Content Detail

• Content META

  Title	Organogenesis (ORGO) Q4 2024 Earnings Call Transcript
  ID	7382851
  External ID	503a1184-eccd-385f-9897-b9c9cf2d5b77
  Author
  Published Date	Feb. 27, 2025, 11:45 p.m.
  Summary	Unlock stock picks and a broker-level newsfeed that powers Wall Street. Upgrade Now Organogenesis (ORGO) Q4 2024 Earnings Call Transcript Motley Fool Transcribing, The Motley Fool Thu, Feb 27, 2025, 1
  Tags	press-release
  URL	No URL
  Sentiment	Negative: 0.02230    Neutral: 0.94826    Positive: 0.02944
  Relevance	0.03150

• Content Details

  Content ID	4688097
  Key	404f5728-f07a-4ceb-a687-48c82e53a7ba
  Content	Unlock stock picks and a broker-level newsfeed that powers Wall Street. Upgrade Now Organogenesis (ORGO) Q4 2024 Earnings Call Transcript Motley Fool Transcribing, The Motley Fool Thu, Feb 27, 2025, 11:45 PM 24 min read In This Article: ORGO +102.28% Image source: The Motley Fool. Organogenesis (NASDAQ: ORGO) Q4 2024 Earnings Call Feb 27, 2025 , 5:00 p.m. ET Contents: Prepared Remarks Questions and Answers Call Participants Prepared Remarks: Operator Welcome, ladies and gentlemen, to the fourth quarter and fiscal year 2024 earnings conference call for Organogenesis Holdings, Inc. At this time, all participants have been placed in 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 can 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 IA, 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 may 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. This call will also include references to certain financial measures that are not calculated in accordance with generally accepted accounting principles or GAAP. We generally refer to these as non-GAAP financial measures. Reconciliations of these non-GAAP financial measures to the most comparable measures calculated and presented in accordance with GAAP are available in the earnings press release on the Investor Relations portion of our website. I would now like to turn the call over to Mr. Gary S. Gillheeney, Organogenesis Holdings president, chief financial officer, and chair of the board. Please go ahead, sir. Gary S. Gillheeney -- Chairman, Director, President, and Chief Executive Officer Thank you, operator, and welcome, everyone, to Organogenesis Holdings' fourth quarter fiscal Year 2024 earnings conference call. I'm joined on the call today by Dave Francisco, our chief financial officer. Let me start with a brief agenda of what we'll cover during our prepared remarks. I'll begin with an overview of our fourth-quarter revenue results and provide an update on key operating and strategic developments in recent months. Story Continues Dave will then provide you with an in-depth review of our fourth quarter financial results, our balance sheet and financial condition at quarter-end as well as our financial guidance for 2025, which we introduced in our press release this afternoon, and then we will open the call up for questions. Beginning with a review of our revenue results for Q4, we delivered sales results above the high end of the guidance range outlined on our third quarter call, growing 27% in the period. Our fourth quarter results reflect strong momentum in underlying business trends and customer demand in excess of what our guidance had assumed. As discussed in our recent investor calls, our fourth quarter and fiscal year 2024 guidance reflected the expectation that the final ruling from the MACs on the proposed LCDs would be announced in the fourth quarter with an effective date of January 1, 2025. Don’t miss this second chance at a potentially lucrative opportunity Ever feel like you missed the boat in buying the most successful stocks? Then you’ll want to hear this. On rare occasions, our expert team of analysts issues a “Double Down” stock recommendation for companies that they think are about to pop. If you’re worried you’ve already missed your chance to invest, now is the best time to buy before it’s too late. And the numbers speak for themselves: Nvidia: if you invested $1,000 when we doubled down in 2009, you’d have $340,411 !* Apple: if you invested $1,000 when we doubled down in 2008, you’d have $45,570 !* Netflix: if you invested $1,000 when we doubled down in 2004, you’d have $533,931 !