Financial

MiMedx Group revenue up 108% in third quarter 2014

MiMedx Group, Inc. (NASDAQ: MDXG), the leading regenerative medicine company utilizing human amniotic tissue and patent-protected processes to develop and market advanced products and therapies for the Wound Care, Surgical, Orthopedic, Spinal, Sports Medicine, Ophthalmic and Dental sectors of healthcare, announced today its results for the third quarter ended September 30, 2014.

On October 13, 2014, the Company issued a press release announcing its third quarter 2014 revenue results, its milestone of achieving the first reported quarterly operating income in the Company’s history, its guidance for the fourth quarter of 2014 and updated full year 2014, and preliminary expectations for 2015 revenue and operating profit margin. Some of the revenue-related details and commentary from that press release are reiterated in this press release. Please refer to the Company’s October 13, 2014, press release for further revenue detail and commentary.

Third Quarter Operating Highlights include:

  • First quarterly operating profit of 11% of revenue
  • 11th consecutive quarter of positive Adjusted EBITDA
  • Adjusted EBITDA was 22% of revenue and a 293% increase over Q3 2013
  • Cash Flow from Operating Activities grew to $8.9 million
  • Wound Care sales grew by 184%
  • Revenue increased by 108% over Q3 2013 and 31% quarter-over-quarter
  • Revenue exceeded upper end of guidance
  • 12th consecutive quarter of meeting or exceeding revenue guidance
  • 2014 nine-month revenue of $78.7 million increased by 91% over 1st nine months of 2013

Third Quarter and Nine Months Ended September 30, 2014, Results
The Company recorded record revenue for the third quarter of 2014 of $33.5 million, a $17.4 million or 108% increase over 2013 third quarter revenue of $16.1 million, and sequentially, a $7.9 million or 31% increase over second quarter of 2014 revenue. The Company’s gross margins for the quarter ended September 30, 2014, were 90% as compared to 87% in the third quarter of 2013. Adjusted EBITDA for the quarter ended September 30, 2014, were $7.3 million, a $5.4 million or 293% improvement, as compared to Adjusted EBITDA of $1.9 million for the third quarter of 2013. The Net Income for the third quarter of 2014 was $3.7 million, or $0.03 per diluted common share, a $4.0 million improvement, as compared to the Net Loss of $0.3 million, or $0.00 per diluted common share, in the 2013 third quarter.

For the nine months ended September 30, 2014, the Company recorded record revenue of $78.7 million, a $37.5 million or 91% increase over revenue of $41.2 million for the first nine months of 2013. The Company’s gross margins for the nine months ended September 30, 2014, were 88% as compared to 85% in the same period of 2013. Adjusted EBITDA for the nine months ended September 30, 2014, were $12.2 million, a $8.0 million or 194% improvement, as compared to Adjusted EBITDA of $4.1 million for the first nine months of 2013. Net Income for the nine months ended September 30, 2014, was $2.4 million, or $0.02 per diluted common share, a $5.1 million improvement, as compared to the Net Loss of $2.7 million, or $0.03 per diluted common share, in the prior year same period.

Management Commentary on Revenue Results
Parker H. “Pete” Petit, Chairman and CEO, stated, “It is very gratifying to report a quarterly operating profit for the first time in our history. We are pleased with our ability to assemble the resources and infrastructure necessary to drive our strong period-over-period revenue growth while continually improving our cash flow, EBITDA and now profit. Our third quarter operating profit of $3.7 million is 11% of revenue and our third quarter positive Adjusted EBITDA of $7.3 million is 22% of revenue. Both of these statistics are the highest in our history. This quarter marked the 11th consecutive quarter of reporting positive Adjusted EBITDA. While I am pleased with our third quarter results from a revenue growth stand point, I am especially pleased with our operating leverage. We have previously stated our commitment to continuing our progress of period-over-period revenue growth and improving our profitability, and the third quarter clearly demonstrated our ability to deliver on that commitment.”

Petit continued, “We are pleased that our third quarter revenue significantly exceeded the upper end of our third quarter revenue guidance. Our record of meeting or exceeding our quarterly revenue forecast continued with the third quarter results as we marked our 12th consecutive quarter in which we met or exceeded our forecast. Achieving quarterly revenue growth of 108% over the prior year’s third quarter and sequential quarter-over-quarter revenue growth of 31% over the 2014 second quarter should definitely be characterized as an effective performance.”

“Wound care sales led the third quarter revenue growth with a 184% increase over the 2013 third quarter and a 26% increase over last quarter,” said Bill Taylor, President and COO. “Our revenue growth was driven by market share gains and increased penetration and sales from existing accounts. We had very solid performance from our established sales professionals, as well as those that joined the Company in the first of our expansion waves in 2014. Since the first of this year, we have added more than 70 sales professionals to our direct sales force bringing our sales force to more than 150 sales professionals as of today. It generally takes about six months, depending on the territory, for new sales professionals to have a meaningful impact on sales results. We expect that the large majority of the new sales professionals that joined us in the first half of the year will influence our growth in the fourth quarter and beyond. We expect the sales professionals that joined us in the second half of the year to have a modest impact on the fourth quarter revenue and begin to have significant influence on our revenue results starting with the first quarter of 2015.”

“We have worked diligently in creating operating leverage. Our third quarter gross margins grew to 90% as compared to 87% in the 2013 third quarter. Our third quarter Adjusted EBITDA of $7.3 million is more than the Adjusted EBITDA of $5.5 million that we recorded for the entire year of 2013,” added Petit. “With our operating leverage, we hope to be able to continue our aggressive pace of generating clinical and scientific studies and facilitating their publication in leading peer-reviewed journals. Studies that confirm the compelling scientific foundation and clinical outcome of our allografts are vital to our success in gaining additional reimbursement coverage. We believe our operating leverage will allow us to aggressively pursue this critical process while continuing to produce improvements in our profitability.”

