[PART I. FINANCIAL INFORMATION](index=4&type=section&id=PART%20I.%20FINANCIAL%20INFORMATION) This section presents the company's unaudited consolidated financial statements, management's discussion and analysis, market risk disclosures, and controls and procedures [Item 1. Unaudited Consolidated Financial Statements](index=4&type=section&id=Item%201.%20Unaudited%20Consolidated%20Financial%20Statements) This section presents the company's unaudited consolidated financial statements, including balance sheets, statements of operations, statements of redeemable common stock and stockholders' equity, and cash flows, along with detailed notes explaining the nature of the business, significant accounting policies, recent acquisition, product sales, fair value measurements, and other financial details [Consolidated Balance Sheets](index=5&type=section&id=Consolidated%20Balance%20Sheets) This section provides a snapshot of the company's financial position, detailing assets, liabilities, and equity at specific points in time Consolidated Balance Sheets (in thousands) | Metric | Sep 30, 2020 (in thousands) | Dec 31, 2019 (in thousands) | | :-------------------------------- | :-------------------------- | :-------------------------- | | Total assets | $246,428 | $220,687 | | Total liabilities | $180,954 | $165,104 | | Total stockholders' equity | $65,474 | $55,583 | | Cash | $36,512 | $60,174 | | Accounts receivable, net | $56,915 | $39,359 | | Inventory | $29,882 | $22,918 | | Current portion of term loan | $11,667 | $— | | Line of credit | $39,353 | $33,484 | | Term loan, net of current portion | $47,999 | $49,634 | [Consolidated Statements of Operations](index=6&type=section&id=Consolidated%20Statements%20of%20Operations) This section outlines the company's financial performance over specific periods, including revenue, expenses, and net income or loss Consolidated Statements of Operations (in thousands) | Metric | Three Months Ended Sep 30, 2020 (in thousands) | Three Months Ended Sep 30, 2019 (in thousands) | Nine Months Ended Sep 30, 2020 (in thousands) | Nine Months Ended Sep 30, 2019 (in thousands) | | :----------------------------------- | :--------------------------------------------- | :--------------------------------------------- | :-------------------------------------------- | :-------------------------------------------- | | Net revenue | $100,799 | $64,265 | $231,491 | $186,336 | | Gross profit | $77,835 | $45,134 | $169,692 | $130,779 | | Net income (loss) | $20,934 | $(10,741) | $(545) | $(36,056) | | Basic EPS | $0.20 | $(0.12) | $(0.01) | $(0.40) | | Diluted EPS | $0.19 | $(0.12) | $(0.01) | $(0.40) | [Consolidated Statements of Redeemable Common Stock and Stockholders' Equity](index=7&type=section&id=Consolidated%20Statements%20of%20Redeemable%20Common%20Stock%20and%20Stockholders'%20Equity) This section details changes in the company's equity, including common stock, net income, and stock-based compensation Consolidated Statements of Redeemable Common Stock and Stockholders' Equity (in thousands) | Metric | As of Sep 30, 2020 (in thousands) | As of Sep 30, 2019 (in thousands) | | :-------------------------- | :-------------------------------- | :-------------------------------- | | Total Stockholders' Equity | $65,474 | $12,808 | | Net income (Q3 2020) | $20,934 | $(10,741) | | Stock issued for acquisition | $7,986 | $— | | Stock-based compensation | $486 | $242 | [Consolidated Statements of Cash Flows](index=8&type=section&id=Consolidated%20Statements%20of%20Cash%20Flows) This section summarizes the cash inflows and outflows from operating, investing, and financing activities over specific periods Consolidated Statements of Cash Flows (in thousands) | Cash Flow Activity (Nine Months Ended Sep 30) | 2020 (in thousands) | 2019 (in thousands) | | :-------------------------------------------- | :------------------ | :------------------ | | Net cash used in operating activities | $(19,475) | $(27,127) | | Net cash used in investing activities | $(16,354) | $(2,776) | | Net cash provided by financing activities | $12,345 | $31,657 | | Change in cash and restricted cash | $(23,484) | $1,754 | | Cash and restricted cash, end of period | $36,886 | $23,159 | [Notes to Consolidated Financial Statements](index=9&type=section&id=Notes%20to%20Consolidated%20Financial%20Statements) This section provides detailed explanations and additional information supporting the consolidated financial statements [1. Nature of the Business and Basis of Presentation](index=9&type=section&id=1.%20Nature%20of%20the%20Business%20and%20Basis%20of%20Presentation) This note describes the company's core business, its market focus, and the accounting principles applied in preparing the financial statements - Organogenesis Holdings Inc. is a leading regenerative medicine company focused on Advanced Wound Care and Surgical & Sports Medicine markets[24](index=24&type=chunk) - The COVID-19 pandemic has not materially adversely affected the company's financial results through Q3 2020, but future impacts are uncertain[25](index=25&type=chunk) - The Avista Merger was accounted for as a reverse merger, with Organogenesis Inc. treated as the accounting acquirer[28](index=28&type=chunk) - As of September 30, 2020, the company had an accumulated deficit of **$171,552k** and used **$19,475k** cash in operations for the nine months ended September 30, 2020[30](index=30&type=chunk) [2. Summary of Significant Accounting Policies](index=10&type=section&id=2.%20Summary%20of%20Significant%20Accounting%20Policies) This note outlines the key accounting policies and standards adopted by the company, including those for emerging growth companies - The company, as an emerging growth company, has elected to use the extended transition period for complying with new or revised financial accounting standards[37](index=37&type=chunk) - The company will adopt ASU 2016-02 (Leases) on January 1, 2021, expecting to recognize all leases with terms over twelve months on the balance sheet[37](index=37&type=chunk) - The adoption of ASU 2016-13 (Credit Losses) on January 1, 2023, is not expected to have a material impact on the consolidated financial statements[39](index=39&type=chunk) [3. Acquisition](index=12&type=section&id=3.%20Acquisition) This note details the acquisition of CPN Biosciences, LLC, including consideration, purchase price allocation, and resulting goodwill - On September 17, 2020, the company acquired certain assets and assumed certain liabilities of CPN Biosciences, LLC for an aggregate consideration of **$19,024k**[40](index=40&type=chunk)[41](index=41&type=chunk) - The consideration included **$6,427k** in cash, **2,151,438** shares of Class A common stock (fair value **$8,815k**), and a contingent Earnout Liability of **$3,782k**[41](index=41&type=chunk) - The preliminary purchase price allocation resulted in **$3,377k** of goodwill, primarily attributed to expected synergies and future growth, and **$13,570k** of intangible assets[45](index=45&type=chunk)[46](index=46&type=chunk) [4. Product and Geographic Sales](index=13&type=section&id=4.%20Product%20and%20Geographic%20Sales) This note breaks down net revenue by product category and geographic region for the reported periods Product and Geographic Sales (in thousands) | Product Category | Three Months Ended Sep 30, 2020 (in thousands) | Three Months Ended Sep 30, 2019 (in thousands) | Nine Months Ended Sep 30, 2020 (in thousands) | Nine Months Ended Sep 30, 2019 (in thousands) | | :----------------------- | :--------------------------------------------- | :--------------------------------------------- | :-------------------------------------------- | :-------------------------------------------- | | Advanced Wound Care | $89,990 | $54,310 | $201,009 | $157,365 | | Surgical & Sports Medicine | $10,809 | $9,955 | $30,482 | $28,971 | | **Total net revenue** | **$100,799** | **$64,265** | **$231,491** | **$186,336** | | Net PuraPly revenue | $40,945 | $31,755 | $101,969 | $86,893 | - Net revenue generated outside the United States represented **less than 1%** of total net revenue for all periods presented[51](index=51&type=chunk) [5. Fair Value of Financial Assets and Liabilities](index=14&type=section&id=5.%20Fair%20Value%20of%20Financial%20Assets%20and%20Liabilities) This note details the fair value measurements of financial instruments, including the Earnout Liability and its valuation methodology Fair Value of Financial Assets and Liabilities (in thousands) | Liability | Fair Value as of Sep 30, 2020 (in thousands) | | :-------------- | :----------------------------------------- | | Earnout Liability | $3,782 | - The Earnout Liability is classified as a Level 3 measurement, with fair value estimated using a Monte Carlo simulation model based on unobservable inputs[54](index=54&type=chunk) [6. Accounts Receivable, Net](index=14&type=section&id=6.%20Accounts%20Receivable,%20Net) This note provides details on accounts receivable, net of allowances for sales returns and doubtful accounts Accounts Receivable, Net (in thousands) | Metric | Sep 30, 2020 (in thousands) | Dec 31, 2019 (in thousands) | | :----------------------------------- | :-------------------------- | :-------------------------- | | Accounts receivable, net | $56,915 | $39,359 | | Allowance for sales returns and doubtful accounts | $5,125 | $3,049 | Allowance Activity (in thousands) | Allowance Activity (Additions (reductions)) | Three Months Ended Sep 30, 2020 (in thousands) | Three Months Ended Sep 30, 2019 (in thousands) | Nine Months Ended Sep 30, 2020 (in thousands) | Nine Months Ended Sep 30, 2019 (in thousands) | | :------------------------------------------ | :--------------------------------------------- | :--------------------------------------------- | :-------------------------------------------- | :-------------------------------------------- | | Additions (reductions) | $1,589 | $(56) | $2,559 | $(29) | [7. Inventories](index=15&type=section&id=7.