* Right now, we’re issuing “Double Down” alerts for three incredible companies, and there may not be another chance like this anytime soon. Continue » *Stock Advisor returns as of February 24, 2025 The LCD was finalized in the fourth quarter. However, the stated effective date of February 12, 2025, was later than we had assumed. We believe the stronger customer demand we experienced in the second half of the fourth quarter is a direct result of less disruption in the marketplace related to the delayed effective date for the final LCD ruling from the MAC. As mentioned on previous earnings calls, we applaud the MACs for continuing to prioritize coverage with demonstrated clinical efficacy for skin substitute products. We have been pushing for reform for many years and believe the LCDs represent a substantial first step forward toward cleaning up the marketplace and providing access to all who need the care. That said, we continue to believe the MAC evidence-based approach to coverage of skin substitute products should include both clinical and real-world data. Importantly, we continue to push for CMS to introduce the requisite changes to the payment policies for skin substitutes as well. As discussed on our last earnings call, we have communicated to CMS that they should transition to a value-based payment methodology, where skin substitute categories are paid on a fixed per square centimeter basis. This value-based payment methodology has the potential to substantially reduce Medicare Part B expenditures, improve patient access, enable physicians to prescribe treatment options based on the individual needs of the patient, and provide the best outcomes for patients in the healthcare system. As a leader in this market, we have been and will continue to actively engage with CMS to advocate for the requisite changes to the current system. We are proud of the team's strong execution in the fourth quarter. They reacted quickly to the news of the delayed effective date and focused on ensuring our customers were both informed and well-positioned to continue to treat our patients with our full portfolio of highly innovative products. We believe the better-than-expected revenue results we delivered in the fourth quarter represent further evidence that Organogenesis' strong brand equity, established commercial infrastructure, and deep customer relationships taken together represent a substantial competitive advantage as we move through and navigate this uncertain market. On January 24, 2025, the MACs announced the second delay in the implementation of the LCDs until April 13, 2025. The news of this decision created an additional ambiguity and disruption in customer behavior, which has resulted in a more challenging operating environment to date in 2025. Dave will discuss our guidance in more detail later on the call, but for now, I'll say that our team is focused on our targeted commercial strategy and on providing excellent service and support for our customers in this dynamic environment. We have introduced our financial guidance for 2025, assuming that the final LCD will be effective on April 13, 2025. As discussed on prior calls, when coverage and reimbursement changes are implemented, the business experiences disruption in demand and utilization trends as customers transition to the new policies. Based on the April 13, 2025, effective date, we expect the environment to continue to be challenging throughout the first half of 2025 followed by an assumed stabilization in the market, as such a significant improvement in our business trends beginning in the third quarter. By way of reminder, the LCDs as finalized in November of 2024 only apply to DFU and VLU indications for skin substitute products. If the LCDs take effect as scheduled, a total of 18 products would remain covered, including our Apligraf and Dermagraft products for both DFU and VLU in our Affinity and NuShield products for DFU. However, more than an estimated 200 products would be classified as non-covered. We continue to believe these material changes from the MACs in the coverage of skin substitutes represents an enormous opportunity for Organogenesis to serve more patients and importantly, will be a positive for the long-term health of the wound care market. Before turning the call over to Dave, I wanted to provide a brief update on a key area of strategic focus for the company. We believe gathering robust and comprehensive clinical and real-world outcomes data is essential in developing a competitive product portfolio and driving further penetration in the markets where we compete. We continue to invest in generating clinical data for our existing and pipeline products and believe such data and enhanced sales efforts with physicians and reimbursement dynamics with payers over time. To that end, I'd like to share an update on our ReNu program as well as key clinical milestones for 2025. We completed the enrollment in our second Phase III prospective multicenter double-blinded randomized saline-controlled clinical trial to evaluate the efficacy of ReNu in patients with knee osteoarthritis in the second quarter of 2024. The study enrolled 594 randomized subjects with KL severity of two to four knee osteoarthritis. We performed the prespecified interim analysis on 50% of the planned 474 subjects after six months of follow-up in the fourth quarter of 2024. The Data Monitoring Committee, or DMC, recommended the clinical trial proceed without modification and without increase in sample size. The