Organogenesis Holdings Inc.

Welcome ladies and gentlemen to the second quarter 2026 earnings conference call for Organogenesis Holdings Inc. At this time, all participants have been placed in listen-only mode. Please note that this conference call is being recorded and that the recording will be available on the company's website for replay shortly. Before we begin, I would like to remind everyone that our remarks today may contain forward-looking statements that are based on the current expectations of management and involve inherent risks and uncertainties that could cause actual results to differ materially from those indicated, including the risks and uncertainties described in the company's filings with the Securities and Exchange Commission, including item 1A, risk factors, of the company's most recent annual report and its subsequently filed quarterly reports. You are cautioned not to place undue reliance upon any forward-looking statements which speak only as of the date made. Although it may voluntarily do so from time to time, the company undertakes no commitment to update or revise the forward-looking statements, whether as a result of new information, future events, or otherwise, except as required by applicable securities laws. This call will also include references to certain financial measures that are not calculated in accordance with generally accepted accounting principles or GAAP. We generally refer to these as non-GAAP financial measures. Reconciliations of those non-GAAP financial measures to the most comparable measures calculated and presented in accordance with GAAP are available in the earnings press release on the investor relations portion of our website. I would now like to turn the call over to Mr. Gary S. Gillheeney Sr., Organogenesis Holdings President, Chief Executive Officer, and Chair of the Board. Please go ahead, sir.

