Third Quarter 2023 Financial Results Summary:
- Net revenue of
$108.5 million for the third quarter of 2023, a decrease of$8.3 million compared to net revenue of$116.9 million for the third quarter of 2022. Net revenue for the third quarter of 2023 consists of:- Net revenue from Advanced Wound Care products of
$101.4 million , a decrease of 7% from the third quarter of 2022. - Net revenue from Surgical & Sports Medicine products of
$7.2 million , a decrease of 2% from the third quarter of 2022.
- Net revenue from Advanced Wound Care products of
- Net income of
$3.2 million for the third quarter of 2023, compared to net income of$0.2 million for the third quarter of 2022, an increase of$3.0 million . - Adjusted net income1 of
$5.3 million for the third quarter of 2023, compared to an adjusted net income of$5.1 million for the third quarter of 2022, an increase of$0.2 million . - Adjusted EBITDA of
$16.0 million for the third quarter of 2023, compared to Adjusted EBITDA of$11.6 million for the third quarter of 2022, an increase of$4.4 million .
"Our third quarter revenue results were impacted by the LCD-related issues discussed on our second quarter call," said
1Defined as GAAP net income (loss) adjusted to exclude the effect of amortization, restructuring charges, LCD legal fees and sales retention, write off of certain assets, facility construction project pause costs, GPO settlement fee and the resulting income taxes on these items.
Third Quarter 2023 Financial Results:
Three Months Ended | Change | ||||||||||||||
2023 | 2022 | $ | % | ||||||||||||
(in thousands, except for percentages) | |||||||||||||||
Advanced Wound Care | $ | 101,357 | $ | 109,514 | $ | (8,157 | ) | (7%) | |||||||
Surgical & Sports Medicine | 7,174 | 7,345 | (171 | ) | (2%) | ||||||||||
Net revenue | $ | 108,531 | $ | 116,859 | $ | (8,328 | ) | (7%) |
Net revenue for the third quarter of 2023 was
Gross profit for the third quarter of 2023 was
Operating expenses for the third quarter of 2023 were
Operating income for the third quarter of 2023 was
Total other expense, net, for the third quarter of 2023 was
Net income for the third quarter of 2023 was
Adjusted net income of
Adjusted EBITDA was
As of
Nine Months ended
The following table represents net revenue by product grouping for the nine months ended
Nine Months Ended | Change | ||||||||||||||
2023 | 2022 | $ | % | ||||||||||||
(in thousands, except for percentages) | |||||||||||||||
Advanced Wound Care | $ | 312,349 | $ | 313,395 | $ | (1,046 | ) | 0% | |||||||
Surgical & Sports Medicine | 21,140 | 21,982 | (842 | ) | (4%) | ||||||||||
Net revenue | $ | 333,489 | $ | 335,377 | $ | (1,888 | ) | (1%) |
Net revenue for the nine months ended
Gross profit for the nine months ended
Operating expenses for the nine months ended
Operating income for the nine months ended
Total other expenses, net, for the nine months ended
Net income of
Adjusted net income for the nine months ended
Adjusted EBITDA of
Fiscal Year 2023 Guidance:
For the year ending
- Net revenue between
$433 million and$446 million , representing a decrease of approximately 1% to 4% year-over-year, as compared to net revenue of$450.9 million for the year endedDecember 31, 2022 .- The 2023 net revenue guidance range assumes:
- Net revenue from Advanced Wound Care products between
$406 million and$418 million , a decrease of 1% to 4% year-over-year as compared to net revenue of$422.2 million for the year endedDecember 31, 2022 . - Net revenue from Surgical & Sports Medicine products between
$27 million and$29 million , an approximately 6% decrease to 0% increase year-over-year as compared to net revenue of$28.7 million for the year endedDecember 31, 2022 .
- Net revenue from Advanced Wound Care products between
- The 2023 net revenue guidance range assumes:
- Net income between
$4 million and$9 million and adjusted net income between$11 million and$17 million . - EBITDA between
$26 million and$37 million and Adjusted EBITDA between$40 million and$51 million .