Balance Sheet and Cash Flow
As of September 30, 2014, total assets increased by $12.6 million to $97.3 million, compared to $84.7 million as of December 31, 2013. Cash on hand as of September 30, 2014, was $47.3 million, an increase of $3.2 million, as compared to $44.1 million as of December 31, 2013. Cash flow from operating activities as of September 30, 2014, was a positive $8.5 million, due primarily to an increase in Adjusted EBITDA, improved working capital and a significant improvement in Days’ Sales Outstanding (“DSO”) in accounts receivable. Free cash flow, which is cash flow from operations less cash flow from investing activities, was a positive $6.2 million as compared to a negative $3.7 million for the same period in 2013.

Accounts receivable increased to $23.3 million as of September 30, 2014, from $16.1 million as of December 31, 2013. DSO as of September 30, 2014, were 63 days, an improvement of nine days from June 30, 2014, DSO of 72 days. Inventory increased approximately $858,000 to $4.7 million as of September 30, 2014, up from $3.9 million as of December 31, 2013. Total liabilities increased to $16.1 million as of September 30, 2014, from $11.1 million as of December 31, 2013. Stockholders’ equity increased by $7.7 million to $81.3 million as of September 30, 2014, from $73.6 million as of December 31, 2013.

GAAP Earnings
The Company recorded Net Income of $3.7 million for the quarter ended September 30, 2014, or $0.03 per diluted common share, as compared to a Net Loss of $0.3 million, or $0.00 per diluted common share, for the quarter ended September 30, 2013.

For the third quarter of 2014, R&D expenses were $2.0 million or 6% of Net Sales, an increase of $0.7 million over the third quarter of 2013 R&D expenses of $1.3 million due to the acceleration of the Company’s investment in clinical trials for reimbursement and regulatory purposes.

Selling, general and administrative (“SG&A”) expenses for the third quarter of 2014 were $24.2 million, a $11.5 million increase over third quarter of 2013 SG&A expenses of $12.7 million, and an increase of $3.0 million over second quarter of 2014 SG&A expenses of $21.2 million. Increases in SG&A were due to the continuation of the buildup of the Company’s direct sales force in the government accounts and commercial accounts sales channels. The full quarterly run-rate impact of the second quarter phase of the Company’s sales force expansion, key management additions and infrastructure enhancements impacted the sequential quarterly and prior year increase in SG&A expenses. For the third quarter of 2014, SG&A expenses as a percentage of revenue were 72%, as compared to 83% for the second quarter of 2014.

Use of Non-GAAP Financial Measures
Management has disclosed adjusted financial measurements in this press announcement that present financial information that is not in accordance with generally accepted accounting principles (“GAAP”). These measurements are not a substitute for GAAP measurements, although Company management uses these measurements as aids in monitoring the Company’s on-going financial performance from quarter-to-quarter and year-to-year on a regular basis and for benchmarking against other medical technology companies. Adjusted EBITDA is earnings before financing expense, interest, taxes, depreciation, amortization, and share-based compensation. For a reconciliation of this non-GAAP financial measure to the most directly comparable financial measure, see the accompanying table to this release. Adjusted financial measures used by the Company may be calculated differently from, and therefore may not be comparable to, similarly titled measures used by other companies. Investors should consider adjusted measures in addition to, and not as a substitute for, or superior to, financial performance measures prepared in accordance with GAAP.

Revenue Breakdown
The Company distinguishes and reports revenue in two categories: (1) Wound Care and (2) Surgical, Sports Medicine and Original Equipment Manufacturer (“OEM”) applications. Revenue for the Company’s Wound Care category comprises both the sheet and powdered form and includes the full spectrum of the wound care settings and wound categories for which the Company’s allografts are utilized. It reflects sales related to both chronic and acute wounds, including surgical wounds. The “Surgical, Sports Medicine and OEM” category includes primarily AmnioFix® sales for orthopedic, soft tissue repair, surgical, dental and ophthalmic uses. This category also includes grafts in both sheet and micronized form. In the third quarter of 2014, Wound Care revenue was $26.0 million, representing 78% of total revenue, and Surgical, Sports Medicine and OEM revenue was $7.5 million, representing 22% of total revenue.

The Company also provides a revenue breakdown in terms of customer type, distinguishing between government and commercial accounts. For the quarter ended September 30, 2014, Commercial sales were $22.7 million, representing 68% of total revenue, and Government sales were $10.8 million, representing 32% of total revenue.

Outlook for Fourth Quarter and Full Year 2014 and Preliminary 2015 Outlook
The Company reaffirmed its guidance communicated in its October 13, 2014, press release. That guidance included:

  • The Company estimates fourth quarter of 2014 revenue to be in the range of $37.3 million to $38.3 million.
  • The Company increased its previously published guidance for full year 2014, and now expects revenue to be in the range of $116 million to $117 million for full year 2014.
  • The Company issued its preliminary guidance for full year 2015, and confirmed that its final 2015 guidance would be issued in mid-December 2014. The Company’s preliminary guidance has full year 2015 revenue expectations in the range of $175 million to $185 million.
  • The Company also expects its operating profit margin for full year 2015 to be in excess of 15%.
Source:

MiMedx Group, Inc.

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Josh Sandberg

Josh Sandberg is the President of Ortho Sales Partners and Partner for The De Angelis Group. He also serves as Co-Founder and Editor of OrthoSpineNews.

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