Thank you, operator, and welcome everyone to, again, the Genesis Holdings Second Quarter 2026 Earnings Conference Call. I'm joined on the call today by David Francisco, our Chief Financial Officer. Let me start with a brief agenda of what we'll cover during our prepared remarks. I'll begin with a brief review of our results and key developments in the second quarter and in recent months. Dave will then provide you with an in-depth review of our second quarter financial results, our balance sheet, and financial condition at quarter end, as well as our financial outlook for 2026, which we updated in our press release this afternoon. Then I will provide you some closing comments before we open the call for your questions. Let me begin with a review of our results and key developments in Q2. Our revenue results reflect the significant contraction and slow pace of recovery in the skin substitute market as a result of the actions and comments from CMS in late December of 2025. Total revenue declined 58% year over year in the second quarter, driven primarily by a 61% decline in sales of our advanced wound care products. We were pleased to see measured improvement in our business trends in the second quarter, On balance, we were encouraged to see the operating environment improve from what we experienced during the first quarter. Net product revenue increased 18% quarter over quarter in Q2, driven primarily by a 23% sequential increase in sales of our advanced wound care products. As a leader in the industry, we leveraged our most comprehensive portfolio across multiple FDA classifications, including the only biologic PMA-approved product, Applegraph. to enhance our market share position with a 30% increase in wound care unit volume on a quarter-over-quarter basis, outperforming the declines that have been reported across the industry. That said, revenue results for Q2 were below the expectations we outlined in our first quarter call. We attribute the majority of this performance to a slower pace of recovery from the significant contraction in the skin substitute market as a result of the sweeping changes from CMS to reform coverage and payment. The prolonged recovery has also prompted us to make important strategic decisions that are intended not only to reduce our cost structure, but also better position organogenesis for success going forward. While operating and financial results in 2026 have been significantly impacted by the contraction in the skin substitute market this year, I want to make it clear that I remain very optimistic about our future. and others. CMS efforts to overhaul coverage and payment for the skin substitute market have addressed the waste, fraud and abuse from bad actors exploiting the system. With the proposed hospital outpatient prospective payment system and the physician fee schedule announced last month, we believe CMS is now seeking to promote stabilization in the market. They've held payment rates steady. They've reinforced the differentiation of PMA products and the importance of clinical data in determining coverage. and we applaud these actions and look forward to expanding access to patients who need these products. With more than 40 years in regenerative medicine and the most diverse evidence-based portfolio with technologies in each FDA category, we believe we are best positioned in the skin substitute market and will continue to be a leader in the space with the best evidence-based portfolio on the market. It is from this strong long-term market position that we are making important strategic decisions and prioritizing our investments that will support our company's future growth and continue leadership in this market. We are increasing our focus on clinical evidence with new published studies because science and evidence have been and always will be the core of our foundation. As coverage policies evolve, evidence will be the currency of credibility and we intend to remain in the lead. Importantly, we continue to advance our strategic initiative to expand the company's mission into entirely new markets with the Renew program. Recently, the FDA formally accepted Mnuvix as the proprietary trade name for the biologic product previously known as Renew. And if approved, Mnuvix will establish a new market category for a biologic product representing a transformational opportunity for organogenesis. and the more than 30 million Americans living with symptomatic knee osteoarthritis. Let me share a few updates on our progress in each of these important strategic initiatives in recent months. The compelling clinical results from our RCT evaluating the safety and efficacy of PurePly AM and the management of non-healing diabetic foot ulcers or DFUs was submitted for publication. The results of this 170 patient study showed statistically significant DFU wound closure at 12 weeks. We believe publication of these impactful results will strongly support PurePly AM's inclusion in any future coverage policies, underscoring its critical role in the wound healing algorithm. The RCT is complemented by an additional exciting publication in the Journal of Wound Care showing reduced rates of non-traumatic lower leg amputation among Medicare beneficiaries with DFU treated with PureApply AM versus standard of care. The use of PureApply AM in nearly 11,000 patients was associated with a statistically significant 20% lower overall amputation rate and an even lower 40% rate for amputations above or at the level of the knee. These new studies built on a significant body of evidence of clinical benefit of PureApply AM, adding to the previous publications on comparative effectiveness research and a prospective analysis of a large patient registry. Together, this compelling evidence spans more than 23,000 patients studied, reflecting both the primary and supporting data CMS considers when making coverage determinations. On July 27th, we announced peer-reviewed results published in the Journal of Wound Care demonstrating Affinity's benefit in the most challenging and complex venous leg ulcers, or VLU. The data showed statistically significant improvements in wound closure at 12 and 16 weeks for Affinity plus standard of care across both wound duration group study, offering compelling new evidence and one of the hardest to treat populations in chronic wound care. These results reinforce Affinity's benefit in the hard to heal wounds, the population that drives the greatest clinical burden and cost in VLU treatment. As those costs continue to rise, particularly within Medicare, this is a meaningful step forward for patients, clinicians and payers. complementing our existing diabetic foot ulcer data, these results add to a growing body of RCT and real-world evidence that strengthens the case for expanded coverage across two of the most common costly wound types. With respect to our recent progress in our MNUVIC program, on July 6th, we announced that the FDA accepted our biologic license application for MNUVICs and has set up a due for target action date of April 24th, 2027. We believe this highly differentiated regenerative therapy has the potential to meaningfully change the treatment paradigm by offering a non-surgical biologic option designed to address pain and improve function, particularly in patients with severe disease who lack approved non-surgical options. And we look forward to continued engagement with the FDA as they complete their review. Before turning the call over to Dave, I want to comment on our updated outlook and important strategic decisions we've made subsequent to quarter end. We have updated our expectations for total revenue in 2026 in this afternoon's press release. While we continue to expect improvement in our revenue results on a sequential basis in the third and fourth quarters, our 2026 revenue guidance now reflects the expectation that we see a more measured pace of recovery as compared to what was contemplated in our prior expectation for total revenue in 2026. Given the impact of a prolonged recovery on our revenue expectations, we completed a restructuring in June. The restructuring included a workforce reduction of 138 employees and is expected to result in cost reductions of approximately $18 million on an annualized basis. This is our second restructuring announced in 2026, which together are expected to reduce annual operating expenses by more than $32 million on an annual basis. Importantly, the benefits of these activities are not limited to expense reductions. Rather, we believe our commercial team is now positioned to maximize the opportunity ahead as the skin substitute market expands from the recalibration over the first half of 2026. With that, let me turn the call over to Dave.