%20Inventories) This note details the composition of inventories by category and the charges for excess and obsolescence Inventory Composition (in thousands) | Inventory Category | Sep 30, 2020 (in thousands) | Dec 31, 2019 (in thousands) | | :----------------- | :-------------------------- | :-------------------------- | | Raw materials | $9,676 | $9,178 | | Work in process | $1,499 | $781 | | Finished goods | $18,707 | $12,959 | | **Total inventories** | **$29,882** | **$22,918** | Inventory Excess and Obsolescence Charge (in thousands) | Inventory Excess and Obsolescence Charge | Three Months Ended Sep 30, 2020 (in thousands) | Three Months Ended Sep 30, 2019 (in thousands) | Nine Months Ended Sep 30, 2020 (in thousands) | Nine Months Ended Sep 30, 2019 (in thousands) | | :--------------------------------------- | :--------------------------------------------- | :--------------------------------------------- | :-------------------------------------------- | :-------------------------------------------- | | Charge to cost of goods sold | $315 | $286 | $2,024 | $809 | [8. Property and Equipment, Net](index=15&type=section&id=8.%20Property%20and%20Equipment,%20Net) This note presents the breakdown of property and equipment, net of accumulated depreciation, and related depreciation expenses Property and Equipment, Net (in thousands) | Property and Equipment Category | Sep 30, 2020 (in thousands) | Dec 31, 2019 (in thousands) | | :------------------------------ | :-------------------------- | :-------------------------- | | Leasehold improvements | $39,169 | $36,344 | | Furniture, computers and equipment | $47,798 | $46,430 | | Accumulated depreciation and amortization | $(68,559) | $(65,812) | | Construction in progress | $37,529 | $30,222 | | **Total property and equipment, net** | **$55,937** | **$47,184** | Depreciation Expense (in thousands) | Depreciation Expense | Three Months Ended Sep 30, 2020 (in thousands) | Three Months Ended Sep 30, 2019 (in thousands) | Nine Months Ended Sep 30, 2020 (in thousands) | Nine Months Ended Sep 30, 2019 (in thousands) | | :------------------- | :--------------------------------------------- | :--------------------------------------------- | :-------------------------------------------- | :-------------------------------------------- | | Depreciation expense | $956 | $792 | $2,749 | $2,553 | [9. Goodwill and Intangible Assets](index=15&type=section&id=9.%20Goodwill%20and%20Intangible%20Assets) This note provides information on goodwill and identifiable intangible assets, including additions from acquisitions and amortization expenses Goodwill and Intangible Assets (in thousands) | Metric | Sep 30, 2020 (in thousands) | Dec 31, 2019 (in thousands) | | :-------------------------- | :-------------------------- | :-------------------------- | | Goodwill | $28,916 | $25,539 | | Identifiable intangible assets, net | $31,849 | $20,797 | - The company recorded **$3,377k** of goodwill and **$13,570k** of intangible assets from the CPN acquisition on September 17, 2020[59](index=59&type=chunk) Amortization of Intangible Assets (in thousands) | Amortization of Intangible Assets | Three Months Ended Sep 30, 2020 (in thousands) | Three Months Ended Sep 30, 2019 (in thousands) | Nine Months Ended Sep 30, 2020 (in thousands) | Nine Months Ended Sep 30, 2019 (in thousands) | | :-------------------------------- | :--------------------------------------------- | :--------------------------------------------- | :-------------------------------------------- | :-------------------------------------------- | | Amortization expense | $885 | $1,529 | $2,518 | $4,526 | [10. Accrued Expenses and Other Current Liabilities](index=16&type=section&id=10.%20Accrued%20Expenses%20and%20Other%20Current%20Liabilities) This note details the composition of accrued expenses and other current liabilities, including personnel costs Accrued Expenses and Other Current Liabilities (in thousands) | Liability Category | Sep 30, 2020 (in thousands) | Dec 31, 2019 (in thousands) | | :------------------------------- | :-------------------------- | :-------------------------- | | Accrued personnel costs | $21,158 | $17,640 | | Other | $4,974 | $5,810 | | **Total accrued expenses and other current liabilities** | **$26,132** | **$23,450** | [11. Long-Term Debt Obligations](index=16&type=section&id=11.%20Long-Term%20Debt%20Obligations) This note outlines the company's long-term debt, including term loans, lines of credit, interest rates, and future payment schedules Long-Term Debt Obligations (in thousands) | Debt Category | Sep 30, 2020 (in thousands) | Dec 31, 2019 (in thousands) | | :-------------------------------------------------- | :-------------------------- | :-------------------------- | | Line of credit | $39,353 | $33,484 | | Term loan | $60,000 | $50,000 | | Less debt discount and debt issuance cost | $(334) | $(366) | | Less current maturities | $(11,667) | $— | | **Term loan, net of debt discount, debt issuance cost and current maturities** | **$47,999** | **$49,634** | - The Term Loan Facility interest rate was **9.25%** and the Revolving Facility interest rate was **5.50%** as of September 30, 2020[67](index=67&type=chunk)[69](index=69&type=chunk) - The company was in compliance with the financial covenants under the 2019 Credit Agreement as of September 30, 2020[73](index=73&type=chunk) Future Payments of 2019 Credit Agreement (as of Sep 30, 2020) (in thousands) | Future Payments of 2019 Credit Agreement (as of Sep 30, 2020) | Amount (in thousands) | | :------------------------------------------------ | :-------------------- | | 2020 (remaining) | $— | | 2021 | $16,667 | | 2022 | $20,000 | | 2023 | $20,000 | | 2024 | $42,686 | | **Total** | **$99,353** | [12. Stockholders' Equity](index=18&type=section&id=12.%20Stockholders'%20Equity) This note details the components of stockholders' equity, including common stock issued and shares reserved for future issuance - As of September 30, 2020, **108,185,702** shares of Class A common stock were issued[79](index=79&type=chunk) Shares Reserved for Future Issuance | Shares Reserved for Future Issuance | Sep 30, 2020 | Dec 31, 2019 | | :---------------------------------- | :----------- | :----------- | | For outstanding options | 6,788,655 | 6,503,646 | | For outstanding restricted stock units | 819,248 | — | | For future grants | 6,819,449 | 9,008,996 | | **Total shares reserved** | **14,427,352** | **15,512,642** | - In Q3 2019, the company issued **3,334,658** shares of common stock through warrant exchange and exercise transactions, resulting in a non-cash deemed dividend of **$0.6 million**[84](index=84&type=chunk)[85](index=85&type=chunk) [13. Stock-Based Compensation](index=19&type=section&id=13.%20Stock-Based%20Compensation) This note provides details on stock-based compensation expense, including grants of restricted stock units and stock options Stock-Based Compensation Expense (in thousands) | Stock-Based Compensation Expense | Three Months Ended Sep 30, 2020 (in thousands) | Three Months Ended Sep 30, 2019 (in thousands) | Nine Months Ended Sep 30, 2020 (in thousands) | Nine Months Ended Sep 30, 2019 (in thousands) | | :------------------------------- | :--------------------------------------------- | :--------------------------------------------- | :-------------------------------------------- | :-------------------------------------------- | | Total expense | $486 | $242 | $1,164 | $700 | - **873,595** time-based restricted stock units were granted in the nine months ended September 30, 2020, with **$1,977k** in total unrecognized compensation cost[95](index=95&type=chunk)[96](index=96&type=chunk) - **1,553,723** stock options were granted in the nine months ended September 30, 2020, with **$1,598k** in total unrecognized stock compensation expense[98](index=98&type=chunk)[100](index=100&type=chunk) [14. Net Income (Loss) per Share (EPS)](index=21&type=section&id=14.%20Net%20Income%20(Loss)%20per%20Share%20(EPS)) This note presents basic and diluted earnings per share calculations and the weighted-average common shares outstanding Net Income (Loss) per Share (EPS) | EPS Metric | Three Months Ended Sep 30, 2020 | Three Months Ended Sep 30, 2019 | Nine Months Ended Sep 30, 2020 | Nine Months Ended Sep 30, 2019 | | :------------------------------------------ | :------------------------------ | :------------------------------ | :----------------------------- | :----------------------------- | | Basic EPS | $0.20 | $(0.12) | $(0.01) | $(0.40) | | Diluted EPS | $0.19 | $(0.12) | $(0.01) | $(0.40) | | Weighted-average common shares outstanding—basic | 105,040,035 | 92,276,858 | 104,748,297 | 91,182,233 | | Weighted-average common shares outstanding—diluted | 108,489,768 | 92,276,858 | 104,748,297 | 91,182,233 | - For periods with a net loss, potentially dilutive securities were excluded from diluted EPS calculation as they had an anti-dilutive effect[104](index=104&type=chunk) [15. Commitments and Contingencies](index=22&type=section&id=15.