Earnings call transcript Q4 2022

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Operator

Welcome, ladies and gentlemen to the Fourth Quarter and Fiscal Year 2022 Earnings Conference Call for Organogenesis Holdings Inc. [Operator Instructions] 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 filed quarterly 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. include in certain accepted accordance or also are measures accounting will GAAP. calculated not with call references financial to that principles This the generally non-GAAP refer measures. these generally as We to financial financial measures presented website. earnings of and with press Reconciliations of on accordance these to the Investor measures in in most available are our the be GAAP release calculated comparable the portion non-GAAP Relations

Executive like Holdings’ Mr. now would Chief Please Gary President to Organogenesis Gillheeney, Sr., call sir. to I ahead, turn over S. and Officer. go the

Gary Gillheeney

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

our I with Let overview a an quarter results recent our in-depth operating an brief revenue call provide me fourth prepared of will today with of at the financial will introduced in with before cover key the our our we fourth outlook thoughts and our which few press questions. months. the of start guidance, our for remarks. Dave some sheet review begin release. then a end update results, and will developments then on and what opening year I our financial up on with of XXXX condition we’ll agenda during for quarter financial share XXXX our balance you

of Care guided. the of revenue & sales a QX, their exceeded by fourth the of product reported both decrease Sports above revenue a we driven Sports quarter products QX provided said, Wound in products for guidance composition Medicine our decrease – products. Surgical net $XXX.X of guidance. which review Surgical by third moreover, sale decrease Advanced a Fourth we quarter X% our quarter, the results than the the we respective sales end XX% Medicine a of was of million decrease range low and earnings our sale of for in of Wound with for beginning XX% of Advanced came our and And So a our in was different revenue call. Care range low That on what our year-over-year, the end

a our low driven growth the products end and range of sales sales total products. a assumed in sales guidance of decline in by net in XX% nearly of mid-single-digit XX% decline non-PuraPly Specifically, PuraPly

amniotic overall related in substitute in did challenging a from which reimbursement non-PuraPly outlined as And XX% our we decline the by on smaller players. As expected, call, in QX, setting physician in competitive sales expected year the environment office our physician publishing sales we contributor primary office by to products. in products the the see continuation year-over-year we to this market pressure skin in for driven uncertainty QX to was fact be ASPs the CMS of disruption operating of impacted

However, that we above the high these resulted range. sales our of were guidance were pleased end

loyalty. of care care and a combination specialties strong portfolio, well-established powerful of to maximize advanced in our our believe with strategy navigated the position proud are environment physician by commercial expanding a who deliver clear we of our our QX in line team of to sites execution wound competitive operating market. represents in results in with illustration the have the leader that We another execution our and leveraged our the We breadth comprehensive across ability challenging guidance a team’s customers brand right as multiple

results, help XXXX. spots there While our which a our net sales in QX growth declined in were support of will number year-over-year, bright

offset we the Excluding hospital in We growth double-digit the the serve and pleased compared the prior product outpatient ReNu, delivered by of setting team number accounts response partially and office the period. Care products our Dermagraft, Wound in headwinds setting the in office Advanced low NuCel And we introductions. saw our that of to market in sales impact the to encouraging the we’re setting, of delivered growth which the in new physician outpatient setting. that both double-digit hospital

to an progress months. of our in operational update recent Turning

afternoon, in First, and announce our we important a in were separate ongoing X to treatment press pleased of release the of achievement the ReNu of trial Phase knee clinical this progress notable an milestone osteoarthritis. for

safety performance interim power primary enrolled study. patients of the relative efficacy the the or X-month completed endpoint. the committee, of we was Specifically, objectives of This by FDA-approved the primary data analysis monitoring the reviewed to the had statistical who and independent assessed analysis patient reached study XX% and who effectiveness interim study of DMC,

comparing By on a a way positive necessary the data is maintaining pain trial, groups, at by and original the in of of are pain months are protocol of improving on reminder, the endpoint the news significant study start results the ReNu Based DMC’s patient the as of encouraged patients review the required in control reduction the the XX% in This very while a is the reduction approval. clinical supports enrolled to study that our of for belief primary and instructed of DMC’s continue we we results the first planned. XXX or X track. study function which were the FDA from efficacy from is review, the

sites the additional towards fact, enrollment to stated ‘XX of also milestone more the on this patient enrolled our year, release X helped enrollment pace the second activating enrollment clinical important strategies implementing completing our hard of result XXXX. we momentum that in of a milestone. than the team’s accelerate this the announced strong as the half morning’s very in by us to team The of over patients of XXX clinical patient get Phase recruiting additional And This delivered study. end in end press of clinical in work and

