MiMedx Group, Inc., 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 first quarter of 2015.
The Company also announced today the decision of its Board of Directors to authorize an increase of $10 million to the Company's Share Repurchase Program. Today's action increases the total authorized to $30 million since the program commenced on May 12, 2014.
First Quarter 2015 Highlights
- Q1 2015 revenue of $40.8 million increases 108% over Q1 2014
- Q1 2015 is 14th consecutive quarter of meeting or exceeding revenue guidance
- Q1 2015 Wound Care sales grows 103% over Q1 2014
- Q1 2015 Surgical, Sports Medicine/Orthopedic revenue increases 125% over Q1 2014
- Adjusted EBITDA* of $8.8 million represents a 343% improvement over Q1 2014
- Quarterly net income of $4.1 million or $0.04 per diluted share vs a net loss of $900,000 or $0.01per diluted share in Q1 2014
- Q1 2015 Cash Flow from Operating Activities of $4.2 million as compared to a negative $1.6 millionin Q1 2014
- Company increases full year guidance range from $175-$190 million to $180-$190 million
- Significant progress made during quarter in gaining coverage from commercial as well as Medicaid payers
- Company signs new building lease adding approximately 25,000 sq. ft. of space in support of planned growth
First Quarter Results
The Company recorded record revenue for the first quarter of 2015 of $40.8 million, a $21.2 million or 108% increase over 2014 first quarter revenue of $19.6 million. The Company's gross margins for the quarter ended March 31, 2015, were 87% as compared to 85% in the first quarter of 2014. Adjusted EBITDA* for the quarter ended March 31, 2015, were $8.8 million, a $6.8 million or 343% improvement, as compared to Adjusted EBITDA* of $2.0 million for the first quarter of 2014. Net Income for the first quarter of 2015 was $4.1 million, or $0.04 per diluted common share, a $5.0 million improvement, as compared to the Net Loss of $922,000, or $0.01 per diluted common share, in the 2014 first quarter.
Management Commentary on Revenue Results
Parker H. "Pete" Petit, Chairman and CEO, stated, "We are pleased with our first quarter results. It was our fourteenth consecutive quarter of meeting or exceeding revenue guidance. All of our revenue segments, from our wound care business through our surgical, sports medicine and OEM segments performed well and recorded strong growth over the same period in 2014. Even with the effects of unusually harsh weather and the reimbursement changes, we had a strong quarter. Absent those events, we believe we would have easily exceeded the upper end of our guidance range. The first quarter reflected normal seasonality associated with the new calendar year, accounting for various factors such as new deductibles, reimbursement changes and weather. We see the same pattern developing this year as we saw last year where each quarter has stronger growth than our first calendar quarter."
Petit added, "We have spoken about the operating leverage that we have created at MiMedx, and this quarter's results speak to that fact. In just our third consecutive quarter of recording operating profits, we are pleased to report that our after-tax income of $4.1 million was 10% of revenue and our positive Adjusted EBITDA* of $8.8 million was 22% of revenue. We expect that this operating leverage will become more evident as we progress through the year."
"We continue to experience rapid growth in the commercial payer segment. We communicated in our press release of April 13, 2015, an update on the progress we have made in gaining coverage from commercial health plans and Medicaid programs. During the first quarter we added an additional 53 million covered lives from 27 new plans and added 10 additional Blue Cross/Blue Shield plans encompassing 20 states. As of this writing, insurance coverage is provided for more than 158 million covered commercial lives and 36 million Medicare beneficiaries," concluded Petit.