%20Commitments%20and%20Contingencies) This note discloses information on capital and operating lease obligations, legal proceedings, and the impact of a ransomware attack - Accrued but unpaid capital lease obligations to affiliates totaled **$10,336k** as of September 30, 2020, subordinated to the 2019 Credit Agreement[107](index=107&type=chunk) Future Capital Lease Obligations (in thousands) | Future Capital Lease Obligations | Amount (in thousands) | | :------------------------------- | :-------------------- | | Present value of minimum lease payments | $15,712 | | Less current maturities | $(3,473) | | **Long-term portion** | **$12,239** | Operating Lease Expenses (in thousands) | Operating Lease Expenses | Three Months Ended Sep 30, 2020 (in thousands) | Three Months Ended Sep 30, 2019 (in thousands) | Nine Months Ended Sep 30, 2020 (in thousands) | Nine Months Ended Sep 30, 2019 (in thousands) | | :----------------------- | :--------------------------------------------- | :--------------------------------------------- | :-------------------------------------------- | :-------------------------------------------- | | Operating lease expenses | $1,620 | $1,766 | $4,971 | $4,993 | - The company experienced a ransomware attack in August 2020, which partially impaired IT systems; no material loss is expected, and costs are anticipated to be reimbursed by insurance[120](index=120&type=chunk) - The company settled the NuTech Medical deferred acquisition consideration dispute for **$4,000k**, recording a gain of **$1,295k** in Q1 2020, and settled an assumed legacy lawsuit in October 2020, recording a gain of **$951k** in Q3 2020[123](index=123&type=chunk) [16. Related Party Transactions](index=24&type=section&id=16.%20Related%20Party%20Transactions) This note describes transactions with related parties, including outstanding loans to a former executive and recovery of receivables - As of September 30, 2020, Liquidity Loans and Option Loans to a former executive were outstanding with aggregate principal balances of **$297k** and **$635k**, respectively[127](index=127&type=chunk) - The company recorded **$1,111k** as a recovery of previously reserved related party receivables in Q3 2020 due to loan repayment and forgiveness[127](index=127&type=chunk) [17. Subsequent Events](index=25&type=section&id=17.%20Subsequent%20Events) This note reports significant events occurring after the balance sheet date, including workforce restructuring and facility consolidation - On October 21, 2020, the company committed to a workforce restructuring and consolidation of La Jolla facilities, expecting a charge of approximately **$5.5 million**, primarily for retention benefits[129](index=129&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=26&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) This section provides management's perspective on the company's financial condition and results of operations, including an overview of its business, detailed analysis of revenue, expenses, and profitability, discussion of liquidity and capital resources, and critical accounting policies. It also addresses the impact of the COVID-19 pandemic and the CPN acquisition [Overview](index=26&type=section&id=Overview) This section provides a high-level summary of the company's business, recent financial performance, and the impact of the COVID-19 pandemic - Organogenesis is a leading regenerative medicine company focused on Advanced Wound Care and Surgical & Sports Medicine markets, offering a comprehensive portfolio of FDA-approved products[131](index=131&type=chunk)[132](index=132&type=chunk) Key Financial Metrics (Nine Months Ended Sep 30) (in millions) | Metric (Nine Months Ended Sep 30) | 2020 (in millions) | 2019 (in millions) | | :-------------------------------- | :----------------- | :----------------- | | Net revenue | $231.5 | $186.3 | | Net loss | $(0.5) | $(36.1) | - The COVID-19 pandemic has not materially adversely affected financial results through Q3 2020, but future impacts on demand, sales, staffing, manufacturing, supply chain, and financial covenants are uncertain and pose significant risks[139](index=139&type=chunk) [CPN Acquisition](index=27&type=section&id=CPN%20Acquisition) This section summarizes the acquisition of CPN Biosciences, LLC, including the consideration and its financial impact - On September 17, 2020, the company acquired CPN Biosciences, LLC for **$19.0 million**, consisting of cash, common stock, and contingent consideration[140](index=140&type=chunk) - CPN's results of operations have been included in consolidated financial statements since the acquisition date, with revenue and expenses not material[140](index=140&type=chunk) [Components of Our Consolidated Results of Operations](index=27&type=section&id=Components%20of%20Our%20Consolidated%20Results%20of%20Operations) This section analyzes the key components influencing the company's financial performance, including revenue, cost of goods sold, and operating expenses [Revenue](index=27&type=section&id=Revenue) This section discusses the sources of net revenue and anticipated changes due to payment structure transitions - Net revenue is derived from Advanced Wound Care and Surgical & Sports Medicine products, sold primarily through direct sales representatives and third-party agencies[142](index=142&type=chunk) - PuraPly products transitioned to a bundled payment structure after September 30, 2020, which is expected to decrease net revenue from these products[145](index=145&type=chunk) [Cost of goods sold, gross profit and gross profit margin](index=28&type=section&id=Cost%20of%20goods%20sold,%20gross%20profit%20and%20gross%20profit%20margin) This section defines the components of cost of goods sold and factors influencing gross profit and margin - Cost of goods sold includes personnel, product testing, quality assurance, raw materials, manufacturing, and facility costs, increasing with sales units[146](index=146&type=chunk) - Gross profit and margin are influenced by product/geographic sales mix, pricing, manufacturing efficiency, material costs, and regulatory actions[147](index=147&type=chunk) [Selling, general and administrative expenses](index=28&type=section&id=Selling,%20general%20and%20administrative%20expenses) This section details the components of SG&A expenses and expectations for future increases due to market development - SG&A expenses include personnel costs, sales commissions, professional fees, depreciation, amortization, bad debt, royalties, and IT costs[148](index=148&type=chunk) - SG&A expenses are expected to increase due to investments in market development and expansion of sales forces[148](index=148&type=chunk) [Research and development expenses](index=28&type=section&id=Research%20and%20development%20expenses) This section describes the nature of R&D expenses and the factors driving their expected increase - R&D expenses cover personnel, manufacturing process improvements, product enhancements, pipeline development, and clinical trials[149](index=149&type=chunk) - R&D expenses are generally expected to increase with ongoing clinical trials, regulatory pathway progression, and new product development[149](index=149&type=chunk) [Other expense, net](index=29&type=section&id=Other%20expense,%20net) This section explains the components of other expense, net, including interest, debt extinguishment, and acquisition settlement gains - Other expense, net, includes interest expense, loss on extinguishment of debt, and gain on settlement of deferred acquisition consideration[151](index=151&type=chunk)[152](index=152&type=chunk)[153](index=153&type=chunk) - A **$1.9 million** loss on debt extinguishment was recognized in 9M 2019 from the termination of the ML Agreement[152](index=152&type=chunk) - Gains of **$1.3 million** (Q1 2020) and **$1.0 million** (Q3 2020) were recognized from the settlement of the NuTech Medical deferred acquisition consideration dispute and an assumed legacy lawsuit[153](index=153&type=chunk) [Income taxes](index=29&type=section&id=Income%20taxes) This section describes the company's approach to income taxes, including the use of valuation allowances against deferred tax assets - The company uses an asset and liability approach for income taxes and provides valuation allowances when necessary[154](index=154&type=chunk) - A valuation allowance is necessary against the full amount of net U.S. deferred tax assets due to a three-year cumulative loss position[155](index=155&type=chunk) [Results of Operations](index=30&type=section&id=Results%20of%20Operations) This section provides a detailed comparative analysis of the company's financial performance for the reported periods [EBITDA and Adjusted EBITDA](index=30&type=section&id=EBITDA%20and%20Adjusted%20EBITDA) This section presents the reconciliation of net income (loss) to EBITDA and Adjusted EBITDA, key non-GAAP financial measures EBITDA and Adjusted EBITDA (in thousands) | Metric | Three Months Ended Sep 30, 2020 (in thousands) | Three Months Ended Sep 30, 2019 (in thousands) | Nine Months Ended Sep 30, 2020 (in thousands) | Nine Months Ended Sep 30, 2019 (in thousands) | | :-------------------------- | :--------------------------------------------- | :--------------------------------------------- | :-------------------------------------------- | :-------------------------------------------- | | Net income (loss) | $20,934 | $(10,741) | $(545) | $(36,056) | | EBITDA | $25,816 | $(5,945) | $13,247 | $(22,477) | | Adjusted EBITDA | $24,601 | $(4,787) | $11,983 | $(18,999) | [Comparison of the Three and Nine Months Ended September 30, 2020 and 2019](index=31&type=section&id=Comparison%20of%20the%20Three%20and%20Nine%20Months%20Ended%20September%2030,%202020%20and%202019) This section offers a detailed comparative analysis of financial performance metrics for the three and nine months ended September 30, 2020 and 2019 [Revenue](index=31&type=section&id=Revenue_Comparison) This section compares net revenue by product category for the three and nine months ended September 30, 2020 and 2019 Revenue by Product Category (Three Months Ended Sep 30) (in thousands) | Product Category | Three Months Ended Sep 30, 2020 (in thousands) | Three Months Ended Sep 30, 2019 (in thousands) | Change ($) | Change (%) | | :----------------------- | :--------------------------------------------- | :--------------------------------------------- | :--------- | :--------- | | Advanced Wound Care | $89,990 | $54,310 | $35,680 | 66% | | Surgical & Sports Medicine | $10,809 | $9,955 | $854 | 9% | | **Net revenue** | **$100,799** | **$64,265** | **$36,534** | **57%** | Revenue by