DMC also reviewed available safety data and found the safety data to be consistent with the known safety profile for ReNu. Regarding our next steps, we expect to have all patients completing the study by the end of the second quarter of 2025. We expect to complete the initial statistical analysis and have top-line data results from the second Phase III study to share publicly in September of 2025. Our current timeline targets completion of the final clinical study report required for the BLA submission in the fourth quarter, which has us on track for a BLA submission by the end of 2025. And we continue to believe that if approved, introducing ReNu to a large and growing pain management market represents a transformational opportunity for the company. We believe ReNu, if approved, will potentially address an unmet clinical need for all patients suffering from symptomatic knee OA, a degenerative joint disease that affects more than 30 million Americans. Today, we have a clear road map and timeline for our ReNu BLA submission. And if successful, ReNu would be the only FDA-approved biologic intra-articular injection to improve pain symptoms related to symptomatic knee osteoarthritis. With that, let me turn the call over to Dave. Dave? Dave Francisco -- Chief Financial Officer Thanks, Gary. I'll begin with a review of our fourth quarter financial results. And unless otherwise specified, all growth rates referenced during my prepared remarks are on a year-over-year basis. Net revenue for the fourth quarter was $126.7 million, up 27%. As Gary mentioned, these results were ahead of the expectations we provided on our Q3 call, which called for a total fourth-quarter revenue in the range of $100 million to $125 million. Our Advanced Wound Care net revenue for the fourth quarter was $119 million, up 27%, and net revenue from Surgical and Sports Medicine products for the fourth quarter was $8 million, up 24%. Gross profit for the fourth quarter was $96 million or 75.5% of net revenue compared to 72.1% last year. Operating expenses for the fourth quarter were $85.4 million, compared to $73.2 million last year, an increase of $12.2 million or 17%. This year-over-year change in operating expenses was driven by a $12.5 million or 20% increase in selling, general, and administrative expenses compared to the prior-year period. Research and development expenses declined 3% year over year but increased 11% sequentially due to the timing of expenses associated with clinical trials and research. Operating income for the fourth quarter was $10.2 million, compared to an operating loss of $1.3 million last year, an increase of $11.5 million. GAAP net income for the fourth quarter was $7.7 million compared to a net loss of $0.6 million last year, an increase of $8.3 million. And net income to common for the fourth quarter was $5.9 million, compared to a net loss of $0.6 million last year. Net income to common includes the impact of both the cumulative dividend and the noncash accretion to redemption value on our convertible preferred stock. Adjusted EBITDA for the fourth quarter was $18.2 million or 14.4% of net revenue, compared to $7.5 million or 7.5% of net revenue last year. We're pleased with the financial results we delivered in the fourth quarter, where we leveraged the better-than-expected revenue results to drive adjusted EBITDA, that we exceeded the high end of our guidance range by more than $2 million. Turning to a brief review of our financial results for the 12 months ended December 31, 2024. Net revenue was $482 million, compared to $433.1 million for the year ended December 31, 2023, an increase of $48.9 million or 11%. The increase in net revenue was driven by an increase of $48.1 million or 12% in the net revenue of Advanced Wound Care products, and an increase of $0.8 million or 3% in net revenue of Surgical and Sports Medicine products. Adjusted EBITDA was $49.8 million or 10.3% of net revenue, compared to adjusted EBITDA of $42.6 million or 9.8% of net revenue for the year ended December 31, 2023. Turning to the balance sheet. As of December 31, 2024, the company had $136.2 million in cash, cash equivalents, and restricted cash and no outstanding debt obligations. This compared to $104.3 million in cash, cash equivalents, and restricted cash, and $66.2 million in net debt obligations as of December 31, 2023. As discussed on our third quarter call, the private placement of Series A convertible preferred stock to Avista Healthcare Partners in November 2024, provided important capital to execute our long-term growth strategies and substantially enhanced our balance sheet and financial condition. We used a portion of the $122.7 million of net proceeds from this transaction to pay off the outstanding borrowings of $66.6 million on our long-term debt facility. We appreciate the support from a leading healthcare investor and