MiMedx Group, Inc. (NASDAQ: MDXG), the leading regenerative medicine company utilizing human amniotic tissue and patent-protected processes to develop and market advanced products and therapies for the Wound Care, Surgical, Orthopedic, Spinal, Sports Medicine, Ophthalmic and Dental sectors of healthcare, announced today its record results for the fourth quarter and full year ended December 31, 2014.
Full Year and Fourth Quarter 2014 Highlights
- Full Year 2014 revenue of $118.2 million doubles 2013 revenue and exceeds upper end of guidance
- Q4 revenue of $39.6 million increases 120% over Q4 2013
- Q4 revenue exceeds $38.3 million upper end of guidance by $1.3 million
- Q4 is 13th consecutive quarter of meeting or exceeding revenue guidance
- 2014 is 3rd consecutive fiscal year of meeting or exceeding guidance
- Full year 2014 Wound Care sales more than doubles full year 2013
- Q4 Wound Care sales grows 24% sequentially over Q3 2014
- 2014 Commercial Accounts and Government Accounts revenue grows 208% and 18%, respectively
- First annual operating income of 6% of revenue recorded for full year 2014
- Q4 is 12th consecutive quarter of positive Adjusted EBITDA
- Full Year Adjusted EBITDA is 17.5% of revenue and a 278% improvement over full year 2013
- Q4 Adjusted EBITDA is 22% of revenue and a 542% improvement over Q4 2013
- 2014 Cash Flow from Operating Activities grows to $16.8 million
Full Year and Fourth Quarter Results
For the year ended December 31, 2014, the Company recorded record revenue of $118.2 million, a $59.0 million or 100% increase over revenue of $59.2 million for full year 2013. The Company’s gross margins for the year ended December 31, 2014, were 89% as compared to 84% in the same period in 2013. Adjusted EBITDA for the year ended December 31, 2014, were $20.7 million, a $15.2 million or 278% improvement, as compared to Adjusted EBITDA of $5.5 million for the full year 2013. Net Income for the year ended December 31, 2014, was $6.2 million, or $0.05 per diluted common share, a $10.3 million improvement, as compared to the Net Loss of $4.1 million, or $0.04 per diluted common share, in the prior year same period. 
The Company recorded record revenue for the fourth quarter of 2014 of $39.6 million, a $21.6 million or 120% increase over 2013 fourth quarter revenue of $18.0 million, and sequentially, a $6.1 million or 18% increase over third quarter of 2014 revenue. The Company’s gross margins for the quarter ended December 31, 2014, were 91% as compared to 83% in the fourth quarter of 2013. Adjusted EBITDA* for the quarter ended December 31, 2014, were $8.5 million, a $7.2 million or 542% improvement, as compared to Adjusted EBITDA* of $1.3 million for the fourth quarter of 2013. The Net Income for the fourth quarter of 2014 was $3.8 million, or $0.03 per diluted common share, a $5.3 million improvement, as compared to the Net Loss of $1.4 million, or $0.01 per diluted common share, in the 2014 fourth quarter.
Management Commentary on Revenue Results
Parker H. “Pete” Petit, Chairman and CEO, stated, “We are pleased to announce our 2014 results. The fourth quarter was our thirteenth consecutive quarter of meeting or exceeding revenue guidance, and full year 2014 was the third consecutive year of meeting or exceeding our guidance. Our full year revenue was double last year’s revenue and fourth quarter revenue was a 120% increase over last year’s fourth quarter revenue. Throughout 2014, we continually increased our revenue growth rate over the prior year’s quarter with a 69% growth rate in the first quarter, 89% in the second quarter, 108% in the third quarter and 120% in the fourth quarter.”
“It is very gratifying to report full year operating profit and net income for the first time in our history,” continued Petit. “The fourth quarter of 2014 marked the 12th consecutive quarter of positive Adjusted EBITDA. The Company’s full year 2014 gross margins of 89% were a five percentage point improvement over 2013 record gross margins of 84%. Our fourth quarter operating profit of $4.7 million is 12% of revenue, and full year operating profit of $7.1 million is 6% of revenue. Our full year positive Adjusted EBITDA was 17.5% of revenue and fourth quarter positive Adjusted EBITDA was 22% of revenue. These statistics clearly demonstrate the operating leverage that we have created with this business. Our operating leverage should become even more evident as we report our results for future quarters.”
Bill Taylor, President and COO, said, “Wound care sales again led our full year and fourth quarter revenue growth by more than doubling over full year 2014 and growing 24% sequentially over last quarter. Throughout 2014, our wound care revenue growth was the result of market share gains and increased penetration and sales from existing accounts. During 2014, we made a series of strategic decisions to accelerate the expansion of our sales force focusing on the surgical and the orthopedic/spine markets. Our 2014 sales force expansion efforts focused on all of our sales verticals. Since January 1, 2014, we have added more than 100 additional sales reps and sales managers to our field sales force. We ended 2013 with 76 members in our sales organization and at present, we have over 180 sales professionals in our field sales force. Not only did we have very solid performances from our established sales professionals, but our sales professionals who joined us during the year also made major contributions. We are continuing to have an aggressive recruiting strategy and are very pleased with our ability to rapidly build out our sales force with high caliber and extremely skilled additions to our sales team.”