Product Category (Nine Months Ended Sep 30) (in thousands) | Product Category | Nine Months Ended Sep 30, 2020 (in thousands) | Nine Months Ended Sep 30, 2019 (in thousands) | Change ($) | Change (%) | | :----------------------- | :-------------------------------------------- | :-------------------------------------------- | :--------- | :--------- | | Advanced Wound Care | $201,009 | $157,365 | $43,644 | 28% | | Surgical & Sports Medicine | $30,482 | $28,971 | $1,511 | 5% | | **Net revenue** | **$231,491** | **$186,336** | **$45,155** | **24%** | - PuraPly revenue increased to **$40.9 million** in Q3 2020 (from **$31.8 million** in Q3 2019) and **$102.0 million** in 9M 2020 (from **$86.9 million** in 9M 2019) due to expanded sales forces and increased sales[166](index=166&type=chunk) [Cost of goods sold, gross profit and gross profit margin](index=32&type=section&id=Cost%20of%20goods%20sold,%20gross%20profit%20and%20gross%20profit%20margin_Comparison) This section compares cost of goods sold, gross profit, and gross profit margin for the three and nine months ended September 30, 2020 and 2019 Cost of Goods Sold, Gross Profit, and Margin (Three Months Ended Sep 30) (in thousands) | Metric | Three Months Ended Sep 30, 2020 (in thousands) | Three Months Ended Sep 30, 2019 (in thousands) | Change ($) | Change (%) | | :--------------- | :--------------------------------------------- | :--------------------------------------------- | :--------- | :--------- | | Cost of goods sold | $22,964 | $19,131 | $3,833 | 20% | | Gross profit | $77,835 | $45,134 | $32,701 | 72% | | Gross profit % | 77% | 70% | | | Cost of Goods Sold, Gross Profit, and Margin (Nine Months Ended Sep 30) (in thousands) | Metric | Nine Months Ended Sep 30, 2020 (in thousands) | Nine Months Ended Sep 30, 2019 (in thousands) | Change ($) | Change (%) | | :--------------- | :-------------------------------------------- | :-------------------------------------------- | :--------- | :--------- | | Cost of goods sold | $61,799 | $55,557 | $6,242 | 11% | | Gross profit | $169,692 | $130,779 | $38,913 | 30% | | Gross profit % | 73% | 70% | | | - The increase in gross profit was primarily due to increased sales volume and a shift in product mix to higher gross margin products[168](index=168&type=chunk) [Research and Development Expenses](index=32&type=section&id=Research%20and%20Development%20Expenses_Comparison) This section compares research and development expenses for the three and nine months ended September 30, 2020 and 2019 Research and Development Expenses (Three Months Ended Sep 30) (in thousands) | Metric | Three Months Ended Sep 30, 2020 (in thousands) | Three Months Ended Sep 30, 2019 (in thousands) | Change ($) | Change (%) | | :------------------------ | :--------------------------------------------- | :--------------------------------------------- | :--------- | :--------- | | Research and development | $3,709 | $3,924 | $(215) | (5%) | | % of net revenue | 4% | 6% | | | Research and Development Expenses (Nine Months Ended Sep 30) (in thousands) | Metric | Nine Months Ended Sep 30, 2020 (in thousands) | Nine Months Ended Sep 30, 2019 (in thousands) | Change ($) | Change (%) | | :------------------------ | :-------------------------------------------- | :-------------------------------------------- | :--------- | :--------- | | Research and development | $13,787 | $11,159 | $2,628 | 24% | | % of net revenue | 6% | 6% | | | - The Q3 2020 decrease was primarily due to delayed enrollment in trials and limited clinical spending due to COVID-19, while the 9M 2020 increase was driven by process development costs, headcount, and pipeline product costs[170](index=170&type=chunk) [Selling, General and Administrative Expenses](index=33&type=section&id=Selling,%20General%20and%20Administrative%20Expenses_Comparison) This section compares selling, general, and administrative expenses for the three and nine months ended September 30, 2020 and 2019 Selling, General and Administrative Expenses (Three Months Ended Sep 30) (in thousands) | Metric | Three Months Ended Sep 30, 2020 (in thousands) | Three Months Ended Sep 30, 2019 (in thousands) | Change ($) | Change (%) | | :---------------------------------- | :--------------------------------------------- | :--------------------------------------------- | :--------- | :--------- | | Selling, general and administrative | $51,146 | $49,475 | $1,671 | 3% | | % of net revenue | 51% | 77% | | | Selling, General and Administrative Expenses (Nine Months Ended Sep 30) (in thousands) | Metric | Nine Months Ended Sep 30, 2020 (in thousands) | Nine Months Ended Sep 30, 2019 (in thousands) | Change ($) | Change (%) | | :---------------------------------- | :-------------------------------------------- | :-------------------------------------------- | :--------- | :--------- | | Selling, general and administrative | $150,261 | $147,325 | $2,936 | 2% | | % of net revenue | 65% | 79% | | | - Q3 2020 increase was driven by headcount and sales commissions, partially offset by reduced travel/marketing due to COVID-19, lower amortization, legal fees, and bad debt[171](index=171&type=chunk) [Other Expense, net](index=34&type=section&id=Other%20Expense,%20net_Comparison) This section compares other expense, net, including interest and acquisition settlement gains, for the three and nine months ended September 30, 2020 and 2019 Other Expense, Net (Three Months Ended Sep 30) (in thousands) | Metric | Three Months Ended Sep 30, 2020 (in thousands) | Three Months Ended Sep 30, 2019 (in thousands) | Change ($) | Change (%) | | :-------------------------------------- | :--------------------------------------------- | :--------------------------------------------- | :--------- | :--------- | | Interest expense, net | $(2,969) | $(2,427) | $(542) | 22% | | Gain on settlement of deferred acquisition consideration | $951 | $— | $951 | 100% | | **Total other expense, net** | **$(1,974)** | **$(2,428)** | **$454** | **(19%)** | Other Expense, Net (Nine Months Ended Sep 30) (in thousands) | Metric | Nine Months Ended Sep 30, 2020 (in thousands) | Nine Months Ended Sep 30, 2019 (in thousands) | Change ($) | Change (%) | | :-------------------------------------- | :-------------------------------------------- | :-------------------------------------------- | :--------- | :--------- | | Interest expense, net | $(8,391) | $(6,392) | $(1,999) | 31% | | Loss on the extinguishment of debt | $— | $(1,862) | $1,862 | (100%) | | Gain on settlement of deferred acquisition consideration | $2,246 | $— | $2,246 | 100% | | **Total other expense, net** | **$(6,055)** | **$(8,243)** | **$2,188** | **(27%)** | - The decrease in total other expense, net, for both periods was primarily driven by gains on settlement of deferred acquisition consideration and the non-recurrence of debt extinguishment loss, partially offset by increased interest expense[175](index=175&type=chunk)[176](index=176&type=chunk) [Liquidity and Capital Resources](index=34&type=section&id=Liquidity%20and%20Capital%20Resources) This section discusses the company's cash position, working capital, cash flow activities, and debt obligations - As of September 30, 2020, the company had **$36.5 million** in cash and **$62.8 million** in working capital, expected to fund operations for at least 12 months[177](index=177&type=chunk) - Primary uses of cash include working capital, capital expenditures, and debt service payments; additional funds may be sought through equity or debt financings[179](index=179&type=chunk)[180](index=180&type=chunk) - The company is subject to financial covenants under the 2019 Credit Agreement, including Minimum Trailing Twelve Month Consolidated Revenue and Non-PuraPly Revenue, with non-compliance risking debt acceleration[180](index=180&type=chunk) [Cash Flows](index=35&type=section&id=Cash%20Flows) This section analyzes the net cash used in operating, investing, and financing activities for the reported periods Cash Flow Activities (Nine Months Ended Sep 30) (in thousands) | Cash Flow Activity (Nine Months Ended Sep 30) | 2020 (in thousands) | 2019 (in thousands) | | :-------------------------------------------- | :------------------ | :------------------ | | Net cash used in operating activities | $(19,475) | $(27,127) | | Net cash used in investing activities | $(16,354) | $(2,776) | | Net cash provided by financing activities | $12,345 | $31,657 | | **Net change in cash and restricted cash** | **$(23,484)** | **$1,754** | - Net cash used in operating activities for 9M 2020 was **$19.5 million**, primarily from net loss and changes in operating assets and liabilities, partially offset by non-cash charges[182](index=182&type=chunk) - Net cash used in investing activities for 9M 2020 was **$16.4 million**, mainly due to capital expenditures and the CPN acquisition, partially offset by notes receivable repayment[184](index=184&type=chunk) - Net cash provided by financing activities for 9M 2020 was **$12.3 million**, primarily from the 2019 Credit Agreement and stock option exercises, offset by capital lease and deferred acquisition consideration payments[185](index=185&type=chunk) [Indebtedness](index=36&type=section&id=Indebtedness) This section details the company's credit facilities, term loans, and compliance with financial covenants - The 2019 Credit Agreement provides for a **$40.0 million** revolving credit facility and a **$60.0 million** term loan facility, fully funded by March 2020[188](index=188&type=chunk) - The company is required to comply with Minimum Trailing Twelve Month Consolidated Revenue and Non-PuraPly Revenue covenants, and was in compliance as of September 30, 2020[189](index=189&type=chunk)[190](index=190&type=chunk) - Outstanding borrowings under the Revolving Facility and Term Loan Facility were **$39.4 million** and **$60.0 million**, respectively, as of September 30, 