MiMedx Group, Inc. (NASDAQ: MDXG), an integrated developer, manufacturer and marketer of patent protected regenerative biomaterials and bioimplants processed from human amniotic membrane, announced today its results for the quarter ended September 30, 2013.
Highlights of third quarter of 2013 results include:
Revenue exceeds high end of guidance (8th consecutive quarter of meeting or exceeding upper end of guidance)
Revenue increased more than 100% over third quarter of 2012
Nine-month revenue increased nearly 150% over same period of 2012
7th consecutive quarter of positive Adjusted EBITDA
Quarterly Cash Flow from Operations Positive for the First time in Company History
Company reiterates increased lower end of 2013 full year revenue guidance
Third Quarter 2013 Results
The Company recorded record revenue for the quarter ended September 30, 2013, with revenue of $16.1 million, an increase of more than 100% over third quarter of 2012 revenue of $8.0 million. The Company's third quarter gross margins were 87% as compared to gross margins of 82% in the third quarter of last year. Earnings before interest, taxes, depreciation, amortization and share based compensation (Adjusted EBITDA*) for the third quarter of 2013 were $1.9 million, a $1.1 million or 156% improvement, as compared to the Adjusted EBITDA of $726,000 for the third quarter of 2012. The Net Loss for the third quarter of 2013 was $307,000 as compared to net loss of $4.2 million in the prior year third quarter. The prior year Net Loss included a $1.8 million Intangible Asset impairment charge and a $1.3 million charge related to the fair value adjustment of the earn-out liability related to the acquisition of Surgical Biologics.
For the nine months ended September 30, 2013, the Company recorded record revenue of $41.2 million, an increase of nearly 150% over revenue of $16.5 million recorded for the first nine months of 2012. The Company's gross margins for the nine months ended September 30, 2013 were 85% as compared to 79% in the same period of last year. Earnings before interest, taxes, depreciation, amortization and share based compensation (Adjusted EBITDA*) for the nine months ended September 30, 2013 were $4.1 million, a $2.2 million or 111% improvement, as compared to the Adjusted EBITDA of $2.0 million for the same nine months of 2012. The Net Loss for the nine months ended September 30, 2013, was $2.7 million, as compared to the Net Loss of $6.1 million in the prior year same period. The prior year Net Loss included a $1.8 million Intangible Asset impairment charge and a $1.3 million charge related to the fair value adjustment of the earn-out liability related to the acquisition of Surgical Biologics.
Management Commentary on Third Quarter Results
Parker H. "Pete" Petit, Chairman and CEO, stated, "We are pleased with our performance this quarter. We exceeded the $16.0 million upper range of our goal and achieved greater than a 100% increase over our 2012 third quarter revenue. This was our 8th straight quarter where we met or exceeded the upper end of our revenue forecast. In the quarter, we continued to produce strong gross margins while we invested in additional clinical trials to position us for future growth. We are equally pleased with our progress on our bottom line as we recorded our seventh consecutive quarter of positive Adjusted EBIDTA. This remains a heightened focus for our management team to continually balance our EBITDA growth with the investments in our sales organization and clinical studies, which are both required to drive our revenue growth.
MiMedx third quarter revenue growth was primarily driven by wound care sales. Sequentially, third quarter wound care revenue grew 25% over second quarter, and Surgical & Sports Medicine revenue grew 10% over the second quarter of 2013. "Early in this year, we began the build out of our sales force dedicated to the commercial sector of the wound care market. We are very pleased with the results this new sales team is generating. Our 2013 year-to-date wound care revenue is up by nearly 260% over last year. With six of the nine Medicare Contractors agreeing to reimburse for our EpiFix® wound care tissue grafts, we are beginning to see the impact that this sales channel can have on the Company's growth. Aggressively pursuing these reimbursement approvals remains a critical priority for our Company," added Petit.
Bill Taylor, President and COO, commented, "During the quarter our R&D expenses were up by more than 50% over last year. Our increase in R&D expenditures is primarily driven by the aggressive schedule of clinical studies that we are conducting to accelerate the pace of reimbursement approvals from the payers. We are confident that these initiatives will play a large part in our revenue growth. We will soon be embarking on the next stage of our direct sales force expansion. At the end of the quarter, we had 66 sales executives in our direct sales force. We expect to expand our direct sales force to between 70 to 80 sales executives by the end of the year."
On October 28, 2013, MiMedx concluded a meeting with the Food and Drug Administration ("FDA") in which the Company presented its basis for concluding that its micronized products are minimally manipulated and meet the criteria for regulation solely under Section 361 of the Public Health Service Act and 21 CFR 1271 of the FDA's regulations. The FDA acknowledged the Company's presentation included new information that they would review and consider, and they committed to responding in a timely fashion. Upon completing their review, we hope the FDA will agree with our position. Countless patients benefit from the clinical effectiveness of our micronized products, and we will work with the FDA on a regulatory solution that ensures our micronized products are available for these patients. These solutions could include, among other things, one or more of the following: labeling changes, changes to the product, changes to the process, or submission of a Biologics License Application.
Balance Sheet and Cash Flow
Total assets increased by $10.1 million to $45.3 million as of September 30, 2013. Cash on hand as of September 30, 2013, was $6.1 million, a decrease of approximately $700,000, as compared to $6.7 million, as of December 31, 2012. Cash increased by $1.9 million as compared to the cash balance as of June 30, 2013. Cash flow from operating activities for the quarter was a positive $1.7 million and marks the first time in company history that the company recorded positive quarterly cash flow from operations. On a year to date basis, cash flows from operating activities is a negative $1.1 million, compared to a negative $2.5 million for the same nine month period in 2012.
Accounts receivable increased to $13.7 million from $7.7 million as of December 31, 2012, due to the higher sales volume and the buildup of commercial wound care sales. In preparation for increased demand in commercial wound care sales in subsequent quarters, inventory increased by $1.5 million to $4.5 million. Total liabilities decreased from $15.2 million as of December 31, 2012 to $9.8 million as of September 30, 2013. The decline in total liabilities was primarily the result of conversion of the senior secured promissory notes and the final payout of the earnout related to the acquisition of Surgical Biologics. Stockholders' equity increased by $15.5 million to $35.5 million as of the end of the quarter.
The Company recorded a Net Loss of $307,000, or $0.00 per diluted common share, for the quarter ended September 30, 2013, as compared to the Net Loss of $4.2 million, or $0.05 per diluted common share, recorded for the quarter ended September 30, 2012. The Net Loss includes a total of $2.1 Million in non-cash related expenses including $1.7 million in share based compensation expense, $260,000 in amortization of intangibles and $185,000 in depreciation expense. The Net Loss for the same period in 2012 included $4.9 million in non-cash related charges. The Company recorded a Net Loss of $2.7million for the nine months ended September 30, 2013, or $.03 per diluted common share, as compared to a Net Loss of $6.1 million, or $0.07 per diluted common share, for the nine months ended September 30, 2012.