MiMedx Announces Filing of 2020 First Quarter Form 10-Q
Company Now Caught Up in Financial Reporting
First Quarter
Highlight of Key Metrics
- First quarter net sales of
$61.7 million , a 7.2% decrease over the quarter endedMarch 31, 2019 - Net loss of
$4.8 million - Adjusted EBITDA1 of
$3.1 million
Quarter Ended |
|||||||
(in thousands) | |||||||
2020 | 2019 | ||||||
Net sales | $ | 61,736 | $ | 66,555 | |||
Net (loss) income | (4,821 | ) | (13,273 | ) | |||
EBITDA1 | (11,961 | ) | (11,514 | ) | |||
Adjusted EBITDA1 | 3,114 | 10,865 | |||||
Net (loss) income per common share - basic | $ | (0.04 | ) | $ | (0.12 | ) | |
Net (loss) income per common share - diluted | $ | (0.04 | ) | $ | (0.12 | ) | |
1. EBITDA and Adjusted EBITDA are non-GAAP financial measures. See “Reconciliation of GAAP Net Income to EBITDA and Adjusted EBITDA” for a reconciliation of EBITDA and Adjusted EBITDA to Net (loss) income, located in “Selected Unaudited Financial Information” of this release. |
Net sales for the quarter ended
Gross margin in the first quarter of 2020 was 84% as compared to 89% in the first quarter of 2019. The gross margin decrease reflects the cost of higher quality standards of current Good Manufacturing Practices (cGMP) and investments in our Biologic License Application (BLA) programs.
Selling, General and Administrative (SG&A) expenses for the first quarter of 2020 decreased approximately
Investigation, restatement and related expense for the first quarter of 2020 decreased approximately
COVID-19 Impact
Our ability to sell our product has been hampered by the COVID-19 pandemic. Our sales force is spread across the country, and in many areas, our sales force was excluded from hospitals and other medical facilities. Additionally, many patients stayed away from healthcare facilities, in part due to shelter-in place restrictions. The impact of the pandemic had an adverse effect on our revenues beginning late in the first quarter of 2020 and continuing into April. By mid-May, access to hospitals and healthcare providers by our sales force had been mostly restored, and we began to see significant numbers of patients return for treatment, including for elective procedures. However, as of the date of this release, additional restrictions have been put in place in some areas of the country that again limit or postpone elective surgical procedures, and in particular, in areas of the country that contribute a larger portion of our sales. Future sales will depend on patients’ willingness to visit healthcare providers for care, and our sales force’s access to healthcare providers. At this time, the future impacts of COVID-19 on our business remain uncertain.
In response to these challenges, our management team initiated several actions. Most discretionary expenses such as travel were cancelled. Merit salary increases were deferred and, beginning on
Recent Developments
We expect net sales during the quarter ended
On
The aggregate proceeds of the
Prior to the
Shareholder Webcast
U.S. Investors: 1-877-407-4018
Conference ID: 13706593
Webcast: http://public.viavid.com/index.php?id=140606
A replay of the webcast will be available on the Company’s website at www.mimedx.com following the conclusion of the call.
Important Cautionary Statement
This press release contains forward-looking statements. All statements relating to events or results that may occur in the future are forward-looking statements, including, without limitation, statements regarding the anticipated effects of the COVID-19 pandemic; expected sales, gross margin and expenses for the second quarter of 2020; and the expected duration and effects of cost containment measures. Forward-looking statements generally can be identified by words such as “expect,” “will,” “intend,” “seek,” “target,” “future,” “plan,” “continue,” “potential,” “possible,” “could,” “would,” “may,” “anticipate,” “to be” and similar expressions. These statements are based on numerous assumptions and involve known and unknown risks, uncertainties and other factors that could significantly affect the Company’s operations and may cause the Company’s actual actions, results, financial condition, performance or achievements to differ materially from any future actions, results, financial condition, performance or achievements expressed or implied by any such forward-looking statements. Factors that may cause such a difference include, without limitation, those discussed under the heading “Risk Factors” in the Company’s Annual Report on Form 10-K for the year ended
Unless required by law, the Company does not intend, and undertakes no obligation, to update or publicly release any revision to any forward-looking statements, whether as a result of the receipt of new information, the occurrence of subsequent events, a change in circumstances or otherwise. Each forward-looking statement contained in this release is specifically qualified in its entirety by the aforementioned factors. Readers are advised to carefully read this release in conjunction with the important disclaimers set forth above prior to reaching any conclusions or making any investment decisions and not to place undue reliance on forward-looking statements, which apply only as of the date of this release.
