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 record results for the second quarter of 2015.
Second Quarter 2015 Highlights
- Q2 2015 is 15th consecutive quarter of meeting or exceeding Company revenue guidance
- Q2 2015 revenue of $45.7 million increased 79% over Q2 2014
- Revenue is at the upper end of Company Q2 guidance
- Q2 2015 Wound Care sales grew 73% over Q2 2014
- Q2 2015 Surgical, Sports Medicine/Orthopedic revenue increased 104% over Q2 2014
- Adjusted EBITDA* of $10.6 million represents a 265% improvement over Q2 2014
- Q2 2015 net income of $5.4 million or $0.05 per diluted share vs Q2 2014 net loss of $390,000 or $0.00 per diluted share
Second Quarter and Six Months Ended June 30, 2015 Results
The Company recorded record revenue for the second quarter of 2015 of $45.7 million, a $20.1 million or 79% increase over 2014 second quarter revenue of $25.6 million. The Company's gross margin for the quarter ended June 30, 2015, was 89%, equal to the gross margin in the second quarter of 2014. Adjusted EBITDA* for the quarter ended June 30, 2015, was $10.6 million, a $7.7 million or 265% improvement, as compared to Adjusted EBITDA* of $2.9 million for the second quarter of 2014. Net Income for the second quarter of 2015 was $5.4 million, or $0.05 per diluted common share, a $5.8 million improvement, as compared to the Net Loss of $390,000, or $0.00 per diluted common share, in the second quarter of 2014.
For the six months ended June 30, 2015, the Company recorded record revenue of $86.4 million, a $41.3 million or 92% increase over revenue of $45.1 million recorded in the same period of 2014. The Company's gross margin for the six months ended June 30, 2015, was 88% as compared to 87% in the same six month period of 2014. Adjusted EBITDA* for the six months ended June 30, 2015, was $19.3 million, a $14.4 million or 297% improvement, as compared to Adjusted EBITDA* of $4.9 million for the six months ended June 30, 2014. Net Income for the six months ended June 30, 2015, was $9.5 million, or $0.08 per diluted common share, a $10.8 million improvement, as compared to the Net Loss of $1.3 million, or ($0.01) per diluted common share, in the first six months of 2014.
Management Commentary on Revenue Results
Parker H. "Pete" Petit, Chairman and CEO, said, "We had another excellent quarter. Our $45.7 million second quarter revenue was at the upper end of our guidance range of $44 to $46 million. This marks our fifteenth consecutive quarter of meeting or exceeding revenue guidance. Revenue from our Wound Care category grew by 73% over the second quarter of last year, and in our other category, Surgical, Sports Medicine and OEM, revenue growth was 104% over the same period in 2014. We are particularly pleased with the revenue growth with our commercial customers. In the second quarter, we had revenue growth of 103% in our commercial accounts."
Bill Taylor, President and COO, commented, "Our wound care revenue growth continues to be the result of market share gains and expanded product usage. Our effective management of the expiration of pass-through status for EpiFix® Medicare patients during the first quarter of this year has paid dividends. We treated significantly more patients than in either of the last two quarters in total and the mix of large wounds treated is essentially the same as it was last year. The number of patients we treat is growing because more people need access to the more cost effective grafts we offer. However, we are also continuing to experience growth in the very large wound sizes where amputation has generally been a resulting course of treatment. The impact of our recent introduction of new sizes and mesh configurations has been beneficial. As we expected, our mesh configuration gained substantial traction during the second quarter. With a full quarter of our mesh configurations and our new sizes being available in the market, we have seen our mix of small to large sizes improve to prior levels with approximately 80% small and 20% large."
"The second quarter was another quarter of aggressive expansion of our sales force. During the quarter, we added another 20 highly experienced sales professionals to our organization. We are hiring a mixture of sales professionals who will focus on surgical, orthopedic/spine, wound care and national accounts," added Taylor.
Petit stated: "During the quarter we announced that we would be pursuing commercialization of our proprietary patent-protected CollaFix™ technology. We believe our CollaFix platform will be our second truly disruptive technology. Peer-reviewed scientific studies have shown that CollaFix has superior mechanical properties which mimic the properties provided by the individual fibers in tendon/ligament tissues. CollaFix may act as an ideal tissue-engineered scaffold for mechanical substitution or augmentation for tendon/ligament repair. In the quarters ahead, we also expect to be unveiling certain other new products based on our AmnioFix® and EpiFix® tissue technologies."