Thanks, Gary. I'll begin with a review of our second quarter financial results. Unless otherwise specified, all growth rates referenced in my prepared remarks are for the three-month period ending June 30, 2026 and are on a year-over-year basis. Net product revenue was $42.8 million, down 58% year-over-year. Our advanced wound care net product revenue was $36.1 million, down 61%. Net product revenue from surgical and sports medicine products was $6.7 million, down 18% year-over-year. Our total revenue results included $1 million of income related to the grant issued by the Rhode Island Life Sciences Hub, offsetting our employee-related costs and our Smithfield facility. This compares to $0.2 million in the prior year period. Our second quarter results reflect notable improvement in growth trends on a sequential basis. specifically our total revenue increased 18% quarter over quarter driven by a 23% increase in sales of advanced wound care products. Gross profit was 19.1 million or 45% of net product revenue compared to 73% last year. Cost of goods included 1.8 million of restructuring related charges excluding these adjustments non-GAAP gross profit was 20.9 million or 49% of net product revenue. Operating expenses were $94.7 million compared to $113.6 million last year, a decrease of $18.8 million, or 17%. Excluding cost of goods sold of $23.7 million for the second quarter and $27.6 million last year, our non-GAAP operating expenses were $63 million compared to $83.4 million last year, a decrease of $20.4 million, or 25%. The year-over-year change in operating expenses excluding cost of goods sold was driven by a 19.8 million or 27% decrease in SG&A expenses offset partially by a 7.9 million or 76% increase in research and development expenses. Note the second quarter R&D expenses included 5.6 million of non-recurring termination costs associated with various R&D programs and vendors. Operating expenses excluding cost of goods sold decline 9.3 million or 12% on a sequential basis, driven primarily by the company's March 2026 restructuring. By way of reminder, the March 2026 restructuring is expected to reduce our operating expenses by approximately $13.4 million on an annualized basis. Operating loss was $51 million compared to an operating loss of $12.6 million last year, an increase of $38.4 million. Excluding non-cash amortization and certain non-recurring costs in both periods, our non-GAAP operating loss was $41.1 million compared to $10 million last year, an increase of $31.1 million year-over-year. GAAP net loss was $96.3 million compared to a net loss of $9.4 million last year. Note, GAAP net loss in the period includes approximately $30 million of non-cash tax expense related to the recording of full valuation allowance on the company's deferred tax assets. Net loss to common stockholders was 99.3 million compared to a net loss of 12.2 million last year. Net loss to common stockholders included the impact of the cumulative dividend and the non-cash accretion to redemption value on our convertible preferred stock. Adjusted net loss was 89 million compared to 7.5 million last year. We've included a detailed reconciliation of GAAP to non-GAAP adjusted loss in our press release this afternoon. Adjusted EBITDA loss was 34.4 million compared to adjusted EBITDA loss of $3.6 million last year. Turning to the balance sheet, as of June 30th, 2026, the company had $46.8 million in cash, cash equivalents and restricted cash, and no outstanding debt obligations compared to $94.3 million in cash, cash equivalents and restricted cash, and no outstanding debt obligations as of December 31st, 2025. We expected our cash on hand and other components of working capital as of June 30th, 2026, plus net cash flows from product sales will be sufficient to fund our operating expenses and capital expenditure requirements for at least the next 12 months. Today, the company entered into an ATM agreement with BTIG and Citizens JMP Securities, pursuant to which the company may offer to sell shares of its common stock, having an aggregate offering price of up to $75 million from time to time through sales agents. Sales under the ATM agreement, if any, will be made pursuant to the company's effective shelf registration statement on form S3 and related prospectus supplement. The company intends to use these net proceeds from any sales under the ATM agreement for working capital, general corporate purposes, research and development activities, and other strategic initiatives. Turning to our 2026 outlook, which we've updated in this afternoon's press release, As Gary outlined earlier, our 2026 total revenue guidance now reflects the softer than expected results in the second quarter and the expectation that we see a more measured recovery in the overall operating environment as we move into the second half of the year. As a result, we now expect total net revenue for the full year of 2026 of $179 million to $215 million, representing a decline in the range of 62% to 68% year-over-year and compared to our prior guidance range, which assumed a decline in the range of 45% to 52% year over year. Note our total revenue range assumes sales of advanced wound care products in the range of 151 million to 183 million, sales of our surgical and sports medicine product in the range of 26 million to 30 million and grant income of 1.9 million. Our updated total revenue guidance continues to reflect the expectation that we see sequential improvement in our revenue trends in the third and fourth quarters. However, at a more measured rate versus what our prior guidance has assumed resulting in a second half revenue decline in the range of approximately 64% to 74% year-over-year. With respect to our profitability expectations, our updated guidance continues to assume improving quarterly adjusted EBITDA performance on a sequential basis, which is expected to result in nearly 60% reduction in adjusted EBITDA loss in the second half of 2026 as compared to the first half of 2026 at the low end of the range, and more than 90% reduction in adjusted EBITDA loss in the second half of 2026 as compared to the first half of 2026, including the expectation of positive adjusted EBITDA generation in the fourth quarter. Given the lower revenue expectations for 2026 and the related impact on gross profit, we have adjusted our assumptions for operating expenses, excluding cost of goods sold, to reduce the impact on our profitability and cash flow this year. Specifically, we now expect to reduce our operating expenses, excluding cost of goods sold, approximately 32% year over year in 2026, including more than 40% year over year in the second half of 2026. Note these updated assumptions are inclusive of estimated cost savings in the third and fourth quarters related to our March 2026 and June 2026 restructurings of approximately $7 million and $9 million respectively. With that, I'll turn the call back over to Gary for closing remarks.