Taylor continued, “We are very pleased with the progress we have made and believe our expanded sales force focusing on the surgical and the orthopedic/spine markets will contribute significantly to our 2015 growth. This specialized sales force is developing consistent with our outlook, and should continue to build momentum throughout the year as more and more physicians and payers become aware of the potential our allografts have to improve outcomes of various surgical applications and medical procedures. We are very excited about the opportunities ahead of us as we broaden the market sectors we serve. During 2014, we also placed a key emphasis on recruiting and building out a strong National Accounts sales team. This team is beginning to have a strong impact on our revenue. As we communicated in our press release of January 12, 2015, we have been very successful in securing national accounts with Group Purchasing Organizations (“GPOs”) and Integrated Delivery Networks (“IDNs”), which now represent in excess of 4,000 U.S hospitals under contract for MiMedx allografts. Most of the GPO and many of the IDN contracts contain amniotic tissue skin substitute commitment levels for MiMedx allografts.”
“Our wound care revenue is growing very rapidly in both the commercial payer and federal payer segments. During the year, we focused a large portion of our expanded sales force resources and capabilities on market opportunities beyond those covered by Centers for Medicare and Medicaid (“CMS”). As a result of this strategy, we expect that the end of the EpiFix® pass-through status from CMS will have little to no effect on our ability to achieve our 2015 revenue goal. We are very excited about the opportunities ahead of us as we continue to broaden the market sectors we serve and gain coverage from additional commercial payers and other programs,” added Petit.mimed
“With our revenue opportunities from multiple market sectors and payers, our operating leverage, and our ability to continue our aggressive pace of generating clinical and scientific studies and facilitating their publication in leading peer-reviewed journals, we expect to be able to report further exciting results throughout the year,” concluded Petit.
Balance Sheet and Cash Flow
As of December 31, 2014, total assets increased by $24.6 million to $109.3 million, compared to $84.7 million as of December 31, 2013. Cash on hand as of December 31, 2014, was $46.6 million, an increase of $2.5 million, as compared to $44.1 million as of December 31, 2013. Net cash flow from operating activities as of December 31, 2014, was a positive $16.8 million, due primarily to an increase in Adjusted EBITDA, improved working capital and a significant improvement in Days’ Sales Outstanding (“DSO”) in accounts receivable. Free cash flow, which is cash flow from operations less capital expenditures and patent application costs, was a positive $13.7 million, as compared to a negative $3.3 million for the same period in 2013.
Accounts receivable increased to $26.7 million as of December 31, 2014, from $16.1 million as of December 31, 2013. DSO as of December 31, 2014, were 61 days, an improvement of 21 days from December 31, 2014, DSO of 82 days. Inventory increased approximately $1.2 million to $5.1 million as of December 31, 2014, up from $3.9 million as of December 31, 2013. Total liabilities increased to $19.9 million as of December 31, 2014, from $11.1 million as of December 31, 2013. Stockholders’ equity increased by $15.8 million to $89.3 million as of December 31, 2014, from $73.6 million as of December 31, 2013.
GAAP Earnings
The Company recorded Net Income of $6.2 million for the year ended December 31, 2014, or $0.05 per diluted common share, as compared to a Net Loss of $4.1 million, or $0.04 per diluted common share, for the year ended December 31, 2013. The Company recorded Net Income of $3.8 million for the quarter ended December 31, 2014, or $0.03 per diluted common share, as compared to a Net Loss of $1.4 million, or $0.01 per diluted common share, for the quarter ended December 31, 2013.
Full year 2014, R&D expenses were $7.0 million or 6% of Net Sales, an increase of $2.2 million over full year 2013 R&D expenses of $4.8 million due to the acceleration of the Company’s investment in clinical trials for reimbursement and regulatory purposes. Fourth quarter 2014 R&D expenses were $1.8 million or 5% of Net Sales, an increase of $0.4 million over fourth quarter 2013 R&D expenses of $1.4 million.
Selling, general and administrative (“SG&A”) expenses for full year 2014 were $90.5 million, a $44.3 million increase over full year 2013 SG&A expenses of $46.2 million. SG&A expenses for the fourth quarter of 2014 were $29.2 million, a $14.9 million increase over fourth quarter of 2013 SG&A expenses of $14.3 million, and a sequential increase of $5.0 million over third quarter of 2014 SG&A expenses of $24.2 million. Increases in SG&A were due to the continuation of the buildup of the Company’s direct sales force in the wound care, surgical and orthopedic /spine sales channels, as well as the sales force focused on national accounts.
Revenue Breakdown
The Company distinguishes and reports revenue in two categories: (1) Wound Care and (2) Surgical, Sports Medicine and Original Equipment Manufacturer (“OEM”) applications. Revenue for the Company’s Wound Care category comprises both the sheet and micronized allograft forms and includes the full spectrum of the wound care settings and wound categories for which the Company’s allografts are utilized. It reflects sales related to both chronic and acute wounds, including surgical wounds. 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 micronized form. For full year 2014, Wound Care revenue was $93.6 million, representing 79% of total revenue, and Surgical, Sports Medicine and OEM revenue was $24.6 million, representing 21% of total revenue.
The Company also provides a revenue breakdown in terms of customer type, distinguishing between government and commercial accounts. For full year 2014, Commercial sales were $78.4 million, representing 66% of total revenue, and Government sales were $39.8 million, representing 34% of total revenue.
2015 Outlook
The Company reiterated its previously communicated guidance for full year 2015 and the first quarter of 2015. The Company’s reiterated guidance for the first quarter of 2015 includes:
- Q1 2015 revenue in the range of $40 million to $41 million; and
- Q1 2015 operating profit in excess of 10%.
The Company’s reiterated full year 2015 expectations include:
- Full year 2015 revenue in the range of $175 million to $190 million; and
- Operating profit margin for full year 2015 in excess of 15%.
MiMedx Group, Inc.