Organogenesis (ORGO) - 2022 Q4 - Earnings Call Transcript

Financial Data and Key Metrics Changes - Net income for Q4 2022 was $7.5 million, a decrease of$ 43.5 million compared to $51 million in Q4 2021, primarily due to a prior year tax benefit of$ 32 million [2] - Adjusted EBITDA for Q4 2022 was $14.1 million, or 12% of net revenue, down from$ 26.3 million, or 21% of net revenue, in the previous year [2] - Operating income for Q4 2022 was $8.7 million, a decrease from$ 19.8 million in the prior year [67] Business Line Data and Key Metrics Changes - Net revenue for Advanced Wound Care products in Q4 2022 was $108.8 million, down 10% year-over-year, while Surgical & Sports Medicine products revenue was$ 6.7 million, down 6% [21][29] - PuraPly products generated $56.8 million in revenue for Q4 2022, a decline of 9% [29] - Excluding certain products, there was low double-digit growth in the number of accounts served in both hospital outpatient and physician office settings [23] Market Data and Key Metrics Changes - The company experienced a 10% decline in sales of non-PuraPly products due to reimbursement uncertainty and competitive pressures [22] - The company expects sales of non-PuraPly products to increase approximately 28% year-over-year in 2023 [3][73] Company Strategy and Development Direction - The company is in the second year of a strategic repositioning, focusing on expanding its commercial reach beyond spine fusion and foot and ankle procedures [5] - The company aims to strengthen its competitive position in the surgical sports medicine market and enhance its product offerings [34][71] - The company plans to optimize independent agency relationships and pilot new commercial strategies [5] Management's Comments on Operating Environment and Future Outlook - Management acknowledged a challenging operating environment in Q4 2022, with expectations for continued competitive noise in 2023 [70] - The company remains confident in its long-term growth potential, targeting sustainable low double-digit growth on a normalized basis [71] - Management expects to navigate challenges in the office setting due to competitive pressures but anticipates stable growth in wound care centers and hospital outpatient settings [52][70] Other Important Information - The company has paused construction of its Canton manufacturing facility due to increased costs, with a 40% rise in estimated project investment [26] - The company has$ 103.3 million in cash and cash equivalents and $70.8 million in debt obligations as of December 31, 2022 [31] Q&A Session Summary Question: What are the assumptions underpinning the guidance from a macro perspective? - Management acknowledged competitive noise but indicated expectations for market growth in 2023 [6] Question: Why has PuraPly seen drastic declines in usage for 2023? - Management noted a pause in acquisition due to the publication of the physician fee schedule, which is expected to improve over time [7] Question: Can you elaborate on potential rebates from CMS? - Management indicated uncertainty regarding potential refund amounts owed to CMS [8][57] Question: What is the outlook for competitive pressures? - Management believes competitive pressures may improve as the market absorbs new product information and efficacy becomes a key differentiator [12][62]