Thanks, David. With more than 40 years in regenerative medicine in the most diverse evidence-based portfolio with technologies in each FDA category, We believe we are best positioned in the skin substitute market and will continue to be a leader in the space with the best evidence-based portfolio in the market. The competitive landscape has changed dramatically in just a few months since CMS announced sweeping changes to coverage and payment policy. Distributed driven competitors, high price amniotic players, and companies engaged in fraudulent practices have been substantially reduced. Many of the remaining players are diversifying away from wound care or exiting the category altogether. Organogenesis is doubling down on wound care. We are leaders because our business is built on efficacy and outcomes, and that is driving our expanding share as the market resets. Customer trust matters now in this new market more than ever before, and simply put, We believe we have the best evidence-based skin substitute products in wound care bar none. We expect to enhance our leadership position by leveraging our portfolio to provide integrated healing solutions that substantially improve outcomes while lowering the overall cost of care. With that, I'll turn the call over to the operator for questions.

Thank you, sir. If you'd like to ask a question, please signal by pressing star 11 on your telephone keypad. If you're using a speakerphone, please make sure your mute function is turned off to allow your signal to reach our equipment. Our first question comes from Ryan Zimmerman from U.S. Bancorp. Please go ahead.

Hi, Gary and Dave. This is Izzy on for Ryan. Thanks for taking the question. I just want to start to get kind of your higher level thoughts on the broader market dynamics and what is going to give you confidence that Medicare is working to stabilize the market beyond just what we've seen in the OPPS proposal?

So this is Gary. Hi, Izzy. So what we're seeing is month over month, we're seeing continued growth in the space. We're seeing more clinicians, getting more comfortable with the current coverage and payment structure that's in place now. We still have a ways to go. And CMS reinstated the $127.14 reimbursement rate. I think they did that with the intention of stabilizing the market and bringing consistency to the market. they also continue to identify the tiers where they recognize PMA products and 510 products and the 361 so maintaining that tier structure is also bringing stability and signaling evidence is still an important function here and will carry weight going forward so we think the stability recognizing PMA products and we're starting to see more and more clinicians starting to use at least our products as we continue to take a fairly significant share in both the first and second quarters.

That's helpful. Thank you. And as we start to think about the back half of the year, I was hoping you could speak a little bit more about the pacing that's baked into guidance for third quarter and fourth quarter.

Yeah, sure.