About
MiMedx® is an industry leader in advanced wound care and an emerging therapeutic biologics company developing and distributing human placental tissue allografts with patent-protected processes for multiple sectors of healthcare. The Company processes the human placental tissue utilizing its proprietary PURION® process methodology, among other processes, to produce allografts by employing aseptic processing techniques in addition to terminal sterilization.
Contacts:
Investor Relations & Corporate Communications
770.651.9066
investorrelations@mimedx.com
Selected Unaudited Financial Information
Condensed Consolidated Balance Sheet |
||||||
(Unaudited) | ||||||
(in thousands) | ||||||
2020 |
2019 |
|||||
ASSETS | ||||||
Current assets: | ||||||
Cash and cash equivalents | $ | 53,525 | $ | 69,069 | ||
Accounts receivable, net | 31,932 | 32,327 | ||||
Inventory, net | 9,247 | 9,104 | ||||
Prepaid expenses | 5,239 | 6,669 | ||||
Income tax receivable | 10,729 | 18 | ||||
Other current assets | 5,216 | 6,058 | ||||
Total current assets | 115,888 | 123,245 | ||||
Other long term assets | 43,021 | 43,921 | ||||
Total assets | $ | 158,909 | $ | 167,166 | ||
LIABILITIES AND STOCKHOLDERS' EQUITY | ||||||
Current liabilities: | ||||||
Accounts payable | $ | 9,756 | $ | 8,710 | ||
Accrued compensation | 17,116 | 21,302 | ||||
Accrued expenses | 30,661 | 32,161 | ||||
Current portion of long term debt | 3,750 | 3,750 | ||||
Other current liabilities | 2,416 | 1,399 | ||||
Total current liabilities | 63,699 | 67,322 | ||||
Long term debt, net | 61,637 | 61,906 | ||||
Other liabilities | 3,234 | 3,540 | ||||
Total liabilities | 128,570 | 132,768 | ||||
Total stockholders' equity | 30,339 | 34,398 | ||||
Total liabilities and stockholders' equity | $ | 158,909 | $ | 167,166 | ||
Condensed Statements of Operations |
||||||||||||||
(Unaudited) | ||||||||||||||
(in thousands, except for percentage data) | ||||||||||||||
Three Months Ended |
Change | |||||||||||||
2020 | 2019 | $ | % | |||||||||||
Net sales | $ | 61,736 | $ | 66,555 | $ | (4,819 | ) | (7.2 | %) | |||||
Cost of sales | 10,025 | 7,418 | 2,607 | 35.1 | % | |||||||||
Gross profit | 51,711 | 59,137 | (7,426 | ) | (12.6 | %) | ||||||||
Operating expenses: | ||||||||||||||
Selling, general and administrative | 46,942 | 50,862 | (3,920 | ) | (7.7 | %) | ||||||||
Investigation, restatement and related | 15,592 | 18,107 | (2,515 | ) | (13.9 | %) | ||||||||
Research and development | 2,650 | 2,902 | (252 | ) | (8.7 | %) | ||||||||
Amortization of intangible assets | 271 | 233 | 38 | 16.3 | % | |||||||||
Impairment of intangible assets | — | 446 | (446 | ) | (100.0 | %) | ||||||||
Operating (loss) income | (13,744 | ) | (13,413 | ) | (331 | ) | (2.5 | %) | ||||||
Other income (expense) | ||||||||||||||
Interest (expense) income, net | (2,387 | ) | 211 | (2,598 | ) | (1231.3 | %) | |||||||
Other income (expense), net | 6 | (29 | ) | 35 | 120.7 | % | ||||||||
(Loss) income before income tax provision | (16,125 | ) | (13,231 | ) | (2,894 | ) | (21.9 | %) | ||||||
Income tax provision benefit (expense) | 11,304 | (42 | ) | 11,346 | 27014.3 | % | ||||||||
Net (loss) income | $ | (4,821 | ) | $ | (13,273 | ) | $ | 8,452 | 63.7 | % | ||||
Condensed Consolidated Statements of Cash Flows |
|||||||
(Unaudited) | |||||||
(in thousands) | |||||||
Three Months Ended |
|||||||
2020 | 2019 | ||||||
Cash flows from operating activities | |||||||
Net loss | $ | (4,821 | ) | $ | (13,273 | ) | |
Adjustments to reconcile net loss to net cash provided by operating activities | |||||||
Share-based compensation | 3,349 | 3,014 | |||||
Depreciation | 1,506 | 1,695 | |||||
Amortization of intangible assets | 271 | 233 | |||||
Amortization of deferred financing costs and debt discount | 668 | — | |||||
Non-cash lease expenses | 239 | 269 | |||||
Loss on fixed asset disposal | — | 1 | |||||
Intangible asset impairment | — | 1,258 | |||||
Increase (decrease) in cash resulting from changes in the balance sheet | (13,493 | ) | (8,457 | ) | |||