hear the year information to in IND request February, in also In recent our submitted responded with to FDA expect study for made to our X end of weeks study of We have Phase the with launch track year related be and additional from to to amendment to end the a last expected of X late second patient and coming respect quarter at progress quarter second in third the this ReNu. of a the remain of this year. second by with efforts the months, first our we FDA we to QX on the enrolled Phase plan for an and

regulatory our than previously, enable present meeting This essentially with our evidence X we we’ve knee gives the major osteoarthritis. scientific XXX-patient patients expect leverage plan a represent as strategy on with moving reminder, operational valid that to in us safety FDA, that sites. the the effectiveness active the with our And advantages to more as more treatment options of us forward, the soon of As plan is from the completed propose belief and based hear will investigator a the and of FDA ReNu continuing study together as strategy. XXX current Phase we RCT for first to discussed the and in

to Recall expected put response recent materials to evaluate alternatives and In to in fall. project Canton, we’ve material in in pause addition in the investment last after our on manufacturing to continued clinical the notable potential also months, due Massachusetts hold inflation facility this construction a progress in to this was that facility construction for costs recent increases decision of years.

a X years represented estimated increase last investment original from budget XX% the ago. the Specifically, project

as of to and we market’s TransCyte expected and was Dermagraft have end including for quarter the ability to products, and of of in meet achieve possible not back by is year. decision a products existing future, or impact products these our remain plan as XX% multiple soon used demand our manufacture market greater definitive building our third to margins to to in place on commercialized be to this ability intended target bringing this expect the than the focused to the the our While gross the

substitute fee during to changes value presenter. Organogenesis under Lastly, skin questions virtual feedback thoughts five I’d specific the our call. and to interested schedule. hall as allotted which on terminology a the an X questions and The the responses our XX, to and was on each to January in parties participated skin I opportunity present few for respond to on CMS’ previewed earnings conducted related substitute organized products town the share to payment of minutes QX like opportunity share to event CMS physician in

applaud of this in schedule CMS July. discussion with a key complicated, that the initiative And their CMS wide-ranging, formally of constituents update advance for to while providing engaging in during we fee constituents updates warranted. longer or believe we And the be annual will is engaging hall, current key important understanding physician town with proposed not our it’s

However, constituents, in including continue our coming key to efforts engage we plan on topic this CMS, vigorous to months. with

Dave. turn the me With that, call to over let

Dave Francisco

fourth for quarter fourth our a Thank a remarks during all otherwise are I will with results, you, prepared million, begin the rates of review growth unless $XXX.X of basis. referenced year-over-year Gary. and Net down was revenue XX%. XXXX my financial on quarter specified,

Advanced was Our for the from million, XXXX products XXXX net of PuraPly & X%. Surgical Sports revenue the $XX.X the XX%. fourth million, fourth quarter net was products XXXX was quarter fourth Care Medicine revenue $XXX.X of down quarter from of for revenue Wound And net lastly, down down $X.X X%, million, for with

fixed changes gross cost for million primarily approximately compared Gross margin last Joya in year. the was activities. prior revenue La $XX.X restructuring of was year quarter fourth XX.X% to absorption as profit mix driven in compared and the of our period, change product by XX.X% impacted net by which normalized XXXX or The to was

in administrative The by quarter operating fourth million an to Operating expenses costs XX% XXXX XXXX $X million compared increase increase expenses X%. year million of compared to selling, development a a for in in million period. or year, last general in prior X% $X.X the or fourth were increase $XX.X driven and the and or $XX.X was increase quarter the X.X% and of expenses research of

costs expenses non-operating in retention year. benefits million, Fourth quarter as well associated consisting of the activities. This $X.X prior including to charges million operating GAAP restructuring and exit items the of employee XXXX compares restructuring-related as other company’s totaling $X.X with certain

in amortization of spending non-cash today’s Note, studies clinical expenses non-operating expense. in increased SG&A of mid-single-digit items XXXX Excluding non-GAAP growth X% and fourth we and press of these our items these ReNu earnings periods, operating by million have the non-cash study-related release. of detailed quarter support higher for year-over-year, in and reconciliation a intangible $X.X non-operating driven both in

operating prioritize growth. for expenses Our reflects our our enhance XXXX investments growth non-GAAP that to in strategy areas foundation future in

was the team, OpEx XX% in marketing, funding $XX in initiatives, clinical in million commercial including The studies. and the non-GAAP XXXX, roughly new and our supporting non-GAAP of Specifically, product development roughly of increase invested in clinical million expanding $X.X sales operating balance increase on for income and objectives was Operating the to support our million decrease compared expenses infrastructure year, quarter of operating continuing a this to to $XX enhance year focused last $XX.X forward. million. was income of fourth growth largely of going XXXX R&D

