MARIETTA, Ga., Feb. 23, 2017 /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, today announced its record results for the fourth quarter and full year ended December 31, 2016.
Full Year 2016 Highlights are:
- Revenue is a 31% increase over full year 2015 revenue
- Revenue of $245.0 million within range of MiMedx guidance
- Wound Care revenue of $184 million is a 30% increase over 2015
- Surgical, Sports Medicine and Orthopedics (SSO) revenue of $61.0 million grew 32% over 2015
- Gross margin of 87%
- Net income of $12.0 million beats consensus by $1.0 million
- GAAP EPS (diluted) of $0.11 beats consensus by $0.01
- Adjusted Net Income* of $24.4 million and EPS (diluted) of $0.22 meets consensus
- Adjusted EBITDA* of $44.4 million
- Net cash flows from operations of $25.8 million is a 37% increase over prior year
- Stock repurchase under the repurchase plan of $10.4 million
Fourth Quarter 2016 Highlights are:
- Revenue grew 35% over Q4 2015 revenue
- Revenue of $69.9 Million within range of MiMedx Q4 2016 guidance
- Wound Care revenue grew 32% over Q4 2015
- SSO revenue for Q4 2016 grew 44% over Q4 2015
- 20th of last 21 quarters of meeting or exceeding revenue guidance
- Gross margin of 87%
- Net income of $5.5 million
- 20th consecutive quarter of positive Adjusted EBITDA*
- Adjusted EBITDA* of $13.9 million
- Adjusted Net Income* of $8.1 million is a 14% increase over 2015
* See the accompanying tables for definitions of each Non-GAAP metric. Reconciliations of GAAP EBITDA to Adjusted EBITDA, GAAP Gross Margin to Adjusted Gross Margin, and GAAP Net Income to Adjusted Net Income and Adjusted Diluted Net Income Per Share appear in the tables below. These non-GAAP measures include, but are not limited to, adjustments for non-cash charges associated with purchase accounting related to the Stability Biologics acquisition, normalization of tax expense, one-time non-recurring cash charges and share based compensation expense.
Parker H. “Pete” Petit, Chairman and CEO stated, “The final revenue is $1.8 million lower than we pre-released on January 9, 2017. This lower revenue is the result of the decision that we made to take what we believe is a very conservative approach related to the transition of certain government accounts from a distributor’s Federal Supply Schedule (FSS) contract to our own FSS contract. As previously reported, the Company has been transitioning since 2015 from sales to government accounts through our relationship with AvKare to sales directly to government accounts on our own FSS. In connection with that transition, we have an obligation to repurchase AvKare’s remaining inventory, if any, within 90 days following the expiration of the agreement on June 30, 2017. At that time, the Company expects AvKare’s inventory to be minimal based on AvKare’s obligation to use commercially reasonable efforts to achieve target sales levels over the remaining term of the agreement.”
Results for Full Year and Fourth Quarter Ended December 31, 2016
The Company recorded record revenue for the year ended December 31, 2016 of $245.0 million, a $57.8 million or 31% increase over 2015 revenue of $187.3 million. The Company’s gross margin for the year ended December 31, 2016, was 87%, compared to an 89% gross margin in the same period of 2015. The decline in gross profit was driven by the impact of purchase accounting related to the acquisition as well as product mix in certain Stability Biologics products. The Company expects overall product gross margins to improve in 2017. Net Income for the year ended December 31, 2016, was $12.0 million, or $.11 per diluted common share, as compared to Net Income of $29.4 million, or $0.26 per diluted common share, in the same period of 2015. Adjusted EBITDA* for the year ended December 31, 2016, was $44.4 million, as compared to Adjusted EBITDA* of $44.0 million for the year ended December 31, 2015.