This is Dave. Hi, Izzy. How are you? Yeah, so we were, as Gary mentioned, we were pleased with the strong sequential growth that we saw between Q1 and Q2. Obviously, as we talked about, you know, a fairly significantly in advanced wound care units up 30%. So that's coming off the Q1 trough. So our expectation is that, you know, the movement from here would be continued share gains, but more modest. And obviously the growth on a sequential basis. would be much more modest than what we'd anticipated or what we experienced in the first to the second quarter. So we see some modest growth into the third quarter with a little bit more strength in the fourth.

Well, thank you. And if I could just squeak one more in. Could either of you speak to what products are actually being paid for versus what might be held up in the market, whether it's synthetics, amniotics, anything you can provide there? Thanks for taking the questions.

We don't really see any particular product, you know, being held up. You know, the concern is, you know, post-application upon audit, would there be a potential clawback on those products? And what we're seeing in the market is products without RCTs are at significant risk. Sometimes, many times, they're considered investigational. So clinicians are getting, you know, Very concerned about products without RCTs. There's a flight to quality, which is why we're seeing the 30% growth that we're seeing in the market share gains because our products have significant evidence. So we think it's more post-application that clinicians are concerned about the clawbacks and the potential paybacks for products that just don't have evidence in the space.

Thank you.

As a reminder, to ask a question, you will need to press star one one on your telephone and wait for your name to be announced. To withdraw your question, please press star one one again. Our next question comes from Ravi Misra from Truist. Please go ahead.

Hi, thanks for taking the questions. So just want to kind of return to the guidance and the outlook that you provided on the on the call. Can you help us understand kind of what gives you comfort to get, you know, what are the kind of the puts and takes that get us to the low end or the high end of the guide? And then how should we think about that, you know, given your commentary just now on surge in concerns, the 30% kind of sequential volume growth, you know, how should we think of that on a 3Q versus 4Q basis? And then, you know, returning maybe back to market in 27, or is that kind of an elongated

Well, I'll start. I think as you look at our low guidance, as Dave indicated, what we've guided to is not what we've seen. Our second quarter growth has been fairly significant at 30%, but what we're guiding to is lower growth and lower share gains on the conservative side. So We're kind of guiding to where we are, but slightly less than the growth experience we had in Q2. That's why we have more confidence in the low end of the range. Now, the high end of the range, and I'll let Dave jump in, is basically reflecting the growth that we are seeing right now in our business with some small, what I call a market expansion at the end of the third quarter and fourth quarter. So, We're guiding to less than the growth that we're seeing right now. And on the low end and on the high end, we're guiding to exactly what we're growing at right now with the small market expansion. So that's kind of the range. Dave, you can jump in.

No, absolutely. It's just probably it's a little bit more biased towards Q4 than it is Q3, just because the evolution of the business and the market. Great, thanks, and then maybe a follow-up.

Just on Dermagraph, just on your cue that you're kind of shelving that for now, can we talk about the opportunity there that you're maybe stepping away from or the thinking around when that does come back to market and the rationale for why?

Well, with slowing down the manufacturing build-out of Dermagraph to preserve cash, So Dermagraph is still a product that we expect to launch. We didn't have significant revenue built in 27 in our thinking or 28, but it will delay it probably a year of its intended launch, which was somewhere in the middle of 27, so probably launch in the middle of 28. But it's a focus on preserving cash and going slower with that build-out.

We think that's prudent right now. I'll get back in queue. Thank you. Thank you.

Thank you. Please stand by. Thank you. Do we have another question from Ravi?

Well, if there's time, yeah, I guess I'll ask one more. MNUVICs, just help us think about maybe how you see this slotting into the competitive landscape if and when approved. Thanks.

Sure. So, you know, MNUVICs, if approved, will be the first biologic in this space. So we think it will have a unique place in this space. We don't see anything else coming to market before MNUVICS. So that's a very positive place to be. Obviously, the clinical data is strong. The safety data, the safety profile of the product is extremely strong. So there's a lot of strong tailwinds driving this product. We expect with the BDUFA date of April 27, if approved, we would launch the product with a temporary code until we get a permanent code. Thank you.

I'm showing no further questions at this time that does conclude our conference call for today. Thank you for your participation.