Third Quarter Earnings Conference Call:
Financial results for the third fiscal quarter of 2023 will be reported after the market closes on November, 9th. Management will host a conference call at
UNAUDITED CONSOLIDATED BA
(amounts in thousands, except share and per share data)
2023 | 2022 | |||||||
Assets | ||||||||
Current assets: | ||||||||
Cash and cash equivalents | $ | 98,226 | $ | 102,478 | ||||
Restricted cash | 599 | 812 | ||||||
Accounts receivable, net | 89,276 | 89,450 | ||||||
Inventory, net | 27,905 | 24,783 | ||||||
Prepaid expenses and other current assets | 9,567 | 5,086 | ||||||
Total current assets | 225,573 | 222,609 | ||||||
Property and equipment, net | 117,503 | 102,463 | ||||||
Intangible assets, net | 17,101 | 20,789 | ||||||
28,772 | 28,772 | |||||||
Operating lease right-of-use assets, net | 42,363 | 43,192 | ||||||
Deferred tax asset, net | 30,014 | 30,014 | ||||||
Other assets | 1,321 | 1,520 | ||||||
Total assets | $ | 462,647 | $ | 449,359 | ||||
Liabilities and Stockholders’ Equity | ||||||||
Current liabilities: | ||||||||
Current portion of term loan, net of debt issuance costs | $ | 5,483 | $ | 4,538 | ||||
Current portion of finance lease obligations | 1,174 | - | ||||||
Current portion of operating lease obligations | 13,048 | 11,708 | ||||||
Accounts payable | 26,784 | 32,330 | ||||||
Accrued expenses and other current liabilities | 34,993 | 26,447 | ||||||
Total current liabilities | 81,482 | 75,023 | ||||||
Term loan, net of current portion and debt issuance costs | 62,117 | 66,231 | ||||||
Finance lease obligations, net of current portion | 2,166 | - | ||||||
Operating lease obligations, net of current portion | 38,826 | 41,314 | ||||||
Other liabilities | 1,191 | 1,122 | ||||||
Total liabilities | 185,782 | 183,690 | ||||||
Commitments and contingencies (Note 18) | ||||||||
Stockholders’ equity: | ||||||||
Preferred stock, | - | - | ||||||
Common stock, | 13 | 13 | ||||||
Additional paid-in capital | 317,254 | 310,957 | ||||||
Accumulated deficit | (40,402 | ) | (45,301 | ) | ||||
Total stockholders’ equity | 276,865 | 265,669 | ||||||
Total liabilities and stockholders’ equity | $ | 462,647 | $ | 449,359 |
(amounts in thousands, except share and per share data)
Three Months Ended | Nine Months Ended | |||||||||||||||
2023 | 2022 | 2023 | 2022 | |||||||||||||
Net revenue | $ | 108,531 | $ | 116,859 | $ | 333,489 | $ | 335,377 | ||||||||
Cost of goods sold | 25,789 | 26,177 | 78,712 | 77,909 | ||||||||||||
Gross profit | 82,742 | 90,682 | 254,777 | 257,468 | ||||||||||||
Operating expenses: | ||||||||||||||||
Selling, general and administrative | 64,222 | 79,328 | 208,373 | 215,515 | ||||||||||||
Research and development | 10,470 | 9,575 | 32,610 | 28,367 | ||||||||||||
Total operating expenses | 74,692 | 88,903 | 240,983 | 243,882 | ||||||||||||
Income from operations | 8,050 | 1,779 | 13,794 | 13,586 | ||||||||||||
Other expense, net: | ||||||||||||||||
Interest expense, net | (444 | ) | (572 | ) | (1,688 | ) | (2,039 | ) | ||||||||
Other income (expense), net | 31 | 5 | 82 | (19 | ) | |||||||||||
Total other expense, net | (413 | ) | (567 | ) | (1,606 | ) | (2,058 | ) | ||||||||
Net income before income taxes | 7,637 | 1,212 | 12,188 | 11,528 | ||||||||||||
Income tax expense | (4,470 | ) | (997 | ) | (6,675 | ) | (3,482 | ) | ||||||||
