MiMedx Announces First Quarter 2016 Results

MARIETTA, Ga., April 25, 2016 /PRNewswire/ -- 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, Spine, Sports Medicine, Ophthalmic, and Dental sectors of healthcare, announced today its results for the first quarter of 2016.

First Quarter 2016 Highlights

  • Q1 2016 revenue of $53.4 Million is 31% increase over Q1 2015 revenue
  • Surgical, Sports Medicine and Orthopedics (SSO) revenue of $14.1 million grew 28% over Q1 2015
  • Wound Care revenue of $39.3 million grew 32% over Q1 2015
  • Completed acquisition of Stability Biologics
  • Adjusted gross margin* of 86.5%
  • 17th consecutive quarter of positive Adjusted EBITDA*
  • Adjusted EBITDA* of $9.1 million
  • Adjusted Net Income* of $4.9 million
  • Adjusted EPS* of $0.04 diluted

    *See Tables provided with this Release for a reconciliation of GAAP to non-GAAP measures. These non-GAAP measures include adjustments for non-cash charges associated with purchase accounting, normalization of tax expense and one-time non-recurring cash charges.

First Quarter 2016 GAAP Results (includes purchasing accounting and one-time non-recurring charges related to the acquisition of Stability Biologics)

  • Gross margin of 85.1%
  • Net Income of $1.2 million
  • EPS of $0.01 diluted

Results for First Quarter Ended March 31, 2016

The Company recorded record revenue for the 2016 first quarter of $53.4 million, a $12.6 million or 31% increase over 2015 first quarter revenue of $40.8 million. The Company's Adjusted Gross Margin for the quarter ended March 31, 2016 was 86.5%. Adjusted EBITDA for the quarter ended March 31, 2016 was $9.1 million. Adjusted Net Income for the quarter ended March 31, 2016 was $4.9 million, or $0.04 per diluted common share.

Management Commentary on Results

Parker H. "Pete" Petit, Chairman and CEO, stated, "As we have previously discussed, our revenue miss in the first quarter was primarily related to issues associated with the major changes in our sales management processes.  These included the installation of a sophisticated Sales Management System (SMS), new realignment requirements for the field sales organization into totally separate Wound Care and SSO sales structures, and the initial integration of Stability Biologics into the organization." 

Petit continued, "I am very pleased to report that in the first three weeks of April, our revenue is up over 25% compared to the first three weeks of January.  This is very encouraging, and it probably indicates that our system changes are beginning to take effect.  However, in no way should this be construed that we expect second quarter revenue to be 25% higher than first quarter revenue.  This is merely a statistic that indicates for this three week period, the issues that negatively impacted the first quarter's sales productivity should be behind us. There could be other factors that may reduce that efficiency as the second quarter progresses." 

Bill Taylor, President and COO, said, "Relative to the integration of Stability Biologics, we are in the process of raising their production capabilities in certain product lines.  Particularly, those production capacities related to the burn applications are being increased.  However, we are also seeing indications that our Physio® bone product is moving more slowly through the value analysis committees than we anticipated.  We are busy obtaining and developing additional clinical and scientific information on Physio, which we expect will drive incremental demand, but this will also take some additional time. At this stage of the Stability Biologics integration, we continue to see the growth opportunities that this acquisition and its diverse sales organization and sales channels consisting of direct sales employees and approximately 100 independent sales agents and distributors will have on our SSO growth."

Taylor added, "In addition, we are developing a new product offering in our OrthoFlo family.  This was alluded to at our Analyst Day presentation last October. While our existing product has been received well, we already have the next generation product in pre-production status.  This should greatly increase the clinical as well as logistical efficiencies.  We will provide further information on these products during our second quarter earnings report."

Taylor noted, "At the beginning of the second quarter, we began rolling out our latest product additions, EpiCord and AmnioCord. These products were also discussed in our Analyst Day presentation. EpiCord and AmnioCord are new products that are derived from a previously discarded part of the placenta. They are minimally manipulated, dehydrated, umbilical cord allografts for homologous use. These allografts provide an excellent alternative to EpiFix and AmnioFix when the physician desires a thicker membrane in various surgical procedures."

