Organogenesis (ORGO) - 2025 Q1 - Quarterly Report

PART I. FINANCIAL INFORMATION Unaudited Condensed Consolidated Financial Statements The company reported a significant Q1 2025 net revenue decrease and increased net loss, with total assets declining and a notable asset write-down Condensed Consolidated Balance Sheets As of March 31, 2025, total assets decreased to $467.4 million, driven by reduced cash, while liabilities and equity also declined Condensed Consolidated Balance Sheet Highlights (in thousands) | Account | March 31, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Assets | | | | Cash and cash equivalents | $109,965 | $135,571 | | Accounts receivable, net | $103,320 | $109,861 | | Asset held for sale | $7,033 | $— | | Total current assets | $268,160 | $285,941 | | Total assets | $467,394 | $497,886 | | Liabilities & Equity | | | | Total current liabilities | $65,053 | $77,477 | | Total liabilities | $99,325 | $112,570 | | Total stockholders' equity | $242,902 | $262,897 | Condensed Consolidated Statements of Operations and Comprehensive Loss Net revenue decreased 21.2% to $86.7 million in Q1 2025, leading to a significantly increased operating loss and net loss per share Q1 2025 vs Q1 2024 Statement of Operations (in thousands, except per share data) | Metric | Q1 2025 | Q1 2024 | | :--- | :--- | :--- | | Net revenue | $86,693 | $109,976 | | Gross profit | $62,970 | $81,280 | | Total operating expenses | $89,716 | $85,132 | | Loss from operations | $(26,746) | $(3,852) | | Net loss | $(18,843) | $(2,100) | | Net loss per share (basic and diluted) | $(0.17) | $(0.02) | - A write-down of $6,567 thousand for an asset held for sale was a significant operating expense in Q1 2025, contributing to the increased operating loss[14] Condensed Consolidated Statements of Cash Flows Net cash used in operating activities significantly increased to $19.9 million in Q1 2025, alongside increased cash usage in investing and financing activities Cash Flow Summary (in thousands) | Activity | Q1 2025 | Q1 2024 | | :--- | :--- | :--- | | Net cash used in operating activities | $(19,935) | $(10,162) | | Net cash used in investing activities | $(3,626) | $(2,222) | | Net cash used in financing activities | $(2,056) | $(2,608) | | Change in cash, cash equivalents and restricted cash | $(25,617) | $(14,992) | Notes to Condensed Consolidated Financial Statements The notes detail key accounting policies, including a significant decline in Advanced Wound Care revenue, an asset write-down, PSU introduction, and no outstanding debt Revenue by Product Category (in thousands) | Product Category | Q1 2025 | Q1 2024 | | :--- | :--- | :--- | | Advanced Wound Care | $79,927 | $103,864 | | Surgical & Sports Medicine | $6,766 | $6,112 | | Total net revenue | $86,693 | $109,976 | - In Q1 2025, the company listed a property for sale and recognized a $6,567 thousand write-down to adjust its carrying value to estimated fair market value[43] - The company introduced Performance Share Units (PSUs) in Q1 2025, granting 602,727 units to executives, which vest based on performance goals[65][66] - As of March 31, 2025, the company had no outstanding borrowings under its Term Loan Facility or its $125 million Revolving Facility[55] Management's Discussion and Analysis of Financial Condition and Results of Operations Management attributes the 21% revenue decline to customer disruption from delayed Medicare LCDs, leading to increased net loss despite stable liquidity - The implementation of new Local Coverage Determinations (LCDs) by Medicare Administrative Contractors (MACs) has been delayed to January 1, 2026. If implemented as finalized, these LCDs would render several of the company's products, including PuraPly and Novachor, non-covered for DFU and VLU indications, which could materially impact revenue[95][96] - Manufacturing of Dermagraft remains suspended, with plans to transition to a new facility in Smithfield, Rhode Island, expected to begin in 2027. Delays could adversely affect future revenue[94] Reconciliation of Net Loss to Adjusted EBITDA (Non-GAAP, in thousands) | Metric | Q1 2025 | Q1 2024 | | :--- | :--- | :--- | | Net loss | $(18,843) | $(2,100) | | EBITDA | $(22,458) | $144 | | Stock-based compensation expense | $3,367 | $2,407 | | Write-down for asset held for sale | $6,567 | $— | | Adjusted EBITDA | $(12,524) | $2,551 | Results of Operations Net revenue declined 21% in Q1 2025, primarily due to a 23% drop