Net income | $ | 3,167 | $ | 215 | $ | 5,513 | $ | 8,046 | ||||||||
Net income, per share: | ||||||||||||||||
Basic | $ | 0.02 | $ | 0.00 | $ | 0.04 | $ | 0.06 | ||||||||
Diluted | $ | 0.02 | $ | 0.00 | $ | 0.04 | $ | 0.06 | ||||||||
Weighted-average common shares outstanding | ||||||||||||||||
Basic | 131,312,483 | 130,903,160 | 131,230,882 | 129,784,890 | ||||||||||||
Diluted | 133,417,721 | 132,232,954 | 132,790,296 | 132,555,265 |
(amounts in thousands, except share and per share data)
Nine Months Ended | ||||||||
2023 | 2022 | |||||||
Cash flows from operating activities: | ||||||||
Net Income | $ | 5,513 | $ | 8,046 | ||||
Adjustments to reconcile net income to net cash provided by operating activities: | ||||||||
Depreciation | 7,466 | 4,331 | ||||||
Amortization of intangible assets | 3,689 | 3,662 | ||||||
Reduction in the carrying value of right-of-use assets | 5,964 | 5,483 | ||||||
Non-cash interest expense | 321 | 326 | ||||||
Deferred interest expense | 367 | 428 | ||||||
Provision recorded for credit losses | 1,320 | 855 | ||||||
Loss on disposal of property and equipment | 104 | 4,412 | ||||||
Adjustment for excess and obsolete inventories | 4,351 | 7,621 | ||||||
Stock-based compensation | 6,630 | 4,697 | ||||||
Changes in operating assets and liabilities: | ||||||||
Accounts receivable | (1,761 | ) | (11,510 | ) | ||||
Inventory | (7,473 | ) | (7,282 | ) | ||||
Prepaid expenses and other current assets | (4,491 | ) | 1 | |||||
Operating leases | (6,282 | ) | (5,250 | ) | ||||
Accounts payable | (3,661 | ) | 5,261 | |||||
Accrued expenses and other current liabilities | 8,179 | (4,061 | ) | |||||
Other liabilities | 68 | 39 | ||||||
Net cash provided by operating activities | 20,304 | 17,059 | ||||||
Cash flows from investing activities: | ||||||||
Purchases of property and equipment | (21,040 | ) | (23,242 | ) | ||||
Net cash used in investing activities | (21,040 | ) | (23,242 | ) | ||||
Cash flows from financing activities: | ||||||||
Payments of term loan under the 2021 Credit Agreement | (3,281 | ) | (938 | ) | ||||
Payments of withholding taxes in connection with RSUs vesting | (333 | ) | (648 | ) | ||||
Proceeds from the exercise of stock options | - | 2,070 | ||||||
Principal repayments of finance lease obligations | (114 | ) | (200 | ) | ||||
Payment of deferred acquisition consideration | - | (608 | ) | |||||
Net cash used in financing activities | (3,728 | ) | (324 | ) | ||||
Change in cash, cash equivalents and restricted cash | (4,465 | ) | (6,507 | ) | ||||
Cash, cash equivalents, and restricted cash, beginning of period | 103,290 | 114,528 | ||||||
Cash, cash equivalents, and restricted cash, end of period | $ | 98,825 | $ | 108,021 | ||||
Supplemental disclosure of cash flow information: | ||||||||
Cash paid for interest | $ | 3,896 | $ | 1,787 | ||||
Cash paid for income taxes | $ | 3,021 | $ | 974 | ||||
Supplemental disclosure of non-cash investing and financing activities: | ||||||||
Purchases of property and equipment included in accounts payable and accrued expenses | $ | 4,146 | $ | 5,547 | ||||
Right-of-use assets obtained through lease obligations | $ | 5,138 | $ | 1,708 | ||||
Shares issued for deferred acquisition consideration | $ | - | $ | 828 |
Non-GAAP Financial Measures
Our management uses financial measures that are not in accordance with generally accepted accounting principles in
