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MiMedx Announces Record Quarterly Results

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SOURCE MiMedx Group, Inc.

Revenue Increases by 69% Over 2013 First Quarter

MARIETTA, Ga., April 25, 2014 /PRNewswire/ -- 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 March 31, 2014.

Highlights include:

  • Revenue exceeds upper end of guidance and increases by 69% over Q1 2013
  • 10th consecutive quarter of meeting or exceeding revenue guidance
  • 9th consecutive quarter of positive Adjusted EBITDA*
  • Adjusted EBITDA* increased by 77% over Q1 2013
  • Added 46 direct sales professionals during Q1 2014
  • Company reiterates second quarter revenue guidance of $21.5 - $23.5 million and
  • Full year 2014 revenue guidance of $95.0 - $110.0 million

First Quarter 2014 Results
The Company recorded record revenue for the first quarter of 2014 of $19.6 million, an increase of 69% over 2013 first quarter revenue of $11.6 million, and above the guidance of $18 million to $19.5 million.  The Company's gross margins for the quarter ended March 31, 2014 were 85% as compared to 84% in the first quarter of 2013.  Earnings before interest, taxes, depreciation, amortization, share-based compensation (Adjusted EBITDA*) for the quarter ended March 31, 2014 were $2.0 million, a $0.9 million or 77% improvement, as compared to the Adjusted EBITDA* of $1.1 million for the first quarter of 2013.  The Net Loss for the first quarter of 2014 was $0.9 million, as compared to the Net Loss of $1.6 million in the prior year first quarter.

Management Commentary on Results
Parker H. "Pete" Petit, Chairman and CEO, said, "We are very pleased with our first quarter performance.  We exceeded the upper end of our guidance range and marked our 10th straight quarter of meeting or exceeding our revenue forecast.  Quarter-over-quarter revenue growth was extremely solid with a 77% increase over the first quarter of 2013.  I am especially pleased with our management team's ability to handle this amount of top line growth and continue to make progress on improving our profitability.  The first quarter was our 9th consecutive quarter of positive Adjusted EBITDA*, and our gross margins remained very strong at 85%.  As we further accelerate the rapid growth of our Company, we will continue to invest heavily in the critical growth drivers of our business.  These are principally investments in our sales organization and in our clinical studies and trials."

Petit continued, "We are pleased with the way our organization responded to the market's confusion resulting from the January 1, 2014 implementation of the Hospital Outpatient Prospective Payment System ("OPPS") Final Rule issued by the Centers for Medicare and Medicaid Services ("CMS").  Whenever a major change in reimbursement methodology is implemented, there is the potential for a temporary period of confusion with the wound care centers and physicians. We anticipated this confusion and pursued an initiative to provide detailed communications and education to the wound care centers and physicians' staff to minimize the reimbursement confusion.  By the end of February, it appeared that the majority of wound care centers had effectively implemented the necessary changes.  As a result, our March revenue grew significantly.  It is important to reiterate our belief that this change in reimbursement methodology by CMS is very favorable to MiMedx and our size appropriate and clinically effective allografts.  We expect second, third and fourth quarter's growth rates to be favorably impacted."

Wound care sales continued to be the primary driver of the Company's first quarter revenue growth, increasing by 136% over first quarter of 2013.  Bill Taylor, President and COO, stated, "Contributing to our rapid growth is our aggressive expansion of our direct sales force.  We ended  2013 with 76 sales professionals in our direct sales force.  We added 46 sales professionals to our sales force during the first quarter, and ended the quarter with 122 sales professionals in our direct sales force.  The primary focus of our expansion strategy is in the area of advanced wound care, and to a lesser extent, in the orthopedic and spinal surgery area.  We are very excited about the wealth of experience and relationships these new professionals bring to the Company.  We expect these additions to begin impacting our sales growth in the second quarter and beyond."

The Company reported that at this time, EpiFix® is covered for the Blue Cross and Blue Shield members in 23 states and coverage is provided for the members in plans offered by many additional private payers.  EpiFix® also has coverage from 18 traditional state Medicaid programs and a number of Managed Medicaid plans throughout the country.