quarter Total in interest project. related expense XXXX to to for on in in was million. fourth related total to year, the expense last lower other our The year-over-year remaining X of million gain of fourth of capitalized $X.X is compared borrowings. million the interest XXXX decision outstanding a to decline was change decrease quarter quarter expense Canton The of the fourth $X.X a other total to $X.X expense primarily for on manufacturing pause XXXX attributable the other

fourth million a $XX.X to of compared $XX of quarter $X.X XXXX Net the income decrease million was year, million. last for

from $XX.X in the allowance, net net or income of or of for million $XX.X of taxes included net million As quarter assets. provided recorded million adjusted Adjusted revenue XXXX for a amount of the revenue release reconciliation fourth XXXX the in of to – net the compared of our a of press quarter XX% the resulting valuation release. last against previously $XX our tax EBITDA We full results our year. income deferred benefit U.S. XX% a taxes recognized, earnings reminder, was EBITDA fourth full of

to Turning sheet. balance now the

and debt which million restricted restricted the $XXX.X and company of cash, compared December $X.X As million obligations. in and million $XX.X December to were million as $XXX.X of of financed cash had in XXXX. debt obligations, cash XX, and cash XX, obligations in cash $XX.X and million This XXXX, in lease equivalents equivalents cash

our on XXXX. also as We borrowings December of credit XX, to have available facility up $XXX of million revolving

press in Turning afternoon. now release we review which of to financial XXXX this guidance, our a introduced our

between range net For the expects million XX of year-over-year company net net the to December assumes for $XXX revenue range X% an net the net as the million Care a XXXX, million the representing ending $XXX a down Wound for guidance and representing year compared to X% Advanced up year change XXXX. as revenue in $XXX revenue between months to compared to of revenue of revenue of approximately December million, XX, $XXX.X The flat from X% ended year-over and XXXX products December XX, million XXXX. $XXX.X million, XX, change of $XXX increase of ended

million the $XXX Sports of Net between XX, million, of $XXX increase revenue as an $XX representing $XX.X sale PuraPly net net products approximately XX% December products as revenue December and year the of XX% the from our from decrease XX% ended XXXX. Surgical million year-over-year, million, XXXX. compared for revenue for to revenue Medicine & And net representing ended X% between a $XX and of compared year to to million of $XXX.X of million year-over-year, XX, to

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

for to addition are some me, financial formal considerations purposes. modeling – our providing we In excuse guidance ‘XX, for XXXX

the our year-over-year non-PuraPly and Gross increase X%, amniotic, year the will expenses at will of the total year-over-year. which For margins sales range PMA GAAP And XX.X% approximately products, operating approximately approximately increase of XXXX, and Total respectively, of include of products, other to X% year-over-year. fiscal will XX% expect XXXX. we X% midpoint expenses to XX.X%. in operating non-GAAP increase X% our

expenses diluted charges and of and intangible $X.X and million interest XX% year, non-GAAP approximately last non-cash compared Total other non-cash million operating respectively. of of approximately $XXX estimated $X.X include and Non-cash average XX%, XXXX and of shares of restructuring $X.X $X million $X.X Our comp expense rates approximately non-GAAP expenses million. amortization million depreciation $X.X approximately to approximately tax and of million. stock million, weighted of

year XXXX $XX expect be to $XX also million full to We approximately CapEx million.

and significant to respectively. that like quarters, our our QX remind And business investors largest seasonality and I’d representing year, finally, smallest QX experiences each quarterly with revenue

the first last X to revenue. quarter approximately XX% revenues years, XX% Over annual our ranged have of between

expect year we of revenue. XX% first $XXX in $XX or our to the of million to XXXX revenue XXXX, For net XX% approximately quarter the range million full

back to Gary With some the that, over turn I’ll call for closing remarks.

