materials the the in filing was construction and SEC in in due inflation to pause made Canton, company The decision expected our decided

are justify to the cannot manufacturing margins investment. original achieve going demand than markets ability the it's represented pause required established alternatives Specifically, our We forward. XX% impact we as decisions evaluating the commercialized of We're the the simply updates our investment will made decision target ago. of products or potential And key this endeavor to meet from change capital project latest gross material facility our a that construction ability note given two estimated currently our our total for provide that future. the to to alternatives XX% this years in regarding important budget not greater existing to increase allocating and we'll and

for the Phase X to knee treatment third for our during progress ongoing Second, of we the continued osteoarthritis. make in trial quarter clinical ReNu

XXXX. than XX% more the further needed activated over trial recruitment seven of implementing sites, to of pace strategies for clinical has balance additional enrollment of as has patients Our enrolled the as additional well team the investigative the accelerate

of We continue end to the target by the enrollment the year. of completion

track late of interim remain first on in the complete of We for also subjects data to the XX% QX. analysis

launch planning X be amendment of the a end Phase FDA the second quarter to submit IND ready to the and of expect We are to to XXXX. by second an trial also

forward the timing investigator initiate as determined This at have amendment best major efficacy leverage IND why osteoarthritis, us we regulatory of submit as possible presenting is strategy required. sites. perspective have our XXX should a valid the gives and as the trial and as scientific trial the We and the to stage, not options X allows completed evidence and the current a of a thus advantages to approach. study in essentially trial, and moving is FDA second the randomized soon company the and based with operational study regulatory Phase current Phase from be that it safety immediately, approach X X plan FDA, continuing to Phase this patient of knee our active for second This ReNu more controlled on the

it and all a payment interested few care treatment. coding wound thoughts to and provide By for and reimbursement continuing rule on important these the and consistent on in decided initiative. parties participating July our delivered Based be changes proposed of this period, in and transition office details of be as the mechanisms November types a Townhall first date announcement this open Finally, physician proposed a well step reminder, the prior payments a CMS coding a forward Medicare standardize on products including way the them issued to in during for to represent on specific look the with tissue-based CMS the physician specific for in more the when early for as conducting received beneficial feedback want advanced event payment comment cellular we will the CMS completed. regarding under would I XXXX wound on is finalizing which engagement to X more CMS products. appropriate care to comment schedule in changes share from to fee of opportunity to the

in release. the sheet a balance quarter, of call for let David that, of third and to David? financial me the turn and of with our in our press results XXXX we the guidance review updated that financial quarter review as of conditions our financial Now, the over end today's

DaveFrancisco

the year-over-year I you, quarter with Net growth are was referenced Thank for a of during our will on all review otherwise third financial XXX.X quarter third million Revenue begin basis. my X%. of a rates Unless up XXXX specified remarks results. Gary. prepared

primarily administrative XX.X by XX to expenses in million of year-over-year million costs in increase The was XX%. and increase XX.X research and XX%. the XXXX driven The and revenue of prior up or surgical from of sports revenue in from in for operating X.X up or Net net XXXX third and of the PuraPly revenue programs restrictions. was was net in quarter costs increase care was X.X was spending to XX% increase the Our X% increase certain year-over-year, travel driven XXXX the amid approvals quarter third quarter XXXX X% our were or quarter development selling, advanced million third for products in expenses, The prior in headcount, force, products increase third XXXX clinical selling, an was the wound a XXX.X up general regulatory of and Gross third XX%. million, or revenue compared general million for million the direct in expenses million compared medicine year. of XX.X% up of last profit spend for marketing year for driven approximately changes and due Operating year. to for quarter XX.X XX.X gross XXXX net expense step was administrative was last sales year-over-year and products. the to primarily higher margin a and The compared by product and of seek in third travel COVID-XX compared of in our XX.X our million, mix. million R&D year, relaxed the primarily XX% change quarter by to related additional necessary and to study

and manufacturing exit GAAP Third the of company's facilities. year X.X non-operating its This expenses of charge million equipment Canton, in other to with incurred to X.X totaling fees million disposal operating to construction decision retention There the in was cancellation Massachusetts and $X.X as in X.X compares quarter progress items. XXXX one the pause activities. items of million facility certain of associated as connection restructuring company's project, in related company's period. included the to million well employee non-operating related certain construction the costs a certain with prior benefits

intangible X.X million of contingent prior of the year non-cash million consideration period, fair and for of amortization year-over-year. expenses XXXX, increased non-GAAP and items in non-operating operating of quarter these value Excluding third X.X the XX%

of to third of in reconciliation of August press of million compared Net in under XXXX reduced year, million non-operating compared year, of items to of of a primarily a income loss million Now was year-over-year X.X for decrease of results million financial driven expenses quarter EBITDA X.X XX.X million. quarter agreement million which compared extinguishment XXXX in to or of third last to the X.X of year expenses of income the XX.X X.X decrease XX.X rate Total this million compared of third decline EBITDA for XX.X period, borrowings total is third year afternoon. last Operating in these net our of non-cash million operating for not interest the quarter XX%, new or last prior X.X net XXXX. XX% last of a of the we XX.X detailed third Remaining the the was year. the and or XX% quarter XXXX. other income XXXX to million quarter have in XX.X credit million. the X.X a revenue signed quarter of million was income on Adjusted did attributable release decrease XXXX third for by revenue adjusted of debt, of impact including other