The following table presents a reconciliation of GAAP net income to non-GAAP EBITDA and non-GAAP Adjusted EBITDA, for the periods presented:
Three Months Ended | Nine Months Ended | |||||||||||||||
2023 | 2022 | 2023 | 2022 | |||||||||||||
(Unaudited) (in thousands) | ||||||||||||||||
Net Income | $ | 3,167 | $ | 215 | $ | 5,513 | $ | 8,046 | ||||||||
Interest expense, net | 444 | 572 | 1,688 | 2,039 | ||||||||||||
Income tax expense | 4,470 | 997 | 6,675 | 3,482 | ||||||||||||
Depreciation | 2,544 | 1,456 | 7,466 | 4,331 | ||||||||||||
Amortization | 1,229 | 1,220 | 3,689 | 3,662 | ||||||||||||
EBITDA | 11,854 | 4,460 | 25,031 | 21,560 | ||||||||||||
Stock-based compensation expense | 2,417 | 1,702 | 6,630 | 4,697 | ||||||||||||
Restructuring charge (1) | 95 | 611 | 1,878 | 1,518 | ||||||||||||
Legal fees (2) | 1,182 | - | 1,182 | - | ||||||||||||
Sales retention (3) | 422 | - | 422 | - | ||||||||||||
Write-off of certain assets (4) | - | 4,200 | - | 4,200 | ||||||||||||
Facility construction project pause (5) | - | 632 | - | 632 | ||||||||||||
Settlement fee (6) | - | - | - | 2,600 | ||||||||||||
Adjusted EBITDA | $ | 15,970 | $ | 11,605 | $ | 35,143 | $ | 35,207 | ||||||||
- Amounts reflect employee severance, retention and benefits as well as other exit costs associated with the Company’s restructuring activities.
- Amount represents the legal fees incurred related to the recently published and withdrawn local coverage determinations, or LCDs.
- Amount represents the compensation expenses related to retention for those sales employees impacted by the LCDs.
- Amount reflects the disposal of certain equipment related to the Company's
Canton, Massachusetts facilities. - Amount reflects the cancellation fees incurred in connection with the Company's decision to pause one of its manufacturing facility construction projects.
- Amounts reflect the fee the Company paid to a group purchasing organization, or GPO, to settle previously disputed GPO fees.
The following table presents a reconciliation of GAAP net income to non-GAAP adjusted net income, for the periods presented:
Three Months Ended | Nine Months Ended | |||||||||||||||
2023 | 2022 | 2023 | 2022 | |||||||||||||
(Unaudited) (in thousands) | (in thousands) | |||||||||||||||
Net Income | $ | 3,167 | $ | 215 | $ | 5,513 | $ | 8,046 | ||||||||
Amortization | 1,229 | 1,220 | 3,689 | 3,662 | ||||||||||||
Restructuring charge (1) | 95 | 611 | 1,878 | 1,518 | ||||||||||||
Legal fees (2) | 1,182 | - | 1,182 | - | ||||||||||||
Sales retention (3) | 422 | - | 422 | - | ||||||||||||
Write-off of certain assets (4) | - | 4,200 | - | 4,200 | ||||||||||||
Facility construction project pause (5) | - | 632 | - | 632 | ||||||||||||
Settlement fee (6) | - | - | - | 2,600 | ||||||||||||
Tax on above | (791 | ) | (1,781 | ) | (1,936 | ) | (3,371 | ) | ||||||||
Adjusted net income | $ | 5,304 | $ | 5,097 | $ | 10,748 | $ | 17,287 | ||||||||
- Amounts reflect employee severance, retention and benefits as well as other exit costs associated with the Company’s restructuring activities.
- Amount represents the legal fees incurred related to the recently published and withdrawn LCDs.
- Amount represents the compensation expenses related to retention for those sales employees impacted by the LCDs.