The Company stated in its press release of April 10, 2016, that it plans to introduce a totally new product line that has both surgical and certain wound care applications. "In mid-year, we will introduce this new product line that utilizes the remaining placenta not used in the production of current allografts.  After these allografts are processed, there is ample placental tissue available to give us excellent capabilities with certain new products.  These products will include the manufacture of collagen materials from the remaining placental material.  As these products enter the market, we will give shareholders additional detail," explained Taylor.

GAAP Earnings, Liquidity and Cash Flow

Due to the impact of the acquisition of Stability Biologics in January 2016 and the release of the valuation allowance on the deferred tax asset on reported tax expense in 2015 on results, the Company has decided to provide adjusted non-GAAP measures to provide comparability of normal ongoing operating results. Beginning this quarter, the Company has reported Adjusted Gross Margin*, Adjusted EBITDA*, Adjusted Net Income* and Adjusted EPS* to normalize results for comparison purposes in addition to reporting GAAP results as summarized below.

The Company recorded Net Income of $1.2 million for the quarter ended March 31, 2016, or $0.01 per diluted common share, as compared to a Net Income of $4.1 million, or $.04 per diluted common share, for the quarter ended March 31, 2015. 

First quarter 2016 R&D expenses were $2.5 million or 4.7% of Net Sales, an increase of $665,000 over first quarter 2015 R&D expenses of $1.8 million.

Selling, general and administrative ("SG&A") expenses for the first quarter of 2016 were $40.6 million, an $11.3 million increase over first quarter of 2015 SG&A expenses of $29.3 million.  Increases in SG&A were due to the continuation of the buildup of the Company's direct sales force in Wound Care and SSO sales channels and increased patent litigation costs. 

Cash on hand as of March 31, 2016 was $15.1 million, as compared to $28.5 million as of December 31, 2015. Net working capital as of March 31, 2016 decreased $3.1 million to $66.4 million, as compared to $69.5 million as of December 31, 2015.  The Company recorded negative net cash flow from operating activities of $977,000 for the quarter ended March 31, 2016. In addition to the customary first quarter payments for annual incentives and year-end commissions, the Company provided an addition of $4 million in working capital due to the acquisition of Stability Biologics.

The impact to net cash flow from investing activities was $7.6 million for the purchase of Stability Biologics, which includes the initial payment and the payoff of assumed debt, plus $2.0 million in normal capital expenditures.

The Company continued to pursue its share repurchase strategy during the first quarter of 2016 with $3.5 million in repurchased shares, bringing the total amount since the inception of the program in the second quarter of 2014 through March 31, 2016 to $49.2 million in repurchased shares.

Revenue Breakdown

The Company distinguishes revenue in two categories: (1) Wound Care and (2) SSO, which includes Original Equipment Manufacturer ("OEM") applications. For first quarter of 2015, Wound Care revenue was $39.3 million, representing 73.6% of total revenue, and SSO (including OEM) revenue was $14.1 million, representing 26.4% of total revenue.

Outlook for Second Quarter and Full Year 2016

MiMedx announced its second quarter revenue guidance and revised its full year 2016 revenue and Adjusted EPS guidance that was communicated in the Company's press release of February 23, 2016. The Company's guidance is inclusive of the Stability Biologics acquisition and it includes:

  • Second quarter of 2016 revenue estimated to be in the range of $55.7 to $57 million
  • Full Year 2016 revenue forecasted to be in the range of $242.5 to $250 million
  • Full Year 2016 Adjusted EPS* estimated to be in the range of $0.30 to $0.32

"In spite of our accelerated revenue ramp rate compared to early January, the variables related to the new Stability Biologics products roll-outs, and the remaining optimization and utilization of our new SMS, we think it is prudent to adjust our financial projections for the second quarter and full year 2016. While we are slightly lowering our projections, they still represent a full year revenue growth rate in excess of 30% and Adjusted EPS* growth rate of 43% over 2015 Adjusted EPS* of $0.21. We want to very quickly return to the same predictable performance that yielded the 17 straight quarters of performing at or above expectations," concluded Petit.

Earnings Call

MiMedx management will host a live broadcast of its first quarter 2016 results conference call on Tuesday, April 26, 2016, beginning at 10:30 a.m. eastern time.  A listen-only simulcast of the MiMedx Group conference call will be available on-line at the Company's website at www.mimedx.com.  A 30-day on-line replay will be available approximately one hour following the conclusion of the live broadcast. 

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