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

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

up revolving a XX to as we million reminder, XXX borrowings September on have available As facility of credit also a XXXX. of

updated from X% revenue roughly the sale year-over-year, XX% adjusted approximately ReNu and Net products net release net surgical revenue to now a approximately XXXX X% in range XXXX XXX ending XX, NuCel for an sales million review and excluding the the of from revenue of XXX revenue million months to XX the now XXXX, our to months five of products year-over-year. guidance year-over-year, of and XX, flat revenue press on which X% enforcement revenue May five to net this we million, approximately to of down for flat include to between expects Turning company of guidance, basis ReNu first December of care The net XX% advanced afternoon, decrease during a net approximately XX% the products revenue sports and months medicine PuraPly representing XXXX. XXXX assumes in XXXX, our and is XX XX% increases results wound from By decreased NuCel FDA and ended products grace period. our way reminder, year-over-year. attributable end our

first on five of basis. XXXX and growth these, NuCel XXXX, flat our Excluding the for revenue ReNu adjusted year-over-year applies sales guidance an months roughly of

the between generate of between net terms income XX million to net million. now million, GAAP for profitability XX income XX and expects adjusted In XX guidance and XXXX, company million

also EBITDA million. EBITDA million XX and of between adjusted XX expect We between and XX million and million XX

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

Our approximately and of previously. increase which full group Gross million X.X to weighted approximately will to GAAP of non-operating approximately our XX% count of at which million year-over-year and XX% approximately million range interest decrease margins D&A a non-amniotic to in and called full tax year-over-year, share year decline our million XXXX midpoint XX% XX of year-over-year. our And Dan the project. CapEx at expect will million compared the to approximately includes million. compared previously. prior XX% which XX% XX midpoint full operating be assumed the collectively rate prior year-over-year approximately compared We PMA XX a year XX% Non-cash approximately comp formed guidance, of prior XX%. turn to stock charges to XX% approximately our million X.X $XXX Road non-cash XX% with respectively year-over-year XX.X% Total and assumed of guidance which back other XXXX call million XX X a over compared of previously. XXXX the in GAAP revenue and to guidance, range XX% the of approximately sales to compared of expectation I'll to decrease that our of expenses average decrease XX a range approximately operator, of of net XXXX now related you. products million now expenses With and XXX non-PuraPly to to the to Sales XX% X.X growth expense will of compared range Total other year diluted to a to million assumes amniotic year-over-year. products

Operator

Thank you, sir. Instructions]. [Operator

with is Our first question from Steve Lichtman Steve? Oppenheimer.

Steve Lichtman

guys. as you wondering. if what, expected call bit Thank at you. perhaps business you specifically a Hi, got or down more the didn't second Gary, better, I could you would have was time? the on you drill get within talk that could quarter to worse that. amnion from Maybe little

Gary Gillheeney

Sure.

think products So continued that ASPs we I talked lot pressure competitive There are about, the the of of aggressive pricing discounting that out all in the that QX for has of rebating continues. and is a there. publishing without and

slightly, So bit and we but also the higher, a we confusion that see reimbursement. with consistent, more in little market maybe see

ASP a fee what there's physician reimbursement of in coming setting confusion, the necessarily means as with schedule non-published understanding lot support So, where the they and out, have setting, well particularly as sophisticated in it the that issue. office don't

or understand a the the publishes brings clarity, that at confusion be case didn't be what's and So ASPs they would so fee being least lot able obviously of predict up, that these a lot is until certainly CMS clarity to office we to that schedule, disturbance don't exactly physician and happening. base, see delivered to clearing of and noise,

Steve Lichtman

so expansion you on the thoughts is And does think but PuraPly nova you this all, guess, I TransCyte mentioned then or on products, follow-up that a on change new anything then facility And any update your the at side, impact mentioned on is in there? separate? Novachor, the don't I Okay.

Gary Gillheeney

we had a now. So is product that launch and Novachor, soft launched being right

And is we that that results The an more product. that a significant the impact quarter. expect a clinicians didn't field really different, of handling appreciate year, little have little better. the it'll have are expect a in very last we clinical this certainly from guided we've the As strong. we're impact next But would getting it

you're Regarding TransCyte, correct.