The Company recorded record revenue for the 2016 fourth quarter of $69.9 million, a $18.0 million or 35% increase over 2015 fourth quarter revenue of $51.8 million. The Company’s gross margin for the quarter ended December 31, 2016, was 87%, as compared to the 90% gross margin in the fourth quarter of 2015. Net Income for the fourth quarter of 2016, was $5.5 million, or $.05 per diluted common share, a $7.9 million or 59% reduction, as compared to Net Income of $13.4 million, or $0.12 per diluted common share, which included an income tax benefit of $5.7 million due to the release of our net operating loss valuation allowance, in the fourth quarter of 2015. Adjusted EBITDA* for the quarter ended December 31, 2016, was $13.9 million, a $1.0 million or 8% improvement, as compared to Adjusted EBITDA* of $12.9 million for the fourth quarter of 2015.
Management Commentary on Results
Petit said, “We are very pleased with the performance of both of our sales verticals during 2016 and especially during the fourth quarter. Our fourth quarter revenue performance was within our guidance, and it marked 21 consecutive quarters of sequential revenue growth and 20 of 21 quarters of meeting or exceeding our revenue guidance. Our core advanced wound care revenue, led by our commercial accounts, was the primary contributor to our record fourth quarter performance. Our new products performed very well with EpiCord®, our new dehydrated human umbilical cord allograft, receiving substantial interest among physicians, and AmnioFill and OrthoFlo Lyophilized, our other recently launched new products, met the Company’s performance expectations.”
Bill Taylor, President and COO, noted, “Our 2016 Wound Care revenue of $184.0 million grew by 30% and Surgical, Sports Medicine and Orthopedics (“SSO”) revenue of $61.0 million increased by 32% over 2015. In the fourth quarter, Wound Care performed extremely well, growing 32% over the fourth quarter of 2015. Our SSO revenue grew significantly and increased by 44% over the 2016 fourth quarter, despite lower than expected fourth quarter revenue from Stability Biologics. EpiFix®, the Company’s flagship product, continues to drive our leadership position in the advanced wound care market. EpiFix is very strong with both our commercial wound care accounts, as well as government accounts.”
Petit commented, “With respect to cash flow and profitability, we were pleased that our cash position at the end of the fourth quarter increased so significantly and the Days Sales Outstanding (DSO) in our Accounts Receivable show a favorable decline. Our profit performance during 2016 was challenging early in the year because of our new product investments, but our profitability was up in the fourth quarter. The fourth quarter was our 20th consecutive quarter of recording positive Adjusted EBITDA*, and our 10th consecutive quarter of operating profit.”
Taylor said, “2016 was another year of accelerated investments in clinical trials. At the end of the year, we had 27 clinical studies ongoing with more than 100 clinical sites under management. As of now, our Compendium of peer-reviewed published studies including completed Randomized Control Trials (RCTs), scientific studies and significant case studies totals 46. Our ongoing investment in this strategy is continuing to propel our successes in gaining reimbursement coverage and furthering our regulatory approvals. During 2016, we added 32.5 million new covered lives and added 21 new plans providing coverage. By year end, we had over 298 million covered lives, which represents more than a 12% increase over year end 2015.”
Petit stated, “With the publication of our 2016 audited financial results, much of the innuendo associated with the recent allegations that two former employees have made against the Company should be resolved. Furthermore, we expect the Audit Committee of our Board will soon be releasing its findings from its in-depth investigation into these allegations. When the results from that investigation are reported, management believes any remaining innuendo that might possibly still remain should be completely resolved.”
“Our sales organization now totals approximately 325 individuals. We have implemented certain territory realignments and management changes to focus on our growth. We have a large sales force with great expertise and effectiveness, and we look forward to continuing to show exceptional growth,” commented Taylor.