believe it reflects Avista's confidence in the compelling opportunity investing in Organogenesis presents. Turning now to a review of our 2025 financial guidance, which we introduced in this afternoon's press release. For the 12 months ended December 31, 2025, the company expects net revenue between $480 million and $535 million, representing year-over-year change in the range of roughly flat to an increase of 11%. The 2025 net revenue guidance range assumes net revenue from Advanced Wound Care products between $450 million and $500 million, representing a year-over-year change in the range of a decline of 1% to an increase of 10%. Net revenue from Surgical and Sports Medicine products of between $30 million and $35 million, representing a year-over-year increase of 6% to 23%. With respect to our GAAP profitability and EBITDA guidance for the company, the company expects GAAP net income in the range of $9.5 million to $38.8 million, EBITDA in a range of $27 million to $66.6 million, non-GAAP adjusted net income in the range of $15.3 million to $44.6 million and adjusted EBITDA in the range of $43.6 million to $83.2 million. In addition to our formal financial guidance for 2025, we're providing some considerations for modeling purposes. As Gary mentioned, we introduced our financial guidance for 2025 with the assumption that the final LCD will be effective on April 13, 2025. Given this implementation date delay, we expect the environment will be very challenging throughout the first half of 2025, followed by a significant improvement in our business trends beginning in the third quarter. For modeling purposes, we expect the first quarter revenue in the range of $85 million to $95 million. And our profitability guidance for 2025 assumes gross margins in the range of 76% to 78%, GAAP operating expenses will be down 2% to flat year over year and excluding noncash intangible amortization of approximately $3.3 million and a nonrecurring FDA payment related to our ReNu BLA filing of $4.6 million, our total non-GAAP operating expenses will increase approximately 3% to 6% year over year. Note, the expected increase in non-GAAP operating expenses this year is primarily related to incremental investments in clinical studies and regulatory-related spending in preparation for our ReNu BLA efforts as well as strategic investments to support key commercial and organizational efficiency initiatives. Finally, our full-year profitability guidance range also assumes total interest and other income of approximately $4 million compared to expense of $1.5 million last year; a GAAP tax rate and non-GAAP tax rate of 26% and 27%, respectively; noncash depreciation of approximately $14.8 million; noncash stock compensation expense of approximately $12 million; capital expenditures of approximately $45 million and a weighted average diluted share of approximately $134 million. With that, I'll turn the call over to the operator to open your call to your questions. Questions & Answers: Operator Thank you. [Operator instructions] One moment for the first question. And our first question will come from the line of Brooks O'Neil of Lake Street Capital Markets. Your line is open. Brooks O'Neil -- Analyst Thank you very much. Good afternoon, you guys. I guess I'd like to start by just asking if you -- you mentioned you expect the first half to be very competitive. Could you just give us a feel for what you're seeing in the marketplace right now from competitors? And maybe importantly, also sort of the typical behavior you're seeing from doctors as it relates to loading up inventory of your products or competitors' products, etc.? Dave Francisco -- Chief Financial Officer Yeah. Sure, Brooks. This is Dave. Thanks for the question. So, we're not really seeing a major change in the competitive environment. It's really more customer buying behavior. As you recall, we had anticipated that the LCD would be implemented on the 1st of January, and so we expected some disruption in the fourth quarter. When that didn't happen and got pushed to February and now actually pushed out to mid-April, we're seeing some kind of changing in buying behaviors with our customers. When any kind of time that there's a reimbursement dynamic change, then customers pause, oftentimes test the reimbursement, need to get comfortable with it. And what we're seeing right now is exactly that. And as far as what you said about stocking and such, obviously, some of our technologies, as you know, that are on the covered list are living technologies. So, with that short shelf life, we don't have that option with customers. Brooks O'Neil -- Analyst OK. Interesting. And then I'm curious, you talked or Gary talked a little bit about the process of moving forward with ReNu. And I'm just curious if you could update us on what you're currently thinking the timeline would look like after submission