Gary Gillheeney

to was a team’s but this continue growth XXXX expect year. year, we the David. proud Thanks, challenging strategies, long-term to are commitment our of and we that

our the be the in revenue in guidance not of readily growth on expectations products of ASPs. Although Wound based for the driven recently office nationwide our launches our in setting it may Care net published Advanced impact sales measured reflected apparent reflects working in growth XXXX, XXXX through physician guidance, with products by primarily key

substitutes competitive CMS’ to from customer its We to surrounding office substitute ASP and under have for This and schedule long-term the this the to opportunity the solutions due for expect advanced for skin players framework skin introduce the to CMS payments continued differentiated initiatives ASPs care in clinically operating We forward wound challenges opportunity nationwide. for patients setting navigate the uncertainty year. proven our significant outside also the their noise We to potential in fee Medicare treatments. changes represents Organogenesis. a with for physician applaud publish XXXX published growth pushing now smaller

products centers. in stable And impacted while care of deliver the Advanced in our hospital in Care XXXX, setting to Advanced Wound of centers expect office sales sales we our and in Wound Care be growth will the wound outpatient products

growth in expect and active We new the customers. of number

and is advanced in of executing strategy treated And adoption of units importantly, in our expected this number growth XXXX. modality, growing entering on in our again, our to with of expect products full new patients We year share the sold result stronger commercialization.

in & the deliver strengthening progress Surgical continued to Sports in XXXX. markets We position Medicine competitive our in also expect

So of of we the year the May – are in business X this strategic FDA following in enforcement our repositioning in of XXXX. deadline

for soft our our will teams using continue including continue our procedures surgical strategies, for continue expand further independent programs, We product focus look in and further we’re procedure to potential identify foot of ankle increasing tissue direct solutions emphasis relationships commercial areas. small our optimize which spine agency in and certain testing and and ongoing progress to an awareness specialists to opportunities on fusion of pilot with wound to beyond commercial in

We commercialization PuraPlyMZ, new it full also our of to adoption product, as look forward this market enters strong year.

mentioned more And growth revenue on measured generation are year. expense earlier, in expect prudent strong focused XXXX will as we this highest profile investment Dave operating help priority a which drive we despite EBITDA in our net areas, adjusted

centers confident care as right in States setting surgical in strengthen are we the the our that market position sports have We XXXX. as United strategy on to in position office wound in and across continue well to competitive the to the medicine leadership our build

Importantly, normalized the growth in we target is growth our that believe and of long-term basis. sustainable opportunity we continue for low long-term confident compelling, to double-digit remain very Organogenesis a on

Our business fundamentals are strong.

improving leader by our to a products substantially continue healing highly on advanced efficacious that will outcomes medicine markets as be of improve launching burn innovative, mission patient care and We we wound our integrated highly position in sports in the and care. surgical reduce provide competitive while solutions cost overall to deliver

it Operator, back you. to I’ll turn

Operator

Instructions] from Thank will [Operator you, our Ryan Zimmerman BTIG. question sir. from first come And

Ryan Zimmerman

Alright. all the to Gary a I’m going number I if of okay. taking questions, questions. Dave, Thanks and for color. ask appreciate the that’s

such for growth for can be from talk might on queue, in underpinning for the that competitive back. in capacity want And why elaborate hop ask a flat, drastic specifically? seen And usage about of you declines start XXXX. call. curious you but noise, could. here. assumptions bit your update to just then And last ‘XX because if PuraPly on about I’ll to I’ll some perspective. pricing some I I’m other I also want there guidance fairly ask guidance the But think, if I a if assume can I macro so, questions think appreciate there CMS. ‘XX certainly, growth held And others then was what into And here has I the the I from as is market market is with the if if

Gary Gillheeney

Dave, So in. I mean can I’ll you jump start.

So XXXX in clearly our growth there market guidance. is

our Dave that at at I accounts expected and talked mentioned XX%, all non-PuraPly year expecting of products of new XXXX. again the the reflection grow and that we during a are midpoint to mentioned, about we’re that’s As that the in

have more accounts. We active

more office. and outpatient both units physician sold setting in have in being the the We

for opportunities the significant non-PuraPly So in growth products.

Now to QX. published and in year, fee was schedule as PuraPly a causes we’ve it published relates will be for PuraPly, pause that of PuraPly seen Once physician the in We’ve in XT. and a acquisition of at end the pause entire dropped typically actually seen the that XXXX the pause. mid-December,

So once have that product rest we we will the going that year, with with And growth we our forward be will by the that now pause of published, get portfolio. relative. more comps the this of overcome

Dave Francisco

Yes, absolutely, Gary.

thing non-PuraPly in around sales we These in I speed of to perspective the guys side think ‘XX. on incremental and the only house, XXXX. other time in ready and obviously July throughout the came the to from really on contribute frame and growth ‘XX reps up brought August

Ryan Zimmerman

I disclosure one the call. the we’re looking I I PuraPly Okay. of this to in still on a want And was topic. through just while as thing ask XX-K did ahead it see on

need that means, does calls implement you refund I’m the it potentially that these that a CMS for amounts on if if may there expect owe take elaborate to And to effect to what to wondering follow rebates you that rebate, from can out just CMS to be what be calculated relates XXXX. it As may through. fact

Gary Gillheeney

be, Dave, but that it would any. So we to know what if I’ll don’t transfer amount

time. calculable So that’s in point this something that’s not at

Dave Francisco

at play Ryan, going Yes, this it’s that’s how out, unclear to point, so...