in Advanced Wound Care, while R&D expenses decreased and SG&A remained flat Revenue Comparison: Q1 2025 vs Q1 2024 (in thousands) | Category | Q1 2025 | Q1 2024 | Change ($) | Change (%) | | :--- | :--- | :--- | :--- | :--- | | Advanced Wound Care | $79,927 | $103,864 | $(23,937) | (23%) | | Surgical & Sports Medicine | $6,766 | $6,112 | $654 | 11% | | Net revenue | $86,693 | $109,976 | $(23,283) | (21%) | - The decrease in Advanced Wound Care revenue was primarily attributed to increased ambiguity and disruption in customer behavior following the delayed implementation of the LCDs[115] - R&D expenses decreased by $2.2 million (17%) due to a reduction in expenses for clinical research and trials[120] Liquidity and Capital Resources As of March 31, 2025, the company maintained strong liquidity with $110.0 million in cash and $125.0 million available credit, having prepaid its Term Loan Facility - As of March 31, 2025, the company had $110.0 million in cash and cash equivalents and $125.0 million available for borrowing under its Revolving Facility[125] - The company prepaid its Term Loan Facility in November 2024 and had no outstanding borrowings under the Term Loan or Revolving Facility as of March 31, 2025[134][139] Quantitative and Qualitative Disclosures About Market Risk The company states that there were no material changes to its market risk disclosures during the three months ended March 31, 2025, as compared to the disclosures in its 2024 Annual Report on Form 10-K - There were no material changes to market risk disclosures during the first quarter of 2025[144] Controls and Procedures Management, including the principal executive and financial officers, evaluated the company's disclosure controls and procedures and concluded they were effective as of March 31, 2025. There were no material changes in internal control over financial reporting during the quarter - Management concluded that as of March 31, 2025, the company's disclosure controls and procedures are effective[145] - No material changes to internal controls over financial reporting occurred during the quarter ended March 31, 2025[146] PART II. OTHER INFORMATION Legal Proceedings The company is contesting a complaint filed by a terminated employee under the U.S. False Claims Act and the Texas State Medicaid Fraud Prevention Act. The U.S. and the State of Texas have declined to intervene. The company believes the claims are without merit and intends to defend itself vigorously - The company was served with a complaint alleging claims under the U.S. False Claims Act and Texas State Medicaid Fraud Prevention Act by a terminated employee[147] - The United States and the State of Texas declined to intervene in the case in September 2024. The company believes the claims are without merit[147] Risk Factors The primary risk factor highlighted is the new Local Coverage Determinations (LCDs) finalized by seven Medicare Administrative Contractors (MACs). Although implementation has been delayed to January 1, 2026, if they take effect as written, they would classify several of the company's key products as 'non-covered' for diabetic foot ulcers (DFUs) and venous leg ulcers (VLUs). This could have a material adverse effect on the company's business and revenue - New LCDs finalized by seven MACs, if implemented, would classify products like PuraPly, PuraPly AM, PuraPly XT, Novachor, TransCyte, Dual, and Matrix as 'non-covered' for DFUs and VLUs[96][151] - The implementation of these new LCDs has been delayed until January 1, 2026, but uncertainty remains about further delays, revisions, or rescission[151] Unregistered Sales of Equity Securities and Use of Proceeds The company reported no unregistered sales of equity securities during the period - None[152] Other Information In March 2025, two company officers, Gary S. Gillheeney, Sr. and Antonio S. Montecalvo, adopted Rule 10b5-1 trading plans to sell shares of the company's Class A common stock, subject to certain conditions - On March 12, 2025, Gary S. Gillheeney, Sr. adopted a Rule 10b5-1 trading plan to sell up to 827,688 shares[156] - On March 13, 2025, Antonio S. Montecalvo adopted a Rule 10b5-1 trading plan to sell up to 200,000 shares (40,708 common stock and 159,292 from options)[157] Exhibits This section lists the exhibits filed with the Form 10-Q, including corporate governance documents, a lease amendment, a form of performance share award agreement, and officer certifications