of your application. And how quickly do you think you might hear back and be able to put to market -- the product on the market? Gary S. Gillheeney -- Chairman, Director, President, and Chief Executive Officer Sure. So, we're expecting to file the BLA submission at the end of 2025. We would expect to hear from the FDA probably in Q4 of 2026, with expectation of getting approval at the end of '26, perhaps the beginning of '27. That's our current timeline, Brooks. Brooks O'Neil -- Analyst OK, great. Thank you very much. Gary S. Gillheeney -- Chairman, Director, President, and Chief Executive Officer You're welcome. Operator Thank you. One moment for the next question. And our next question will be coming from the line of Ross Osborn of Cantor Fitzgerald. Your line is open. Ross Osborn -- Cantor Fitzgerald -- Analyst Hey, guys, congrats on the strong quarter. Maybe starting off on your sales force, I would be curious to hear if you experienced any heightened levels of attrition or if retention has been pretty good through the quarter, and how that's trended year to date. Dave Francisco -- Chief Financial Officer Yeah. Actually, we did see some attrition in the quarter, but it wasn't really that significant, Ross. And we've done a nice job of backfilling those heads and seeing some good talent out there. So, we feel good about where we are right now. And again, the team executed extraordinarily well in '24. So, we're pleased. Ross Osborn -- Cantor Fitzgerald -- Analyst Yeah, glad to hear it. And then in terms of your products that were not on the covered list, any update on how those RCTs are going? Gary S. Gillheeney -- Chairman, Director, President, and Chief Executive Officer Could you repeat the question? Ross Osborn -- Cantor Fitzgerald -- Analyst Yeah. Just curious how your progress on your RCTs are going for the products not on the covered list. Gary S. Gillheeney -- Chairman, Director, President, and Chief Executive Officer Sure. So, our PuraPly study, which we started, we expect to have an interim analysis in Q4, and we expect to have a publication in Q1 of '26 for that study, with the expectation of having it ready and available for reconsideration by the MACs by Q1 of '26, when, we believe, they'll be considering, assuming the LCD goes forward in reconsideration of products. Ross Osborn -- Cantor Fitzgerald -- Analyst OK. Got it. Thank you for taking our questions. Gary S. Gillheeney -- Chairman, Director, President, and Chief Executive Officer Sure. Operator Thank you. [Operator instructions] And our next question will be coming from the line of Ryan Zimmerman of BTIG. Your line is open. Ryan Zimmerman -- Analyst Thank you. Good afternoon, everyone. Thanks for taking our questions. Congrats on the quarter. Maybe to start, Gary, listening to one of your competitors last night, they expect LCDs to go through as written. You've made the statement that it's your prevailing assumption -- your current operating assumption. I just want to be clear -- I mean, you have no reason to believe it would be changed at this point. I know this is your assumption, but is there anything you can say from your perspective, having had those discussions, are you -- you're operating under the view that nothing is changing as written right now? Gary S. Gillheeney -- Chairman, Director, President, and Chief Executive Officer That's correct. I mean, I think it's clear to CMS in the MACs that the costs are continuing to spiral. And though the LCD is not perfect, we think it's a good step, and it's a mechanism to gain some of the savings that they're looking to gain. So, we think from that perspective, it's likely -- more likely than not that it would go forward. I don't think it will be delayed. That's not something that I think could happen. I mean, it's possible it could be rescinded because delaying it again is cause -- would cause significant confusion in the market. And I think CMS is hearing how confusing the market is and patients are not being served appropriately with all of the confusion going on. So, that's another reason to implement it in April. It's certainly another reason not to delay it. But if for some reason, they weren't happy with it, it would be, rescinded is probably a better answer, quite honestly, at this point in time and start again. But I think it will be implemented. Ryan Zimmerman -- Analyst OK. Very helpful. And then as we think about it in the context of the guidance, I appreciate that you're giving a wider range on guidance for the year given some of the unknowns that are going to play out here in the first half of the year. But maybe Dave and Gary, take us through kind of your assumptions on both the low end and the high end. And what I really want to kind of understand is what convertible in your mind from a product standpoint, what's at risk from a product standpoint as you try and move product usage