Our TransCyte in were and be new to scheduled facility. both manufactured Dermagraft our

particular have alternatives out But do we we'll on the So And when alternatives strategies to we additional actually those update forward. are we're you that in alternative some do have market. get products coming at. those looking

Steve Lichtman

two and jump Thanks. Okay. I'll back leave it queue. in at the

Operator

Thank much. you very

from will BTIG. with next Ryan Ryan? be Our Zimmerman question

Ryan Zimmerman

Good afternoon. follow want question. to of for Gary Thanks a taking couple up things. the on

impact don't lot You cited each how how I of not each? staffing, of kind And office, a think or those hurricane et of the factors, to to how magnitude the factors. parse this quarter, know of out cetera. to about the

Gary, is abate. into what's when can As of move a previously. not I but that that appreciate we mean, follow have a as in your you had this abating, couple does expected I then competition multi-part fourth I And quarter, of But expectation kind for question, ups.

Gary Gillheeney

it a the mean, week of out, Florida before down getting we hurricane started into is, It just the folks had the I So last day, then hit. last challenges to as product shut happened. sales And our some it area. little situational, just down affected bit

So speaks we into affected pressure, as range. still, to And mentioned. the going to of range, as to end range, as that at confusion, we're more competitive the reimbursement, were but ability certainly be the our guidance lower well that the jump the you

pressure going rebaiting does all competitive calculated asked, that major Schedule in the patients publishing pressure care make feeling, input that competitive site feel, is a think once right I changes are and before see take the think how ruling is, and kind how will and thing still CMS be important. the place delay the more there's of playing to on strategy that need. end. and Fee everyone's that said overhang ASP filing, to that the first products to that questions field And in That's we industries does for as input I all CMS that all clarity, to will our others it as Physician to input, the lift looking a of how when and of I've sure good step those have allowing end, I clearly is the and patients step So pricing looking think, we've leveling just they're as is what's of they're here the well that than access clinical those for

competitive as So share, significantly reasonable at results in that and extremely continue a in with the the well of we to think, site office reasonable care. that site in with area will help will do well add change and

Ryan Zimmerman

for though, of Okay. if that just be to and sure clear, kind I in Follow up Affinity is I for how think that we I to just expect want could, And me near-term do of the to follow as CMS move you down more that's published rate also XX%. into the quarter fourth 'XX? impact a that correct. make

Dave Francisco

we're mean, about But was to it that experiencing the pricing is pricing price definitely strategy down, the down. I going don't did Yes, competition right related we intense now. forward. talk part we take this of I mean, And that

still in But right of is on happening forward. fundamentals that team you in commercial the each broad. combat are the is that And in we're continue they ensuring the to commercial I we'll And So focused I the as understand can think strong know, the quite team fact the mean, accounts and situation business. very push that now. to everything these they that what's doing

and feel as the NuCel our growing modestly excluding and We guide we about would base business. doing they're standpoint. ReNu clearly a just continue of so, good out under foundation not but fast Dermagraft new like, really customer we're fundamentals that great the our as and and we and the job growing still core, to so getting to down It's from build

Ryan Zimmerman

about advanced or the of sports should be I we wound now of the And surgical and takes 'XX, comment considering in early, what rate I to that overall we the business, expectation on the your some care it's think as context you don't growth I is mean, and want if just puts but these right know guys, that may, be for of dynamics. all know 'XX, and medicine, it

Gary Gillheeney

we it, don't much we dynamics, a so the certainly But 'XX. some I have sales Ryan, about of Well, at force. way bigger will really talk mean, we the look

of of a new year, we've have growth end drive that customer that lot already this the seen, we've We at the year. reps will that added help even that

have headwinds, more new as With have do the in we of an products, mentioned, will you impact 'XX. that

is surgical brand in PuraPly well doing Our extremely the setting.

accounts, we in that added an will of And to that force. So that lot us growth a focus be on. sales next we've double-digit that's we're adding with accounts area available larger year

on competitive So, fundamentals of is get the going said, CMS's What as more when Dave assess the core business, to we have forward, good. business the happens we'll base information the environment. decisions.

Ryan Zimmerman

Just last a one in queue. I'll for back hop me,

need feel up consider other obviously, of Is the belt any some some cost the and to As tighten? how comes next about cost quarter into kind expect this you assuming the you're Dave, there like was year, But next facility to manage Just allow belt I think we up in scaling know dynamics you to lifted of do of there that you OpEx. margins? one-time kind that that a keep And back Massachusetts? year? back, those out, tightening do you

Dave Francisco

Yes, at in the fundamentals ready revenue. They're repeat. mean, But we going than said, to not but transitory yet, still outlook returns that of I it as our to Gary a we today. great said, talk Again, We here. the on in infrastructure are in to prudent capture continuing have sure customer we really, have said, obviously obviously, made to as and it will the based question. 'XX, kind resources the costs lot that a we're business the for is build that not strong. when we're what want investment there's we both base. demand of stronger are be Ryan. there 'XX We're is profile some basis to It's as make of about investment you

Ryan Zimmerman

guys. Thanks,

Operator

Instructions]. [Operator

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

Gary Gillheeney

you. Thank

Organogenesis (ORGO) 10 Nov 222022 Q3 Earnings call transcript