Full Year 2017 and First Quarter 2017 Guidance Highlights
MiMedx reiterated its first quarter and full year 2017 guidance that was previously communicated by the Company on January 9, 2017, which included:
- First quarter of 2017 revenue forecasted to be in the range of $69.5 to $72.5 million
- 2017 revenue guidance in the range of $302 to $307 million
- Gross profit margins for 2017 expected to be in the range of 86% to 88%
- 2017 Operating Earnings forecasted to grow by 90% or greater
- GAAP EPS for 2017 projected to be in the range of $0.18 to $0.20
- 2017 GAAP Net Earnings expected to grow in excess of 95%
- 2017 Adjusted EBITDA* expected to be in the range of 21% to 23% of revenue
- Adjusted EPS* for 2017 projected to be in the range of $0.31 to $0.33
“Our first quarter of 2017 expectations are tempered by the normal seasonality effects experienced in the first quarter of every year. Even with that offset for seasonality, our first quarter of 2017 guidance provides for 30% to 36% revenue growth over first quarter of 2016 of $53.4 million. With the traditional seasonality experienced in our market, the first quarter of the year is typically the lightest quarter, followed by strong growth in the second, slightly lower growth in the third quarter due to some vacation effects, and then another quarter of strong growth with the fourth quarter,” said Petit.
Liquidity and Cash Flow
Cash on hand as of December 31, 2016, was $34.4 million, as compared to $28.5 million as of December 31, 2015. Net working capital as of December 31, 2016 increased $6.3 million to $75.8 million, as compared to $69.5 million as of December 31, 2015. The Company recorded positive net cash flow from operating activities of $25.8 million for the year ended December 31, 2016 due primarily to increased Adjusted EBITDA*.
Share Repurchase Program
The Company continued to acquire its shares through the Company’s Share Repurchase Program during 2016. Since the May 2014 inception of the program through December 31, 2016, the Company acquired $56.1 million in repurchased shares.
In its press release of February 6, 2017, the Company announced that the MiMedx Board of Directors had authorized an increase of $10 million to the Company’s Share Repurchase Program, and the Board would consider a substantial additional commitment to this program at its next meeting. The Board’s action earlier in February brought the total authorized to $76 million since the Share Repurchase Program commenced. The Company reported that at yesterday’s meeting, the MiMedx Board of Directors authorized an additional increase of $10 million to the Share Repurchase Program, bringing the total authorized to date to $86 million. “With the on-going undervaluation, market conditions, our available resources and other related factors, I believe this increase is a very wise investment for the Company and one that will continue to be anti-dilutive,” commented Petit.
GAAP Earnings
The Company recorded Net Income of $12.0 million for the year ended December 31, 2016, or $0.11 per diluted common share, as compared to a Net Income of $29.4 million, or $0.26 per diluted common share, for the year ended December 31, 2015. The Company recorded Net Income of $5.5 million for the quarter ended December 31, 2016, or $0.05 per diluted common share, as compared to a Net Income of $13.4 million, or $.12 per diluted common share, for the quarter ended December 31, 2015.
Full year 2016 Research & Development (“R&D”) expenses were $12.0 million or 5% of Net Sales, an increase of $3.6 million over full year 2015 R&D expenses of $8.4 million. Fourth quarter 2016 R&D expenses were $3.5 million or 5% of Net Sales, an increase of $1.1 over fourth quarter 2014 R&D expenses of $2.3 million.
Selling, general and administrative (“SG&A”) expenses for full year 2016 were $180.0 million, a $46.6 million increase over full year 2015 SG&A expenses of $133.4 million. SG&A expenses for the fourth quarter of 2016 were $48.4 million, an $11.9 million increase over fourth quarter of 2015 SG&A expenses of $36.5 million. Increases in SG&A were due to the continuation of the buildup of the Company’s National Accounts function, direct sales force in Wound Care and SSO sales channels, as well as patent litigation costs.
“As I have previously stated, our 2016 earnings were reduced due to the Company’s increased expenses related to our accelerated introductions of the three new products we launched during the year. We believe this strategic decision to accelerate their respective launches and allocation of sales and marketing resources and expenses will prove to be very beneficial as we see the 2017 and beyond revenue results from these products, each of which address critical needs of the market,” concluded Petit.
Revenue Breakdown
The Company distinguishes revenue in two categories: (1) Wound Care and (2) SSO, which includes Original Equipment Manufacturer (“OEM”) applications. For fourth quarter of 2016, Wound Care revenue was $52.8 million, representing 75.5% of total revenue, and SSO (including OEM) revenue was $17.1 million, representing 24.5% of total revenue.
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