Petit added, "A crucial factor in gaining expanded reimbursement coverage is the continued initiation and management of clinical trials.  We are increasing our investment in this vital contributor to our Company's growth.  Commercial health plans diligently evaluate the clinical efficacy of products approved for reimbursement.  Their evaluation is focused on the results of published evidence-based clinical studies.  We have presented health plans with a large portfolio of study data, including clinical data and results from Randomized Controlled Trials (RCTs) and cross-over clinical studies.  With our continually expanding sources of evidenced-based results, we are gaining significant momentum in receiving awards of coverage."

"In March, we had our first Pre-Investigational New Drug ("IND") meeting at the FDA.  We had an extremely productive meeting regarding our plans for our first targeted Biologics License Application ("BLA"), and we anticipate additional interactions as we finalize our study protocols and review additional information.  We are expanding our R&D function and our related investments for our BLA application, including those resources supporting the clinical studies in support of this regulatory process.  We are also increasing the number of studies and trials supporting our reimbursement initiatives for our AmnioFix® surgical products," noted Taylor.

Balance Sheet and Cash Flow
As of March 31, 2014, total assets increased by $2.6 million to $87.3 million, compared to $84.7 million as of December 31, 2013.  Cash on hand as of March 31, 2014, was $43.0 million, a decrease of $1.1 million, as compared to $44.1 million as of December 31, 2013.  Cash flow from operating activities for the quarter ended March 31, 2014, was a negative $1.6 million, due to increased working capital requirements in support of sales growth as compared to a negative $2.1 million in the first quarter of 2013.

Accounts receivable increased to $19 million as of March 31, 2014, from $16.1 million as of December 31, 2013.  This was largely due to the higher sales volume and the buildup of the Company's commercial wound care sales.  Inventory decreased by $240,000 to $3.6 million as of March 31, 2014, from $3.9 million as of December 31, 2013. Total liabilities remained unchanged at $11.1 million as of March 31, 2014. Stockholders' equity increased by $2.7 million to $76.2 million as of March 31, 2014.

GAAP Earnings
The Company recorded a Net Loss of $0.9 million for the quarter ended March 31, 2014, or $0.01 per diluted common share, as compared to a Net Loss of $1.6 million, or $0.02 per diluted common share, for the quarter ended March 31, 2013.

For the first quarter of 2014, Research and Development (R&D) expenses were $1.4 million or 7% of Net Sales, an increase of $0.1 million over the first quarter of 2013 R&D expenses.  Due to the continuation of the accelerated investment in clinical trials for reimbursement purposes, the R&D expenses remained level with the $1.4 million recorded in the fourth quarter of 2013.

Selling, general and administrative (SG&A) expenses for the first quarter of 2014 were $15.9 million, or 81% of Net Sales, a $7.5 million increase over first quarter of 2013 SG&A expenses of $8.4 million, or 72% of Net Sales, and an increase of $1.6 million over fourth quarter of 2013 SG&A expenses of $14.3 million, or 79% of Net Sales.  Increases in SG&A 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 SG&A expenses.

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 financing expense, interest, taxes, depreciation, amortization, and share-based compensation.  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 and reports revenue in two categories: (1) Wound Care and (2) Surgical, Sports Medicine and OEM applications.  Revenue for the Company's Wound Care category comprises both the sheet and powdered form.  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 injectable form.  In the first quarter of 2014, Wound Care represented 75% of revenue, and Surgical, Sports Medicine and OEM represented 25% of revenue.

The Company also provides a revenue breakdown in terms of customer type, distinguishing between government and commercial accounts.  Government accounts include the Veterans Administration as well as the Department of Defense and Indian Health Services. Commercial sales include sales through distributors, OEM sales and direct sales to non-government accounts.  For the quarter ended March 31, 2014, Commercial sales represented 53% and Government sales represented 47% of revenue.

Outlook for Second Quarter and Full Year 2014
The Company reaffirmed its previously communicated guidance for the second quarter and 2014 full year.  As previously communicated, the Company estimates second quarter of 2014 revenue to be in the range of $21.5 million to $23.5 million and full year 2014 revenue to be in the range of $95.0 million to $110 million.