2020[190](index=190&type=chunk) [Contractual Obligations and Commitments](index=37&type=section&id=Contractual%20Obligations%20and%20Commitments) This section confirms no material changes to contractual obligations and commitments since the prior annual report - There have been no material changes to contractual obligations and commitments as of September 30, 2020, from those disclosed in the Annual Report on Form 10-K for 2019[194](index=194&type=chunk) [Critical Accounting Policies and Significant Judgments and Estimates](index=37&type=section&id=Critical%20Accounting%20Policies%20and%20Significant%20Judgments%20and%20Estimates) This section highlights the reliance on significant estimates and judgments in financial reporting and potential impacts of assumption changes - The preparation of financial statements requires significant estimates, assumptions, and judgments, which are evaluated on an ongoing basis[195](index=195&type=chunk) - Changes in assumptions, especially given COVID-19 risks, could materially affect consolidated statements of operations, liquidity, and financial condition[195](index=195&type=chunk) [Emerging Growth Company Status](index=37&type=section&id=Emerging%20Growth%20Company%20Status) This section notes the company's status as an "emerging growth company" and its use of related exemptions - The company is an "emerging growth company" and utilizes exemptions, including an extended transition period for new accounting standards, which may affect comparability[196](index=196&type=chunk) [Off-Balance Sheet Arrangements](index=37&type=section&id=Off-Balance%20Sheet%20Arrangements) This section confirms the absence of any off-balance sheet arrangements during the reported periods - The company did not have any off-balance sheet arrangements during the periods presented or currently[197](index=197&type=chunk) [Recently Issued Accounting Pronouncements](index=37&type=section&id=Recently%20Issued%20Accounting%20Pronouncements) This section refers to Note 2 for disclosures regarding recently issued accounting standards - All recently issued accounting standards have been reviewed and are disclosed in Note 2 to the consolidated financial statements[198](index=198&type=chunk) [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=37&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) As a smaller reporting company, Organogenesis Holdings Inc. is not required to provide quantitative and qualitative disclosures about market risk - The company is a "smaller reporting company" and is not required to provide quantitative and qualitative disclosures about market risk[199](index=199&type=chunk) [Item 4. Controls and Procedures](index=38&type=section&id=Item%204.%20Controls%20and%20Procedures) This section details management's evaluation of disclosure controls and procedures, identifies material weaknesses in internal control over financial reporting, outlines remediation plans, and reports on changes in internal control [Evaluation of Disclosure Controls and Procedures](index=38&type=section&id=Evaluation%20of%20Disclosure%20Controls%20and%20Procedures) This section presents management's assessment of the effectiveness of disclosure controls and procedures - Management evaluated the effectiveness of disclosure controls and procedures as of September 30, 2020[200](index=200&type=chunk) - It was concluded that internal control over financial reporting and disclosure controls were not effective as of December 31, 2019, and September 30, 2020, due to identified material weaknesses[203](index=203&type=chunk) [Material Weaknesses on Internal Control over Financial Reporting](index=38&type=section&id=Material%20Weaknesses%20on%20Internal%20Control%20over%20Financial%20Reporting) This section identifies specific material weaknesses in the company's internal control over financial reporting - A material weakness existed in the design and maintenance of formal accounting, business operations, and Information Technology policies, procedures, and controls[203](index=203&type=chunk) - Specific deficiencies included a lack of formalized policies for reviews over account reconciliations, journal entries, and accounting analyses, and inadequate controls for segregation of duties[203](index=203&type=chunk) [Plans for Remediation of Material Weakness](index=38&type=section&id=Plans%20for%20Remediation%20of%20Material%20Weakness) This section outlines the company's strategies and actions to address and remediate identified material weaknesses - Management is implementing a new company-wide enterprise resource planning (ERP) system, expected to go live in the first half of 2021, to enhance systematic controls and segregation of duties[204](index=204&type=chunk) - An outside firm was engaged to assist with enhancing risk assessment, reviewing processes, designing controls for data completeness and accuracy, and developing a monitoring protocol[209](index=209&type=chunk) - Regular reports on remediation progress have been provided to the audit committee[209](index=209&type=chunk) [Changes in Internal Control Over Financial Reporting](index=39&type=section&id=Changes%20in%20Internal%20Control%20Over%20Financial%20Reporting) This section reports on any changes in internal control over financial reporting during the period - No material changes in internal control over financial reporting occurred during the period ended September 30, 2020, other than those related to the ongoing remediation plan[207](index=207&type=chunk) [PART II. OTHER INFORMATION](index=38&type=section&id=PART%20II.%20OTHER%20INFORMATION) This section provides additional information not covered in the financial statements, including legal proceedings, risk factors, and other disclosures [Item 1. Legal Proceedings](index=39&type=section&id=Item%201.%20Legal%20Proceedings) This section confirms that the company is not a party to any material legal proceedings and believes that the resolution of general claims would not materially affect its financial position or operations - The company is not a party to any material legal proceedings[208](index=208&type=chunk) - Management believes the ultimate resolution of various claims would not have a material adverse effect on the company's financial position, operating results, or cash flows[208](index=208&type=chunk) [Item 1A Risk Factors](index=40&type=section&id=Item%201A%20Risk%20Factors) This section refers to the Annual Report for detailed risk factors and highlights new or updated risks, including those related to information technology systems, supply chain interruptions, and the potential adverse impacts of the COVID-19 pandemic on manufacturing, sales, and financial covenants - Significant disruptions of IT systems or security breaches, such as the August 2020 ransomware attack, could adversely affect business, results of operations, and financial condition[211](index=211&type=chunk) - Interruptions in product supply or inventory loss, including production issues with Affinity product, may adversely affect business[212](index=212&type=chunk) - The global COVID-19 pandemic could negatively impact manufacturing facilities, supply chain (raw materials, source tissue), sales force effectiveness, and the ability to comply with financial covenants and raise capital[214](index=214&type=chunk)[215](index=215&type=chunk)[216](index=216&type=chunk)[217](index=217&type=chunk)[222](index=222&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=42&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) This section states that there were no unregistered sales of equity securities or use of proceeds to report - None[223](index=223&type=chunk) [Item 3. Defaults Upon Senior Securities](index=42&type=section&id=Item%203.%20Defaults%20Upon%20Senior%20Securities) This section states that there were no defaults upon senior securities to report - None[224](index=224&type=chunk) [Item 4. Mine Safety Disclosures](index=42&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) This section indicates that mine safety disclosures are not applicable to the company - Not Applicable[225](index=225&type=chunk) [Item 5. Other Information](index=42&type=section&id=Item%205.%20Other%20Information) This section reports recent changes in the company's board of directors and committee appointments - Albert Erani and Maurice Ades resigned as members of the board of directors effective November 3, 2020[226](index=226&type=chunk) - David Erani and Robert Ades were elected to fill the vacancies on the board of directors[227](index=227&type=chunk) - Art Leibowitz was appointed as a member of the compensation committee[228](index=228&type=chunk) [Item 6. Exhibits](index=43&type=section&id=Item%206.%20Exhibits) This section lists all exhibits filed as part of the Form 10-Q report - Exhibits include the Certificate of Incorporation, Bylaws, Separation Letter Agreement, Certifications of Principal Executive and Financial Officers, and XBRL documents[229](index=229&type=chunk) [SIGNATURES](index=44&type=section&id=SIGNATURES) This section contains the formal attestations and signatures for the quarterly report [Signatures](index=44&type=section&id=SIGNATURES_Details) This section contains the formal signatures for the quarterly report - The report was signed on November 9, 2020, by Henry Hagopian, Interim Chief Financial Officer[232](index=232&type=chunk)[233](index=233&type=chunk)

Organogenesis Holdings, Inc. (NASDAQ:ORGO) Q2 2020 Earnings Conference Call August 10, 2020 5:00 PM ET Company Participants Gary Gillheeney - President, Chief Executive Officer & Director Timothy Cunningham - Chief Financial Officer Conference Call Participants Matthew Miksic - Crédit Suisse Ryan Zimmerman - BTIG Richard Newitter - SVB Leerink Steven Lichtman - Oppenheimer Operator Good afternoon, ladies and gentlemen, and welcome to the Second Quarter 2020 Earnings Conference Call for Organogenesis Holding ...