Petit noted, "We are extremely pleased to have reported our fourth consecutive quarter of operating profits while we continue to invest in our sales organization and other growth initiatives. With additional investments now planned in the second half of the year, we have moderated our guidance on operating margin. As in the past, we believe the decisions to accelerate certain investments with very high return on investment have been prudent."
"Gaining coverage from additional commercial health plans and Medicaid programs continued to be a major priority during the quarter. During the second quarter, we added an additional 12.5 million covered lives from new plans including 16 additional Blue Cross/Blue Shield plans. With our second quarter progress, insurance coverage for our allografts is now provided for 160 million covered commercial lives and 36 million Medicare beneficiaries. The Centers for Medicare /Medicaid Services (CMS) 2016 prospective payment systems for hospital outpatient and physician offices has been published, and as we expected, there are no material changes with respect to our products," said Taylor.
The Company also provided an update on the Congressional investigation into practices within the Food and Drug Administration (FDA) regarding the FDA's issuance of Untitled Letters and Guidance Documents to change rules and policies. "We are staying very attentive to the findings of the investigation. We believe the inappropriate practices being examined during this investigation are the same ones to which MiMedx was subjected when it was issued an Untitled Letter in September 2013. We will keep our shareholders posted on the progress of this important investigation," concluded Petit.
Balance Sheet and Cash Flow
As of June 30, 2015, total assets were $113.8 million, compared to $109.3 million as of December 31, 2014. Cash on hand as of June 30, 2015, was $38.6 million, as compared to $46.6 million as of December 31, 2014. While the Company recorded positive net cash flow from operating activities of $7.1 million for the six months ended June 30, 2015, resulting primarily from increased Adjusted EBITDA and improved working capital management, share repurchases of $16.6 million influenced the decrease in cash. Accounts receivable increased to $39.4 million as of June 30, 2015, from $26.7 million as of December 31, 2014. Days Sales Outstanding (DSO) as of June 30, 2015, were 78 days, compared to 61 days as of December 31, 2014. Inventory decreased by $1.2 million to $3.9 million as of June 30, 2015, compared to $5.1 million as of December 31, 2014. Inventory turns were 5.3 for the second quarter of 2015 as compared to 2.8 in the fourth quarter of 2014. Total liabilities increased to $20.6 million as of June 30, 2015, from $19.9 million as of December 31, 2014. Stockholders' equity increased by $3.9 million to $93.2 million as of March 31, 2015, from $89.3 million as of December 31, 2014.
GAAP Earnings
The Company recorded Net Income of $5.4 million for the quarter ended June 30, 2015, or $0.05 per diluted common share, as compared to a Net Loss of $390,000, or $0.00 per diluted common share, for the quarter ended June 30, 2014. Second quarter 2015 R&D expenses were $2.1 million or 4.5% of Net Sales, an increase of $254,000 over second quarter 2014 R&D expenses of $1.8 million. Selling, general and administrative ("SG&A") expenses for the second quarter of 2015 were $32.7 million, an $11.5 million increase 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 wound care, surgical and orthopedic /spine sales channels, as well as the sales force focused on national accounts and patent litigation costs.
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 micronized allograft forms 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. For second quarter of 2015, Wound Care revenue was $35.6 million, representing 78% of total revenue, and Surgical, Sports Medicine and OEM revenue was $10.1 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 second quarter of 2015, Commercial sales were $33.6 million, representing 73% of total revenue, and Government sales were $12.1 million, representing 27% of total revenue.
2015 Outlook
The Company reiterated its previously communicated guidance for full year 2015 and provided its outlook for the third quarter of 2015.
The Company's guidance for the third quarter of 2015 includes:
- Q3 2015 revenue in the range of $47 million to $50 million; and
- Q3 2015 operating profit between 13% and 14%.
The Company's reiterated full year 2015 revenue guidance in the range of $180 million to $190 million.
Due to the decision to accelerate certain growth related investments, the Company is now projecting full year Operating margin in the range of 12% to 14%.
Earnings Call
MiMedx management will host a live broadcast of its second quarter 2015 results conference call on Thursday, July 30, 2015, beginning at 10:30 a.m. eastern time.
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