Bill Taylor, President and COO, said, "Our detailed strategic and tactical planning once again paid dividends in the first quarter, and our achievement of hitting the upper end of our revenue range proves that fact. Compared to our results a year ago, we again grew at a triple digit pace. Wound care sales in the first quarter grew by 103% over the first quarter of 2014. First quarter revenue in our surgical and the orthopedic/spine markets grew by 125% over the first quarter of 2014. Our wound care revenue growth continues to be the result of market share gains and increased penetration and sales from existing accounts. We are also very pleased that we managed the expiration of pass through status for EpiFix® Medicare patients extremely well. The effects on our overall business due to this change and our subsequent actions such as our introduction of new sizes and meshed configurations occurred essentially as we predicted. We expect stronger growth in the second quarter, particularly as our mesh configuration gains more traction and the significant improvements in our health plan coverage take effect. We are also pleased that the expansion of our sales professionals focusing on the surgical and the orthopedic/spine markets is progressing as expected and continues to build momentum. We are building out this sales force with highly talented and experienced individuals, and we look forward to promising results and increasing market share from this expansion."
"We have a great degree of confidence in our ability to deliver upon the many promising growth opportunities ahead as we become a broader based regenerative medicine company," commented Taylor. "This confidence is founded on the strong National Accounts sales team we have assembled and the more than 4,000 U.S hospitals under contract for MiMedx allografts through our national accounts with Group Purchasing Organizations ("GPOs") and Integrated Delivery Networks ("IDNs"), the expertise we are building in our sales professionals focusing on the surgical and the orthopedic/spine markets, our continuing progress in gaining health plan coverage, our unparalleled expertise and market share in the advanced wound care market, the growing number of clinical studies being conducted for numerous medical applications for our allografts, and the operating leverage we have created."
Balance Sheet and Cash Flow
As of March 31, 2015, total assets were $106.1 million, compared to $109.3 million as of December 31, 2014. Cash on hand as of March 31, 2015, was $38.7 million, as compared to $46.6 million as of December 31, 2014. The decrease in cash was due to share repurchases of $12.2 million somewhat offset by positive net cash flow from operating activities of $4.2 million, due primarily to an increase in Adjusted EBITDA and improved working capital management. Accounts receivable increased to $31.0 million as of March 31, 2015, from $26.7 million as of December 31, 2014. Days Sales Outstanding (DSO) as of March 31, 2015were 68 days, compared to 61 days as of December 31, 2014. Inventory decreased approximately $885,000 to $4.2 million as of March 31, 2015, compared to $5.1 million as of December 31, 2014. Inventory turns were 4.9 for the quarter as compared to 2.8 in the prior quarter. Total liabilities decreased to $19.7 millionas of March 31, 2015, from $19.9 million as of December 31, 2014. Stockholders' equity decreased by $2.9 million to $86.4 million as of March 31, 2015, from $89.3 million as of December 31, 2014.
The Company recorded Net Income of $4.1 million for the quarter ended March 31, 2015, or $0.04 per diluted common share, as compared to a Net Loss of $922,000, or $0.01 per diluted common share, for the quarter ended March 31, 2014. First quarter 2015 R&D expenses were $1.8 million or 4.5% of Net Sales, an increase of $0.4 million over first quarter 2014 R&D expenses of $1.4 million. Selling, general and administrative ("SG&A") expenses for the first quarter of 2015 were $29.3 million, a $13.4 million increase over first quarter of 2014 SG&A expenses of $15.9 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.
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 first quarter of 2015, Wound Care revenue was $29.8 million, representing 73% of total revenue, and Surgical, Sports Medicine and OEM revenue was $11.0 million, representing 27% of total revenue.
The Company also provides a revenue breakdown in terms of customer type, distinguishing between government and commercial accounts. For the first quarter of 2015, Commercial sales were $27.0 million, representing 66% of total revenue, and Government sales were $13.8 million, representing 34% of total revenue.
The Company increased its previously communicated guidance for full year 2015 and provided its outlook for the second quarter of 2015.
The Company's guidance for the second quarter of 2015 includes:
- Q2 2015 revenue in the range of $44.0 million to $46 million; and
- Q2 2015 operating profit in excess of 11%.
The Company's increased full year 2015 expectations include:
- Full year 2015 revenue in the range of $180 million to $190 million; and
- Operating profit margin for full year 2015 in excess of 15%.