PART I. FINANCIAL INFORMATION [Item 1. Unaudited Consolidated Financial Statements](index=4&type=section&id=Item%201.%20Unaudited%20Consolidated%20Financial%20Statements) Presents Organogenesis Holdings Inc.'s unaudited consolidated financial statements as of June 30, 2020, detailing balance sheets, operations, cash flows, and accounting notes [Consolidated Balance Sheets](index=5&type=section&id=Consolidated%20Balance%20Sheets) Details the company's financial position, including assets, liabilities, and stockholders' equity, at June 30, 2020, and December 31, 2019 Consolidated Balance Sheet Highlights (in thousands) | Account | June 30, 2020 | December 31, 2019 | | :--- | :--- | :--- | | **Assets** | | | | Cash | $40,455 | $60,174 | | Accounts receivable, net | $44,024 | $39,359 | | Inventory | $28,562 | $22,918 | | Total current assets | $117,706 | $125,600 | | Total assets | $216,487 | $220,687 | | **Liabilities & Stockholders' Equity** | | | | Total current liabilities | $66,058 | $59,894 | | Total liabilities | $180,737 | $165,104 | | Total stockholders' equity | $35,750 | $55,583 | [Consolidated Statements of Operations](index=6&type=section&id=Consolidated%20Statements%20of%20Operations) Summarizes the company's financial performance, including net revenue, gross profit, and net loss, for the three and six months ended June 30 Consolidated Statements of Operations Highlights (in thousands, except per share data) | Metric | Three Months Ended June 30, 2020 | Three Months Ended June 30, 2019 | Six Months Ended June 30, 2020 | Six Months Ended June 30, 2019 | | :--- | :--- | :--- | :--- | :--- | | Net revenue | $68,960 | $64,948 | $130,692 | $122,071 | | Gross profit | $48,918 | $45,502 | $91,857 | $85,645 | | Loss from operations | $(2,252) | $(7,319) | $(17,336) | $(19,440) | | Net loss | $(5,166) | $(9,649) | $(21,479) | $(25,315) | | Net loss per share | $(0.05) | $(0.11) | $(0.21) | $(0.28) | [Consolidated Statements of Cash Flows](index=8&type=section&id=Consolidated%20Statements%20of%20Cash%20Flows) Reports cash inflows and outflows from operating, investing, and financing activities for the six months ended June 30, 2020, and 2019 Consolidated Statements of Cash Flows Highlights (in thousands) | Cash Flow Activity | Six Months Ended June 30, 2020 | Six Months Ended June 30, 2019 | | :--- | :--- | :--- | | Net cash used in operating activities | $(26,618) | $(21,674) | | Net cash used in investing activities | $(6,118) | $(1,501) | | Net cash provided by financing activities | $13,120 | $21,929 | | Change in cash and restricted cash | $(19,616) | $(1,246) | [Notes to Consolidated Financial Statements](index=9&type=section&id=Notes%20to%20Consolidated%20Financial%20Statements) Provides detailed explanations of the company's business, COVID-19 impact, liquidity, revenue recognition, debt, stock compensation, and legal matters - The company is a regenerative medicine firm focused on Advanced Wound Care and Surgical & Sports Medicine markets. While the COVID-19 pandemic has not materially adversely affected financial results through Q2 2020, significant risks and uncertainties remain regarding future impact[25](index=25&type=chunk)[26](index=26&type=chunk) - Management believes cash on hand (**$40.5 million**), working capital (**$51.6 million**), and cash flows from sales will be sufficient to fund operations, capital expenditures, and debt service for at least 12 months from the filing date[31](index=31&type=chunk) Revenue by Product Category (in thousands) | Category | Three Months Ended June 30, 2020 | Six Months Ended June 30, 2020 | | :--- | :--- | :--- | | Advanced Wound Care | $59,731 | $111,019 | | Surgical & Sports Medicine | $9,229 | $19,673 | | **Total net revenue** | **$68,960** | **$130,692** | - As of June 30, 2020, the company had outstanding borrowings of **$60.0 million** under its Term Loan Facility and **$39.4 million** under its Revolving Facility. The company was in compliance with all financial covenants[59](index=59&type=chunk)[58](index=58&type=chunk) - In February 2020, the company settled a dispute over a **$5.0 million** deferred acquisition consideration related to the NuTech Medical acquisition for **$4.0 million**, resulting in a gain of **$1.3 million**[99](index=99&type=chunk)[127](index=127&type=chunk) [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=21&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discusses Q2 and H1 2020 financial performance, covering revenue growth, COVID-19 impact, PuraPly reimbursement, liquidity, and debt obligations [Results of Operations](index=25&type=section&id=Results%20of%20Operations) Q2 2020 net revenue grew **6%** to **$69.0 million**, driven by Advanced Wound Care, with stable gross margin and positive Adjusted EBITDA, while operating loss significantly decreased Revenue Comparison (in thousands) | Category | Q2 2020 | Q2 2019 | % Change | H1 2020 | H1 2019 | % Change | | :--- | :--- | :--- | :--- | :--- | :--- | :--- | | Advanced Wound Care | $59,731 | $55,211 | 8% | $111,019 | $103,055 | 8% | | Surgical & Sports Medicine | $9,229 | $9,737 | -5% | $19,673 | $19,016 | 3% | | **Total Net Revenue** | **$68,960** | **$64,948** | **6%** | **$130,692** | **$122,071** | **7%** | - PuraPly products, which retain pass-through reimbursement status until September 30, 2020, are expected to see a decrease in net revenue after transitioning to a bundled payment structure, potentially not fully offset by growth in other products[120](index=120&type=chunk) - Selling, general and administrative (SG&A) expenses decreased by **5%** in Q2 2020, primarily due to a **$3.8 million** reduction in travel and marketing programs amid COVID-19 restrictions, partially offset by increased sales force headcount[142](index=142&type=chunk) EBITDA and Adjusted EBITDA Reconciliation (in thousands) | Metric | Q2 2020 | Q2 2019 | H1 2020 | H1 2019 | | :--- | :--- | :--- | :--- | :--- | | Net loss | $(5,166) | $(9,649) | $(21,479) | $(25,315) | | EBITDA | $(520) | $(5,081) | $(12,569) | $(16,532) | | Adjusted EBITDA | $274 | $(4,847) | $(12,618) | $(14,212) | [Liquidity and Capital Resources](index=29&type=section&id=Liquidity%20and%20Capital%20Resources) As of June 30, 2020, the company held **$40.5 million** in cash and **$51.6 million** in working capital, deemed sufficient for 12 months, and remained compliant with debt covenants - The company's primary sources of capital are product sales, institutional lenders, and proceeds from stock sales; as of June 30, 2020, cash was **$40.5 million** and working capital was **$51.6 million**[148](index=148&type=chunk) Cash Flow Summary - Six Months Ended June 30 (in thousands) | Activity | 2020 | 2019 | | :--- | :--- | :--- | | Net cash used in operating activities | $(26,618) | $(21,674) | | Net cash used in investing activities | $(6,118) | $(1,501) | | Net cash provided by financing activities | $13,120 | $21,929 | - The company is required to comply with financial covenants under its 2019 Credit Agreement, including Minimum Trailing Twelve Month Consolidated Revenue and Non-PuraPly Revenue, and was in compliance as of June 30, 2020[160](index=160&type=chunk)[161](index=161&type=chunk) [Quantitative and Qualitative Disclosures About Market Risk](index=31&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) As a "smaller reporting company," Organogenesis is exempt from providing disclosures under this item - The Company is a "smaller reporting company" as defined by SEC rules and is therefore not required to provide the disclosures under this item[170](index=170&type=chunk) [Controls and Procedures](index=31&type=section&id=Item%204.%20Controls%20and%20Procedures) Management concluded disclosure controls were ineffective as of June 30, 2020, due to a material weakness in internal control over financial reporting, with remediation underway - A material weakness in internal control over financial reporting, identified as of December 31, 2019, continued to exist at June 30, 2020[175](index=175&type=chunk) - The weakness stems from a lack of formal accounting policies, procedures, and controls, including inadequate segregation of duties and review controls over financial reporting[175](index=175&type=chunk) - Remediation efforts are in progress, including the implementation of a new ERP system (expected in H2 2020), formalizing policies, and engaging an outside firm to assist with enhancing controls and monitoring[181](index=181&type=chunk)[178](index=178&type=chunk) PART II. OTHER INFORMATION [Legal Proceedings](index=33&type=section&id=Item%201.