Earnings Call
MiMedx management will host a live broadcast of its first quarter results conference call on Friday, April 25, 2014, beginning at 10:30 a.m. eastern time.  A listen-only simulcast of the MiMedx Group conference call will be available on-line at the Company's website at www.mimedx.com.  A 30-day on-line 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.

About MiMedx
MiMedx® is an integrated developer, processor and marketer of patent protected regenerative biomaterial products and bioimplants processed from human amniotic membrane.  "Innovations in Regenerative Biomaterials" is the framework behind our mission to give physicians products and tissues to help the body heal itself.  Our biomaterial platform technologies include AmnioFix® and EpiFix®, our tissue technologies processed from human amniotic membrane that is derived from donated placentas.  Through our donor program, mothers delivering full-term Caesarean section births can elect in advance of delivery to donate the placenta in lieu of having it discarded as medical waste.  We process the human amniotic membrane utilizing our proprietary PURION® process, to produce a safe and effective implant. MiMedx® is the leading supplier of amniotic tissue, having supplied over 225,000 allografts to date for application in the Wound Care, Surgical, Sports Medicine, Ophthalmic and Dental sectors of healthcare.

Safe Harbor Statement
This press release includes statements that look forward in time or that express management's beliefs, expectations or hopes.  Such statements are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995.  These statements include, but are not limited to, the impact of clinical trials on reimbursement coverage, the effect of expansion of the sales force on period-over-period revenue growth, the effect of the CMS reimbursement changes on revenue growth, the expectation for rapid revenue growth, the ability to add additional sales and R&D professionals in the time periods anticipated, the potential for increases in awards of coverage, favorable outcomes of clinical trials, and the Company's projected revenues for second quarter and full year 2014.  These statements are based on current information and belief, and are not guarantees of future performance.  Among the risks and uncertainties that could cause actual results to differ materially from those indicated by such forward-looking statements include that the outcome of in-process and future clinical trials will not be as anticipated or that the Company's clinical trials may not have the desired effect on reimbursement coverage or increased interest in our products , the expansion of the sales force might not have the expected effect on revenue growth in any particular territory or overall, the Company may not be successful in further expanding its sales force and R&D function in the time periods anticipated, the Company may not achieve its projected revenue goals, the CMS reimbursement changes prove not to be favorable to the Company, the Company may not obtain the anticipated increases in awards of coverage, and the risk factors detailed from time to time in the Company's periodic Securities and Exchange Commission filings, including, without limitation, its 10-K filing for the fiscal year ended December 31, 2013.  By making these forward-looking statements, the Company does not undertake to update them in any manner except as may be required by the Company's disclosure obligations in filings it makes with the Securities and Exchange Commission under the federal securities laws.

 


MIMEDX GROUP, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS



March 31,
 2014

(unaudited)


December 31,
 2013

ASSETS





Current assets:




Cash and cash equivalents

$

43,019,559



$

44,077,751


Accounts receivable, net

18,966,543



16,092,836


Inventory, net

3,639,094



3,880,776


Prepaid expenses and other current assets

2,278,996



1,337,408


Total current assets

67,904,192



65,388,771








Property and equipment, net of accumulated depreciation

4,288,743



4,086,106


Goodwill

4,040,443



4,040,443


Intangible assets, net of accumulated amortization

11,115,188



11,178,573


Total assets

$

87,348,566



$

84,693,893








LIABILITIES AND STOCKHOLDERS' EQUITY




Current liabilities:




Accounts payable

$

2,618,753



$

2,490,531


Accrued compensation

5,413,595



5,588,811


Accrued expenses

1,369,048



1,405,974


Other current liabilities

192,522



122,551


Total current liabilities

9,593,918



9,607,867








Other Liabilities

1,516,464



1,517,956


Total liabilities

11,110,382



11,125,823








Commitments and contingencies (Note 12)

-



-








Stockholders' equity:




Preferred stock; $.001 par value; 5,000,000 shares authorized and 0 shares issued and outstanding

-



-


Common stock; $.001 par value; 130,000,000 shares authorized; 105,843,137 issued and

105,793,137 outstanding as of March 31,2014 and 104,425,614 issued and 104,375,614

outstanding as of December 31, 2013

105,843



104,426


Additional paid-in capital

150,874,988



147,284,219


Treasury stock (50,000 shares at cost)

