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:
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Revenue exceeds high end of guidance (8th consecutive quarter of meeting or exceeding upper end of guidance)
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Revenue increased more than 100% over third quarter of 2012
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Nine-month revenue increased nearly 150% over same period of 2012
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7th consecutive quarter of positive Adjusted EBITDA
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Quarterly Cash Flow from Operations Positive for the First time in Company History
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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."
FDA Update
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.
GAAP Earnings
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.
In the third quarter of 2013, Research and Development expenses were $1.3 million or 8% of Net Sales, an increase of $449,000 over the third quarter of 2012 expenses due to the accelerated investment in clinical trials for reimbursement purposes. Research and Development expenses were $3.5 million, or 8% of Net sales, as compared to $1.8 million, or 11% of Net sales, for the same period in 2012. Selling, general and administrative expenses for the third quarter were $12.7 million, or 79% of Net Sales, a $7.0 million increase over third quarter of 2012 expenses of $5.8 million. These increases were due to the continuation of the buildup of the Company's direct sales force in the government accounts and commercial accounts sales channels. The addition of key management and infrastructure related resources necessary to support the Company's growth, including key resources in support of our reimbursement activities also impacted the increase in Selling, general and administrative expenses. Selling, general and administrative expenses for the nine months ended September 30, 2013, were $32.0 million, or 78% of Net Sales, as compared to $11.4 million, or 69% of Net sales for the nine months ended September 30, 2012.
Use of non-GAAP financial measures
Management has disclosed adjusted financial measurements in this press announcement that present financial information that is not in accordance with generally accepted accounting principles (GAAP). These measurements are not a substitute for GAAP measurements, although Company management uses these measurements as aids in monitoring the Company's on-going financial performance from quarter-to-quarter and year-to-year on a regular basis, and for benchmarking against other medical technology companies. Adjusted EBITDA* is earnings before interest, taxes, depreciation, amortization, share-based compensation, non-cash impairment and earn out liability charges. For a reconciliation of this non-GAAP financial measure to the most directly comparable financial measure, see accompanying table to this release. Adjusted financial measures used by the Company may be calculated differently from, and therefore may not be comparable to, similarly titled measures used by other companies. Investors should consider adjusted measures in addition to, and not as a substitute for, or superior to, financial performance measures prepared in accordance with GAAP.
Revenue Breakdown
The Company distinguishes its revenue breakdown among three primary regenerative medicine specialties, "Wound Care," "Surgical & Sports Medicine," and "Other," and reports its revenue in these categories. Revenue for the Company's EpiFix® grafts comprises the Wound Care category. Its Surgical & Sports Medicine specialty is comprised of the Company's injectable, orthopedic and surgical applications for its AmnioFix® grafts. The "Other" category of the MiMedx regenerative medicine specialties includes the Company's tissue revenue from its dental and ophthalmic applications and products from its HydroFix® technology. In the third quarter of 2013, Wound Care represented 57% of MiMedx revenue, Surgical & Sports Medicine represented 38% of revenue and 5% of MiMedx revenue was attributed to the "Other" revenue category.
The Company also provides a revenue breakdown in terms of customer type between government and commercial accounts. Government accounts include the Veterans Administration as well as the Department of Defense and Indian Health Services. Commercial sales would include sales through distributors, OEM sales and direct sales to non-government accounts. For the quarter ended September 30, 2013 Government sales represented 58% and Commercial sales represented 42% of revenue. For the nine months ended September 30, 2013 Government sales represented 61% and Commercial sales represented 39% of total revenue.
Outlook for Fourth Quarter and Full Year 2013
The Company reaffirmed its previously communicated guidance for full year 2013 in which the lower end of the range was increased. The 2013 full year revenue is forecasted to be in the range of $57 million to $60 million. The Company's goal for the fourth quarter of 2013 is revenue to be in the range of $15.8 million to $18.8 million.
At the end of the second quarter, MiMedx had increased the lower end of its full year 2013 revenue range from $50 million to $54 million. Following the third quarter and in advance of this release, MiMedx again increased the lower end of its 2013 full year revenue guidance to $57 million. With both increases in the lower end of the guidance range, the upper end of the guidance has remained at $60 million.
Earnings Call
MiMedx management will host a live broadcast of its first quarter results conference call on Wednesday, October 30, 2013, beginning at 10:30 a.m. eastern time. A listen-only simulcast of the MiMedx Group conference call will be available online at the Company's website at www.mimedx.com or at www.earnings.com. A 30-day online replay will be available approximately one hour following the conclusion of the live broadcast. The replay can also be found on the Company's website at www.mimedx.com or at www.earnings.com.
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