Net cash flows used in operating activities | (12,281 | ) | (15,260 | ) | |||
Cash flows from investing activities: | |||||||
Purchases of property and equipment | (1,011 | ) | (648 | ) | |||
Principal payments from note receivable | — | 389 | |||||
Patent application costs | (75 | ) | (174 | ) | |||
Net cash flows used in investing activities | (1,086 | ) | (433 | ) | |||
Cash flows from financing activities: | |||||||
Proceeds from exercise of stock options | 298 | — | |||||
Shares repurchased for tax withholdings on vesting of restricted stock | (1,538 | ) | (1,044 | ) | |||
Repayment of term loan | (937 | ) | — | ||||
Net cash flows (used in) provided by financing activities | (2,177 | ) | (1,044 | ) | |||
Net change in cash | (15,544 | ) | (16,737 | ) | |||
Cash and cash equivalents, beginning of year | 69,069 | 45,118 | |||||
Cash and cash equivalents, end of year | $ | 53,525 | $ | 28,381 | |||
Reconciliation of GAAP Net Income to EBITDA and Adjusted EBITDA
In addition to our GAAP results, we provide certain non-GAAP metrics including Earnings Before Interest, Taxes, Depreciation and Amortization (“EBITDA”) and Adjusted EBITDA. We believe that the presentation of these measures provides important supplemental information to management and investors regarding our performance. These measurements are not a substitute for GAAP measurements. Company management uses these Non-GAAP measurements as aids in monitoring our on-going financial performance from quarter-to-quarter and year-to-year on a regular basis and for benchmarking against comparable companies. EBITDA is intended to provide a measure of the Company’s operating performance as it eliminates the effects of financing and capital expenditures. EBITDA consists of GAAP net income (loss) excluding: (i) depreciation, (ii) amortization of intangibles, (iii) interest (income) expense and (iv) income tax provision. Adjusted EBITDA is intended to provide an enduring, normalized view of EBITDA and our broader business operations that we expect to experience on an ongoing basis by removing items which may be irregular, one-time, or non-recurring from EBITDA; most significantly those expenses related to the Audit Committee investigation and restatement. This enables us to identify underlying trends in our business that could otherwise be masked by such items. Adjusted EBITDA consists of GAAP net income (loss) excluding: (i) depreciation, (ii) amortization of intangibles, (iii) interest expense (income), (iv) income tax provision, (v) costs incurred in connection with the Audit Committee investigation and restatement, (vi) the effect of the change in revenue recognition on net income, (vii) share-based compensation and (viii) impairment of intangible assets. A reconciliation of GAAP Net Income (Loss) to EBITDA and Adjusted EBITDA appears in the table below.
Three Months Ended |
Change | |||||||||||||
2020 | 2019 | $ | % | |||||||||||
Net (loss) income | $ | (4,821 | ) | $ | (13,273 | ) | $ | 8,452 | 63.7 | % | ||||
Non-GAAP Adjustments: | ||||||||||||||
Depreciation expense | 1,506 | 1,695 | (189 | ) | (11.2%) | |||||||||
Amortization of intangible assets | 271 | 233 | 38 | 16.3% | ||||||||||
Interest expense (income), net | 2,387 | (211 | ) | 2,598 | n/a | |||||||||
Income tax provision (benefit) expense | (11,304 | ) | 42 | (11,346 | ) | n/a | ||||||||
EBITDA | $ | (11,961 | ) | $ | (11,514 | ) | $ | (447 | ) | (3.9%) | ||||
Additional Non-GAAP Adjustments | ||||||||||||||
Costs incurred in connection with the Audit Committee Investigation and Restatement |
15,592 | 18,107 | (2,515 | ) | (13.9%) | |||||||||
Effect of change in revenue recognition | (3,866 | ) | — | (3,866 | ) | n/a | ||||||||
Share-based compensation | 3,349 | 3,014 | 335 | 11.1% | ||||||||||
Impairment of intangible assets | — | 1,258 | (1,258 | ) | n/a | |||||||||
Adjusted EBITDA | $ | 3,114 | $ | 10,865 | $ | (7,751 | ) | (71.3%) |
Source: MiMedx Group, Inc.