Organogenesis (ORGO) - 2023 Q4 - Annual Results

Financial Highlights Fourth Quarter 2023 Financial Results Summary Organogenesis reported a 14% year-over-year net revenue decline to $99.7 million in Q4 2023, resulting in a $0.6 million net loss and a 47% decrease in Adjusted EBITDA to $7.5 million Q4 2023 Key Financial Metrics (vs. Q4 2022) | Metric | Q4 2023 | Q4 2022 | Change | Change (%) | | :--- | :--- | :--- | :--- | :--- | | Net Revenue | $99.7M | $115.5M | -$15.8M | -14% | | - Advanced Wound Care | $93.2M | $108.8M | -$15.6M | -14% | | - Surgical & Sports Medicine | $6.5M | $6.7M | -$0.2M | -3% | | Net (Loss) Income | ($0.6M) | $7.5M | -$8.1M | -108% | | Adjusted Net Income | $1.9M | $8.9M | -$7.0M | -79% | | Adjusted EBITDA | $7.5M | $14.1M | -$6.6M | -47% | Fiscal Year 2023 Financial Results Summary For fiscal year 2023, net revenue decreased 4% to $433.1 million, with net income falling 68% to $4.9 million and Adjusted EBITDA declining 14% to $42.6 million Fiscal Year 2023 Key Financial Metrics (vs. FY 2022) | Metric | FY 2023 | FY 2022 | Change | Change (%) | | :--- | :--- | :--- | :--- | :--- | | Net Revenue | $433.1M | $450.9M | -$17.8M | -4% | | - Advanced Wound Care | $405.5M | $422.2M | -$16.7M | -4% | | - Surgical & Sports Medicine | $27.6M | $28.7M | -$1.1M | -4% | | Net Income | $4.9M | $15.5M | -$10.6M | -68% | | Adjusted Net Income | $12.7M | $26.2M | -$13.5M | -52% | | Adjusted EBITDA | $42.6M | $49.3M | -$6.7M | -14% | Management Commentary CEO Statement The CEO noted challenging conditions but expects 2024 revenue growth driven by commercial programs, new product launches, and the significant value potential of the ReNu program - The company is building momentum through commercial programs to enhance customer relationships and regain lost accounts[4] - Expects a return to revenue growth in 2024 through new product launches in both Advanced Wound Care and Surgical & Sports Medicine markets[5] - The ReNu program for treating knee osteoarthritis symptoms is considered a significant value driver for the company[5] Detailed Financial Results Fourth Quarter 2023 Financial Results Q4 2023 net revenue declined 14% to $99.7 million, driven by Advanced Wound Care, leading to a gross margin contraction to 72% and a net loss of $0.6 million Q4 2023 Revenue by Segment (in thousands) | Segment | Q4 2023 | Q4 2022 | Change ($) | Change (%) | | :--- | :--- | :--- | :--- | :--- | | Advanced Wound Care | $93,165 | $108,836 | $(15,671) | -14% | | Surgical & Sports Medicine | $6,486 | $6,680 | $(194) | -3% | | Total Net Revenue | $99,651 | $115,516 | $(15,865) | -14% | - Gross profit decreased by 19% to $71.9 million, with the gross margin falling to 72% from 77% in Q4 2022[8] - Operating expenses decreased by 8% to $73.2 million, driven by a 10% reduction in selling, general and administrative expenses[9] - The company reported a net loss of $0.6 million, or $(0.00) per share, a significant decrease from the net income of $7.5 million, or $0.06 per share, in Q4 2022[11] Fiscal Year 2023 Results Full-year 2023 net revenue decreased 4% to $433.1 million across both segments, resulting in a 44% drop in operating income and a net income of $4.9 million FY 2023 Revenue by Segment (in thousands) | Segment | FY 2023 | FY 2022 | Change ($) | Change (%) | | :--- | :--- | :--- | :--- | :--- | | Advanced Wound Care | $405,514 | $422,231 | $(16,717) | -4% | | Surgical & Sports Medicine | $27,626 | $28,662 | $(1,036) | -4% | | Total Net Revenue | $433,140 | $450,893 | $(17,753) | -4% | - Gross profit for FY 2023 was $326.7 million (75% of net revenue), a 6% decrease from $345.9 million (77% of net revenue) in FY 2022[14] - Total operating expenses decreased by 3% to $314.1 million, with R&D expenses increasing by 12% while SG&A expenses decreased by 5%[15] - Net income decreased by 68% to $4.9 million ($0.04 per share) for the year, compared to $15.5 million ($0.12 per share) in 2022[17] Fiscal Year 2024 Guidance Full Year 2024 Projections Organogenesis projects fiscal year 2024 net revenue between $445.0 million and $470.0 million, anticipating a net income (loss) range of ($10.6) million to $4.6 million and Adjusted EBITDA of $15.8 million to $35.0 million Fiscal Year 2024 Guidance | Metric | Guidance Range | YoY Growth (%) | | :--- | :--- | :--- | | Net Revenue | $445.0M - $470.0M | 3% to 9% | | - Advanced Wound Care | $415.0M - $435.0M | 2% to 7% | | - Surgical & Sports Medicine | $30.0M - $35.0M | 9% to 27% | | Net Income (Loss) | ($10.6M) - $4.6M | N/A | | Adjusted Net Income (Loss) | ($8.1M) - $7.1M | N/A | | EBITDA | $5.8M - $25.0M | N/A | | Adjusted EBITDA | $15.8M - $35.0M | N/A | Consolidated Financial Statements Consolidated Balance Sheets As of December 31, 2023, total assets were $460.0 million, total liabilities $181.4 million, and total stockholders' equity $278.7 million, with cash at $103.8 million Key Balance Sheet Items (in thousands) | Account | Dec 31, 2023 | Dec 31, 2022 | | :--- | :--- | :--- | | Cash and cash equivalents | $103,840 | $102,478 | | Total current assets | $225,044 | $222,609 | | Total assets | $460,025 | $449,359 | | Total current liabilities | $80,509 | $75,023 | | Term loan (total) | $66,231 | $70,769 | | Total liabilities | $181,362 | $183,690 | | Total stockholders' equity | $278,663 | $265,669 | Consolidated Statements of Operations Fiscal year 2023 consolidated operations show a 4% revenue decline to $433.1 million, with gross profit falling to $326.7 million, leading to a 44% drop in operating income and a 68% decrease in net income to $4.9 million FY 2023 vs FY 2022 Statement of Operations (in thousands) | Account | Year Ended Dec 31, 2023 | Year Ended Dec 31, 2022 | | :--- | :--- | :--- | | Net revenue | $433,140 | $450,893 | | Gross profit | $326,659 | $345,874 | | Total operating expenses | $314,134 | $323,570 | | Income from operations | $12,525 | $22,304 | | Net income | $4,945 | $15,532 | | Diluted EPS | $0.04 | $0.12 | Consolidated Statement of Cash Flows Net cash from operating activities increased to $30.9 million in FY 2023, while investing and financing activities used $24.4 million and $5.5 million respectively, resulting in a $1.0 million increase in cash to $104.3 million Cash Flow Summary (in thousands) | Activity | Year Ended Dec 31, 2023 | Year Ended Dec 31, 2022 | | :--- | :--- | :--- | | Net cash provided by operating activities | $30,917 | $24,859 | | Net cash used in investing activities | $(24,364) | $(33,898) | | Net cash used in financing activities | $(5,505) | $(2,199) | | Change in cash | $1,048 | $(11,238) | | Cash at end of year | $104,338 | $103,290 | Non-GAAP Financial Measures Reconciliation of Net Income to EBITDA and Adjusted EBITDA The company reconciles GAAP net income to non-GAAP Adjusted EBITDA, which was $42.6 million in FY 2023, reflecting adjustments for items like stock-based compensation and restructuring charges Adjusted EBITDA Reconciliation Summary (in thousands) | Metric | Q4 2023 | Q4 2022 | FY 2023 | FY 2022 | | :--- | :--- | :--- | :--- | :--- | | Net (Loss) Income | $(568) | $7,486 | $4,945 | $15,532 | | EBITDA | $2,917 | $11,459 | $27,948 | $33,019 | | Adjusted EBITDA | $7,473 | $14,064 | $42,616 | $49,271 | Reconciliation of Net Income to Adjusted Net Income This section details the reconciliation to non-GAAP adjusted net income, which was $12.7 million in FY 2023, after adjustments for items such as amortization and restructuring charges Adjusted Net Income Reconciliation Summary (in thousands) | Metric | Q4 2023 | Q4 2022 | FY 2023 | FY 2022 | | :--- | :--- | :--- | :--- | :--- | | Net (Loss) Income | $(568) | $7,486 | $4,945 | $15,532 | | Adjusted Net Income | $1,928 | $8,930 | $12,676 | $26,217 | Reconciliation for 2024 Guidance The company provides a reconciliation for its 2024 financial guidance, projecting Adjusted EBITDA between $15.8 million and $35.0 million and Adjusted Net Income (Loss) between ($8.1) million and $7.1 million 2024 Guidance Reconciliation (in thousands) | Metric | Low End (2024L) | High End (2024H) | | :--- | :--- | :--- | | Projected Net (Loss) Income | $(10,565) | $4,616 | | Projected Adjusted EBITDA | $15,823 | $34,957 | | Projected Adjusted Net (Loss) Income | $(8,083) | $7,098 | Other Information Forward-Looking Statements This section cautions that forward-looking statements, including 2024 guidance, are subject to risks such as changes in reimbursement, competition, technological shifts, and supply chain issues - The company's financial guidance and other forward-looking statements are subject to significant risks[35] - Key risk factors include changes to reimbursement levels, competition, technological obsolescence, physician adoption, ability to raise funds, and supply chain issues[35] About Organogenesis Holdings Inc. Organogenesis Holdings Inc. is a regenerative medicine company focused on providing a portfolio of bioactive and acellular biomaterials for advanced wound care and surgical biologics, including orthopedics and spine applications - The company is a leading regenerative medicine firm with a product portfolio in advanced wound care and surgical biologics[36]