- Amount reflects the disposal of certain equipment related to the Company's
Canton, Massachusetts facilities. - Amount reflects the cancellation fees incurred in connection with the Company's decision to pause one of its manufacturing facility construction projects.
- Amounts reflect the fee the Company paid to a GPO to settle previously disputed GPO fees.
The following table presents a reconciliation of projected GAAP net income to projected non-GAAP EBITDA and projected non-GAAP Adjusted EBITDA included in our guidance for the year ending
Year Ending | ||||||||
2023L | 2023H | |||||||
Net income | $ | 4,200 | $ | 9,300 | ||||
Interest expense | 2,700 | 2,700 | ||||||
Income tax expense | 4,700 | 9,700 | ||||||
Depreciation | 9,900 | 9,900 | ||||||
Amortization | 4,900 | 4,900 | ||||||
EBITDA | $ | 26,400 | $ | 36,500 | ||||
Stock-based compensation expense | 9,000 | 9,000 | ||||||
Restructuring charge | 3,400 | 3,400 | ||||||
LCD legal fees and sales retention | 1,600 | 1,600 | ||||||
Adjusted EBITDA | $ | 40,400 | $ | 50,500 |
The following table presents a reconciliation of projected GAAP net income to projected non-GAAP adjusted net income included in our guidance for the year ending
Year Ending | ||||||||
2023L | 2023H | |||||||
Net income | $ | 4,200 | $ | 9,300 | ||||
Amortization | 4,900 | 4,900 | ||||||
Restructuring charge | 3,400 | 3,400 | ||||||
LCD legal fees and sales retention | 1,600 | 1,600 | ||||||
Tax on above | (2,700 | ) | (2,700 | ) | ||||
Adjusted net income | $ | 11,400 | $ | 16,500 |
Forward-Looking Statements
This release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements relate to expectations or forecasts of future events. Forward-looking statements may be identified by the use of words such as “forecast,” “intend,” “seek,” “target,” “anticipate,” “believe,” “expect,” “estimate,” “plan,” “outlook,” and “project” and other similar expressions that predict or indicate future events or trends or that are not statements of historical matters. Such forward-looking statements include statements relating to the Company’s expected revenue, net income, adjusted net income, EBITDA, and Adjusted EBITDA for fiscal 2023 and the breakdown of expected revenue in both its Advanced Wound Care and Surgical & Sports Medicine categories. Forward-looking statements with respect to the operations of the Company, strategies, prospects, and other aspects of the business of the Company are based on current expectations that are subject to known and unknown risks and uncertainties, which could cause actual results or outcomes to differ materially from expectations expressed or implied by such forward-looking statements. These factors include, but are not limited to: (1) the impact of any changes to the coverage and reimbursement levels for the Company’s products; (2) the Company faces significant and continuing competition, which could adversely affect its business, results of operations and financial condition; (3) rapid technological change could cause the Company’s products to become obsolete and if the Company does not enhance its product offerings through its research and development efforts, it may be unable to effectively compete; (4) to be commercially successful, the Company must convince physicians that its products are safe and effective alternatives to existing treatments and that its products should be used in their procedures; (5) the Company may owe rebates to the federal government prospectively on certain of its products if more than a certain percentage of the product is not administered to a patient and is discarded (wasted) by providers; (6) the Company’s ability to raise funds to expand its business; (7) the Company has incurred losses in prior years and may incur losses in the future; (8) changes in applicable laws or regulations; (9) the possibility that the Company may be adversely affected by other economic, business, and/or competitive factors; (10) the Company’s ability to maintain production of Affinity in sufficient quantities to meet demand; (11) any resurgence of the COVID-19 pandemic and its impact, if any, on the Company’s fiscal condition and results of operations; (12) the impact of the suspension of commercialization of: (a) ReNu and NuCel in connection with the expiration of the FDA’s enforcement grace period for HCT/Ps on
About
Investor Inquiries: ICR WestwickeMike Piccinino , CFA OrganoIR@westwicke.com Press and Media Inquiries: Organogenesis communications@organo.com
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