Ryan Zimmerman

XX-K. factor the in citing risk Just the

Dave Francisco

Yes, that’s correct.

Ryan Zimmerman

And really first think to clinical to Okay. trial – be I great. as the that is more then looks power have up for off, To as fantastic. a not on interim trial, light, far positive your the analysis able

is forward little going a elaborated of you CMS. kind the Just Gary, plan bit, with on what

You’re on track.

But the us here. understand some seeking IND. You’re help outcomes of

the RCT Help understand time neo XXX-patient X on conjunction us if the can’t submit that lines you could Phase for second like? trial what with be look does market. in potentially a potentially of kind when So trial, indication

Gary Gillheeney

Sure.

first XXXX. efficacy use if – end Phase – approval. we with would a second our XXXX. Phase study accepted, the way interim phase in the answer trial. To the our at first QX the analysis approval Phase are next with or be expect looking the second fact, is If accepted, second in for approval data, trial which half first XXXX the our the initiating, was the would the trial to required, of of X FDA BLA your if, for we study submission discussion half to X are second in if go that BLA rather has And So XXX-patient the and trial question, XXX% we of BLA would of X the through all be

Ryan Zimmerman

on helpful And a that. Very in. then could if couple squeeze I more

Gary Gillheeney

Sure.

Ryan Zimmerman

to they Competitive of the after curious of Do number sight thinking there. the XXXX. think get the year? gets happens entirety help yet around understand better think, just quarter, line supposed kind CMS the competitive And first quarter. Just I one perspective this fourth to what published your you pressure. into current abate products your over of persisting new pressures, more in of quarter, are now were us terms and the a into of

Gary Gillheeney

Sure.

publish just created to on products impact which has did market confusion, removed created still I in CMS process they why confusion. see the which first has see – the additional the some the So quarter. list. have expect whole I XX clearly think we is several, believe in And some

for better our noise, technology the with the that out of even not those perhaps customers But programs we’re market. rebating rest are some is CMS once results. those some is impact of even starting actually, other the seeing with they if competitive Now because competitive absorbed to getting the we’re to products, reverting that see see to there, the back in get one of of start would information us the that expect we publishes much to trends

And we noise XT, starting see back. that and improvement is recruiting there have with in some as Affinity been haven’t national a customers basis that we’re in those in competitive accounts those now on products. So launch with just you we to –

to starting inroads see little earlier. We’re some a

tells seeing are products some of the on other in our dehydrated they clinicians not me that of that are the So using and much products the benefits perhaps side. so

we get So better We going better, better think of gets eventually, it published. Ryan. gets will is win. to think efficacy gets because these think We it others because it some

question, think – So it in – we same encouraging. the to answer it your we Though improves. and are our But right see is is far now, same. XXXX noise confusion the the trends it’s the so

Ryan Zimmerman

kind on your But the I a income? the non-cash. and year-over-year Right. these of up on into it the they question adjusted how then is down a are to modestly, thinking guidance more what there bouncing – kind is top implied That’s and get your I back are ‘XX? based I’ll are I apologize, queue, helpful. of that the are where bit line But little I’m bit – are know control going in to given around hop levers be Because guidance. that but and me, And about essentially here. line, of said, are, with little in sales spend you some for and your EBITDA, expenses last net mean And

Dave Francisco

environment also based gross from standpoint, of there are you absolutely. where, PuraPly. decline in see on And flattish line, the related mean to I mix is is margin, a see looking Ryan. our one thing this is can we the that, I primarily Yes, prepared top an which at remarks, say the out would we shift obviously,

there, imagine, business that’s fairly profitable As might you a franchised.

expenses is back relatively do that the to trying be in. we’re It’s investing prudent operating what So minor. we’re about

think and deep resources the that we we’re most we’re I – they’ll tools add are that optimizing digging all the where in redeploying the pretty value. we’ve levers have our got to ensure

where are at different again, profile things. all consistent point, we we line. And the we’ve forward, those is to around your got on So think the with going that investment that we’re looking top

Ryan Zimmerman

my you am I stop queue. Okay. And answered appreciate to hop questions back going there. all in today. But

Gary Gillheeney

you. Sure, Ryan. Thank

Dave Francisco

Thanks, Ryan.

Operator

Thank you.

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

Gary Gillheeney

Thank you.

Organogenesis (ORGO) 1 Mar 232022 Q4 Earnings call transcript