(25,000)



(25,000)


Accumulated deficit

(74,717,647)



(73,795,575)


Total stockholders' equity

76,238,184



73,568,070








Total liabilities and stockholders' equity

$

87,348,566



$

84,693,893


 

 

MIMEDX GROUP, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(unaudited)



Three Months Ended March 31,


2014



2013


Net sales

$

19,559,188



$

11,556,493


Cost of sales

2,977,275



1,905,020


Gross margin

16,581,913



9,651,473








Operating expenses:




Research and development expenses

1,390,044



1,246,757


Selling, general and administrative expenses

15,851,553



8,369,010


Amortization of intangible assets

231,331



262,596








Operating income (loss)

(891,015)



(226,890)








Other income (expense), net




Amortization of debt discount

-



(1,328,439)


Interest expense, net

(21,024)



(14,804)








Income (loss) before income tax provision

(912,039)



(1,570,133)


Income tax provision

(10,033)



(50,275)








Net Income (loss)

$

(922,072)



$

(1,620,408)








Net income (loss) per common share - basic and diluted

$

(0.01)



$

(0.02)







Weighted average shares outstanding - basic and diluted

105,358,694



93,128,466


 

 

MIMEDX GROUP, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(unaudited)



Three Months Ended March 31,


2014



2013


Cash flows from operating activities:




Net income (loss)

$

(922,072)



$

(1,620,408)


Adjustments to reconcile net income (loss) to net cash from operating activities:




Depreciation

263,131



98,751


Amortization of intangible assets

231,331



262,596


Amortization of debt discount and deferred financing costs

-



1,328,439


Share-based compensation

2,372,364



984,792


Increase (decrease) in cash resulting from changes in:




Accounts receivable

(2,873,707)



(2,167,942)


Inventory

241,682



(933,555)


Prepaid expenses and other current assets

(941,588)



(555,692)


Other assets

-



(249,545)


  Accounts payable

128,222



(194,977)


  Accrued compensation

(175,216)



765,532


  Accrued expenses

(36,926)



236,788


  Accrued interest

-



(41,641)


  Other liabilities

101,808



(11,324)


Net cash flows from operating activities

(1,610,971)



(2,098,186)








Cash flows from investing activities:




Purchases of equipment

(465,768)



(73,534)


Patent application costs

(167,946)



-


Net cash flows from investing activities

(633,714)



(73,534)








Cash flows from financing activities:




Proceeds from exercise of warrants

774,750



924,624


Proceeds from exercise of stock options

445,072



232,531


Principal payments of equipment leases

(33,329)



(14,813)


Net cash flows from financing activities

1,186,493



1,142,342








Net change in cash

(1,058,192)



(1,029,378)








Cash and cash equivalents, beginning of period

44,077,751



6,754,485


Cash and cash equivalents, end of period

$

43,019,559



$

5,725,107


 

 

MiMedx Group, Inc. and Subsidiaries

Non-GAAP Financial Measures and Reconciliation


As used herein, "GAAP", refers to generally accepted accounting principles in the United States. We use various numerical measures in conference calls, investor meetings and other forums which are or may be considered "Non-GAAP financial measures" under Regulation G. We have provided below for your reference, supplemental financial disclosure for these measures, including the most directly comparable GAAP measure and an associated reconciliation.


Reconciliation of Net Loss to "Adjusted EBITDA" defined as Earnings before Financing expense, Interest, Taxes, Depreciation, Amortization, and Share - Based Compensation:




Three Months Ended March 31,


2014



2013


Net Loss (Per GAAP)

$

(922,072)



$

(1,620,408)








Add back:




Income Taxes

10,033



50,275


Financing expense associated with beneficial conversion of Senior Secured Promissory Notes

-



1,328,439


Other interest expense, net

21,024



14,804


Depreciation Expense and loss on fixed asset disposal

263,131



98,751


Amortization Expense

231,331



262,596


Share - Based Compensation

2,372,364



984,792


Adjusted EBITDA

$

1,975,811



$

1,119,249


 

©2012 PR Newswire. All Rights Reserved.

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