or sales to the products that are on the covered list. Dave Francisco -- Chief Financial Officer Yeah, sure. I think the idea there on the first half really is the fact that because it got delayed from February to mid-April was the kind of issue there, that just extends that confusion and ambiguity in the marketplace. So, our expectation was back when it was going to happen in the middle of February, that we would start to see some switching and transition in February. Now, that's obviously pushed to the second quarter. So, we've got a longer period of this uncertainty. When we think about the back half, though, so I think back to your question about low end versus high end, the one question is, how quickly do you convert those products in the back half of Q2, assuming it goes into place in April 13th? That's one component. How successful are we? And then I think as you think about the back half and as we talked about the business trends changing once we get to the third quarter, as Gary mentioned in his prepared remarks, we're three products out of 18. So, we see a major, major shift in the competitive dynamics in the back half and see a lot of opportunity for share gains among ourselves and other traditional players in the market. And us as a market leader, we think we'll take a proportionate share of that. So, we see the back half being stronger than the first. Gary S. Gillheeney -- Chairman, Director, President, and Chief Executive Officer In addition, Ryan, to converting our own products, obviously, there is significant market share available as Dave mentioned. I mean, this -- a very large component of the market, particularly just DFU and VLU is available. What we're also finding out is some customers are only using products that are on that approved list even for non-DFU and -VLU, to avoid any potential confusion of using a product inappropriately and not getting reimbursed. So, we feel that the DFU, VLU open market is substantial, but there's also non-DFU and VLU that we're seeing now with covered products. Ryan Zimmerman -- Analyst But just maybe to follow up on this point. I think one of the big components of the Advanced Wound Care business is PuraPly, right? And as of today, it's not on the list. But just to remind everyone, not necessarily all PuraPly usage is strictly relegated to DFU and VLU. I guess what I'm trying to understand is that entire business line isn't going away come April 13th and some of that is preserved outside of potentially what's included in the LCD. Gary S. Gillheeney -- Chairman, Director, President, and Chief Executive Officer Well, that's completely accurate. Just as a benchmark, about 55% of the market is DFU, VLU. The rest of it is non-DFU, -VLU. So, as a guide, that's generally what we've seen in the space. I think our PuraPly product relationship to non-DFU is a little higher. It's used a lot in dermatology and other wounds. So, PuraPly has a better ratio than that for us. So, you're right, Ryan, there's a lot of revenue still available, and including the surgical side -- including the surgical side. Ryan Zimmerman -- Analyst Very, very helpful, Gary. Operator Thank you. And at this time, I'm not showing any more questions in the queue. [Operator signoff] Duration: 0 minutes Call participants: Gary S. Gillheeney -- Chairman, Director, President, and Chief Executive Officer Dave Francisco -- Chief Financial Officer Brooks O'Neil -- Analyst Gary Gillheeney -- Chairman, Director, President, and Chief Executive Officer Ross Osborn -- Cantor Fitzgerald -- Analyst Ryan Zimmerman -- Analyst More ORGO analysis All earnings call transcripts This article is a transcript of this conference call produced for The Motley Fool. While we strive for our Foolish Best, there may be errors, omissions, or inaccuracies in this transcript. As with all our articles, The Motley Fool does not assume any responsibility for your use of this content, and we strongly encourage you to do your own research, including listening to the call yourself and reading the company's SEC filings. Please see our Terms and Conditions for additional details, including our Obligatory Capitalized Disclaimers of Liability. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy . Organogenesis (ORGO) Q4 2024 Earnings Call Transcript was originally published by The Motley Fool View Comments Terms and Privacy Policy Privacy Dashboard More Info Recommended Stories
  Content Reference URL	None

• Publisher

  None

• Data Source

  Data Source Name	Yahoo Finance News (#2)
  Data Source Type	news
  Data Source URL	https://finance.yahoo.com/
  Description	Yahoo! Finance is a media property that is part of the Yahoo! network. It provides financial news, data and commentary including stock quotes, press releases, financial reports, and original content. It also offers some online tools for personal finance management.
  Weight	10