%20Legal%20Proceedings) The company is not currently a party to any material legal proceedings, though it may face litigation in the ordinary course of business - The company is not currently a party to any material legal proceedings[180](index=180&type=chunk) [Risk Factors](index=34&type=section&id=Item%201A%20Risk%20Factors) Updates the company's risk factors, emphasizing COVID-19's potential adverse impacts on manufacturing, supply chains, sales force, product demand, and financial covenant compliance - The COVID-19 pandemic poses a significant risk to the company's manufacturing facilities, supply chain for raw materials and source tissue, and the ability of its sales force to meet with healthcare providers[183](index=183&type=chunk)[185](index=185&type=chunk)[187](index=187&type=chunk) - The company may experience unpredictable reductions in product demand if patients are unable to access therapies or if providers prioritize resources to address the pandemic[189](index=189&type=chunk) - The economic impact of COVID-19 could adversely affect the company's ability to meet financial covenants in its 2019 Credit Agreement and could negatively impact its ability to raise additional capital[191](index=191&type=chunk) [Unregistered Sales of Equity Securities and Use of Proceeds](index=35&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) No unregistered sales of equity securities occurred during the reporting period - None[192](index=192&type=chunk) [Defaults Upon Senior Securities](index=35&type=section&id=Item%203.%20Defaults%20Upon%20Senior%20Securities) No defaults upon senior securities occurred during the reporting period - None[193](index=193&type=chunk) [Mine Safety Disclosures](index=35&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) This item is not applicable to the company's operations - Not Applicable[194](index=194&type=chunk) [Other Information](index=35&type=section&id=Item%205.%20Other%20Information) No other information is reported for the period - None[195](index=195&type=chunk) [Exhibits](index=36&type=section&id=Item%206.%20Exhibits) Lists exhibits filed with Form 10-Q, including CEO and CFO certifications required by Sarbanes-Oxley Act and XBRL data files - Exhibits filed include Certifications of the Principal Executive Officer and Principal Financial Officer pursuant to Sarbanes-Oxley Act Sections 302 and 906, as well as XBRL data files[197](index=197&type=chunk)

Financial Data and Key Metrics Changes - Total revenue for Q1 2020 was $61.7 million, an increase of 8% from $57.1 million in Q1 2019 [18] - Gross profit for Q1 2020 was $42.9 million, up 7% from $40.1 million in Q1 2019, with a gross profit margin of 69.6% compared to 70.3% in the prior year [23] - Operating loss for Q1 2020 was $15.1 million, compared to a loss of $12.1 million in Q1 2019, reflecting a 24% increase in losses [30] - Net loss for Q1 2020 was $16.3 million or $0.16 per share, compared to a net loss of $15.7 million or $0.17 per share in Q1 2019 [32] Business Line Data and Key Metrics Changes - Revenue from Advanced Wound Care products was $51.3 million, a 7% increase from $47.8 million in Q1 2019, representing 83% of total revenue [19] - Revenue from Surgical & Sports Medicine products was $10.4 million, a 13% increase from $9.3 million in Q1 2019, representing 17% of total revenue [20] - Revenue from PuraPly products was $32.5 million, a 28% increase from $25.4 million in Q1 2019, accounting for approximately 53% of total revenue [21] Market Data and Key Metrics Changes - Sales through February 2020 were up 13% year-over-year, but sales declined 14% year-over-year in the second half of March due to COVID-19 disruptions [11] - Sales of Surgical & Sports Medicine products declined 52% year-over-year in April, while Advanced Wound Care products saw a 24% decline [13] Company Strategy and Development Direction - The company is focused on long-term growth and market share gain, driven by investments in the commercial team and new product launches [38] - The strategy includes expanding the office presence for PuraPly and adapting to the shift of procedures from outpatient settings to offices [64] Management's Comments on Operating Environment and Future Outlook - Management expressed cautious optimism about recovery trends as healthcare facilities begin to reopen, but acknowledged uncertainty regarding the pace of recovery [14] - The company expects to realize $5 million to $6 million in savings in Q2 2020 due to proactive cost-saving measures [29] Other Important Information - The company withdrew its fiscal year 2020 revenue guidance due to uncertainties from the COVID-19 pandemic [36] - As of March 31, 2020, the company had $46.9 million in cash and $110 million in debt obligations [34] Q&A Session Summary Question: Insights on recovery signs across product lines and geographies - Management noted that capacity for Surgical & Sports Medicine has opened up to 80%-82%, with rural hospitals showing better performance [42] - Wound care centers are gradually reopening, with 80% now open and more than half accepting new patients [44] Question: Impact of deferred procedures on product mix - Management indicated that larger and more infected wounds are being observed, leading to expected increases in PuraPly sales [50] Question: Percentage of business related to traumatic wounds - Management stated that 45% of procedures are nonelective, with a reasonable percentage being traumatic, but specific percentages were not disclosed [53] Question: Expectations for backlog recovery - Management anticipates that about 85% of the backlog will be addressed within 4 to 5 months [55] Question: Criteria for allowing sales reps into centers - The criteria depend on regional COVID-19 experiences, with varying rates of access for sales reps [58] Question: Importance of clinical data presentations - Management expressed concern over the inability to present clinical data at conferences due to the pandemic, which may impact brand support [66]

PART I. FINANCIAL INFORMATION This section presents Organogenesis's unaudited consolidated financial statements and management's discussion [Item 1. Unaudited Consolidated Financial Statements](index=5&type=section&id=Item%201.%20Unaudited%20Consolidated%20Financial%20Statements) This section presents Organogenesis Holdings Inc.'s unaudited consolidated financial statements for Q1 2020, including balance sheets, operations, equity, cash flows, and notes [Consolidated Balance Sheets](index=5&type=section&id=Consolidated%20Balance%20Sheets) This section presents the company's financial position, detailing assets, liabilities, and equity at quarter-end | Metric | March 31, 2020 (in thousands) | December 31, 2019 (in thousands) | | :-------------------------------- | :----------------------------- | :------------------------------- | | Cash | $46,898 | $60,174 | | Total current assets | $111,398 | $125,600 | | Total assets | $208,340 | $220,687 | | Total current liabilities | $54,825 | $59,894 | | Total liabilities | $168,045 | $165,104 | | Total stockholders' equity | $40,295 | $55,583 | [Consolidated Statements of Operations](index=6&type=section&id=Consolidated%20Statements%20of%20Operations) This section details the company's revenues, expenses, and net loss for Q1 2020 and 2019 | Metric | Three Months Ended March 31, 2020 (in thousands) | Three Months Ended March 31, 2019 (in thousands) | | :----------------------------------- | :--------------------------------------------- | :--------------------------------------------- | | Net revenue | $61,732 | $57,123 | | Cost of goods sold | $18,793 | $16,980 | | Gross profit | $42,939 | $40,143 | | Total operating expenses | $58,023 | $52,264 | | Loss from operations | $(15,084) | $(12,121) | | Total other expense, net | $(1,194) | $(3,508) | | Net loss | $(16,313) | $(15,666) | | Net loss per share — basic and diluted | $(0.16) | $(0.17) | | Weighted-average common shares outstanding | 104,486,924 | 90,604,107 | [Consolidated Statements of Redeemable Common Stock and Stockholders' Equity](index=7&type=section&id=Consolidated%20Statements%20of%20Redeemable%20Common%20Stock%20and%20Stockholders'%20Equity) This section outlines changes in redeemable common stock and stockholders' equity for Q1 2020 and 2019 | Item | Three Months Ended March 31, 2020 (in thousands) | Three Months Ended March 31, 2019 (in thousands) | | :------------------------------------ | :--------------------------------------------- | :--------------------------------------------- | | Balance as of December 31 | $55,583 | $47,041 | | Exercise of stock options | $816 | $628 | | Stock-based compensation expense | $209 | $224 | | Net loss | $(16,313) | $(15,666) | | Balance as of March 31 | $40,295 | $32,559 | [Consolidated Statements of Cash Flows](index=8&type=section&id=Consolidated%20Statements%20of%20Cash%20Flows) This section presents the company's cash flows from operating, investing, and financing activities for Q1 2020 and 2019 | Cash Flow Activity | Three Months Ended March 31, 2020 (in thousands) | Three Months Ended March 31, 2019 (in thousands) | | :--------------------------------- | :--------------------------------------------- | :--------------------------------------------- | | Net cash used in operating activities | $(17,283) | $(9,558) | | Net cash used in investing activities | $(4,243) | $(317) | | Net cash provided by financing activities | $8,230 | $19,133 | | Change in cash and restricted cash | $(13,296) | $9,258 | | Cash and restricted cash, end of period | $47,074 | $30,663 | [Notes to Consolidated Financial Statements](index=9&type=section&id=Notes%20to%20Consolidated%20Financial%20Statements) These notes detail the unaudited consolidated financial statements, covering business, accounting policies, financial condition, debt, equity, and COVID-19 impacts [1. Nature of the Business and Basis of Presentation](index=9&type=section&id=1.%20Nature%20of%20the%20Business%20and%20Basis%20of%20Presentation) This note describes Organogenesis's business, regenerative medicine focus, and basis for financial statement presentation - Organogenesis Holdings Inc. is a leading regenerative medicine company focused on Advanced Wound Care and Surgical & Sports Medicine markets, serving hospitals, wound care centers, government facilities, ASCs, and physician offices[24](index=24&type=chunk) - The COVID-19 pandemic had no material adverse effect on Q1 2020 financial results but presents significant future risks to demand, sales, staffing, manufacturing, supply chain, and financial covenants, with the company implementing cost-saving measures and monitoring the situation[25](index=25&type=chunk)[26](index=26&type=chunk) - The Avista Merger in December 2018 was accounted for as a reverse merger, with Organogenesis Inc. treated as the accounting acquirer, resulting in no goodwill or other intangible assets recorded from the merger[27](index=27&type=chunk)[28](index=28&type=chunk) - The company has incurred recurring operating losses since inception and had an accumulated deficit of **$187.3 million** as of March 31, 2020, with management believing current cash and credit facilities will be sufficient for at least 12 months, but future funding may be needed[30](index=30&type=chunk)[31](index=31&type=chunk) [2. Summary of Significant Accounting Policies](index=10&type=section&id=2.%20Summary%20of%20Significant%20Accounting%20Policies) This note outlines key accounting principles and policies applied in preparing consolidated financial statements - The unaudited consolidated financial statements are prepared in accordance with GAAP and SEC rules for interim reporting, and should be read with the Annual Report on Form 10-K for the fiscal year ended December 31, 2019[32](index=32&type=chunk) - No material changes to significant accounting policies previously disclosed in the Annual Report[36](index=36&type=chunk) - The company, as an emerging growth company, will adopt ASU 2016-02 (Leases) on January 1, 2021, and ASU 2016-13 (Credit Losses) on January 1, 2023, recognizing cumulative-effect adjustments to retained earnings[38](index=38&type=chunk)[39](index=39&type=chunk) [3. Product and Geographic Sales](index=12&type=section&id=3.%20Product%20and%20Geographic%20Sales) This note details revenue by product category and geographic region, along with revenue recognition policies - Revenue is generated from Advanced Wound Care and Surgical & Sports Medicine products, recognized when customers obtain control, net of returns, discounts, and GPO rebates[41](index=41&type=chunk) | Product Category | Three Months Ended March 31, 2020 (in thousands) | Three Months Ended March 31, 2019 (in thousands) | | :----------------------- | :--------------------------------------------- | :--------------------------------------------- | | Advanced Wound Care | $51,288 | $47,844 | | Surgical & Sports Medicine | $10,444 | $9,279 | | **Total net revenue** | **$61,732** | **$57,123** | | Net PuraPly revenue | $32,505 | $25,447 | - Net revenue generated outside the United States represented less than **1%** of total net revenue for all periods presented[42](index=42&type=chunk) [4. Accounts Receivable, Net](index=12&type=section&id=4.%20Accounts%20Receivable,%20Net) This note breaks down accounts receivable, net of allowances for sales returns and doubtful accounts | Metric | March 31, 2020 (in thousands) | December 31, 2019 (in thousands) | | :----------------------------------- | :----------------------------- | :------------------------------- | | Accounts receivable | $35,928 | $42,408 | | Less — allowance for sales returns and doubtful accounts | $(3,204) | $(3,049) | | **Accounts receivable, net** | **$32,724** | **$39,359** | | Allowance for Sales Returns and Doubtful Accounts | Three Months Ended March 31, 2020 (in thousands) | Three Months Ended March 31, 2019 (in thousands) | | :------------------------------------------------ | :--------------------------------------------- | :--------------------------------------------- | | Balance at beginning of period | $3,049 | $3,420 | | Additions (reductions) | $217 | $(76) | | Write-offs | $(62) | $(52) | | Balance at end of period | $3,204 | $3,292 | [5. Inventories](index=12&type=section&id=5.%20Inventories) This note details the composition of inventories, including raw materials, work in process, and finished goods | Inventory Category | March 31, 2020 (in thousands) | December 31, 2019 (in thousands) | | :----------------- | :----------------------------- | :------------------------------- | | Raw materials | $10,142 | $9,178 | | Work in process

Organogenesis Holdings Inc. (NASDAQ:ORGO) Q4 2019 Earnings Conference Call March 9, 2020 5:00 PM ET Company Participants Gary S. Gillheeney, Sr. - President & Chief Executive Officer Tim Cunningham - Chief Financial Officer Conference Call Participants Matt Miksic - Credit Suisse Richard Newitter - SVB Leerink Ryan Zimmerman - BTIG Steven Lichtman - Oppenheimer & Company Operator Good afternoon, ladies and gentlemen, and welcome to the Fourth Quarter 2019 Earnings Conference Call for Organogenesis Holdings ...

Table of Contents UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, DC 20549 FORM 10-K (Mark One) ☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the Fiscal Year Ended December 31, 2019 OR ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 (Exact Name of Registrant as Specified in Its Charter) Delaware 98-1329150 (State or Other Jurisdiction of Incorporation or Organization) (I.R.S. Employer Identification No.) 85 ...

Organogenesis Holdings Inc. (NASDAQ:ORGO) Q3 2019 Earnings Conference Call November 12, 2019 5:00 PM ET Company Participants Gary Gillheeney - President & Chief Executive Officer Tim Cunningham - Chief Financial Officer Conference Call Participants Vik Chopra - Credit Suisse Ryan Zimmerman - BTIG Steven Lichtman - Oppenheimer & Company Operator Good afternoon, ladies and gentlemen, and welcome to the Third Quarter 2019 Earnings Conference Call for Organogenesis Holdings Incorporated. At this time, all parti ...

UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 Commission File Number 001-37906 ORGANOGENESIS HOLDINGS INC. (Exact name of registrant as specified in its charter) Delaware 98-1329150 (State or other jurisdiction of incorporation or organization) (I.R.S. Employer Identification No.) (Mark One) ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 Fo ...

Organogenesis Holdings, Inc. (NASDAQ:ORGO) Q2 2019 Earnings Conference Call August 9, 2019 8:00 AM ET Company Participants Gary Gillheeney – Chief Executive Officer Tim Cunningham – Chief Financial Officer Conference Call Participants Ryan Zimmerman – BTIG Steven Lichtman – Oppenheimer Operator Good morning, ladies and gentlemen, and welcome to the Second Quarter 2019 Earnings Conference Call for Organogenesis Holdings Inc. [Operator Instructions] Please note that this conference call is being recorded and ...