Please standby. Good afternoon, ladies and gentlemen and welcome to the Second Quarter 2021 Earnings Conference Call for Organogenesis Holdings, Inc. At this time all participants have been placed in a 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 on the company’s most recent annual and 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 the 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 and Chief Executive Officer. Please go ahead, sir.

Thank you, operator and welcome everyone to Organogenesis Holdings’ second quarter 2021 earnings conference call. And I’m joined on the call today by Dave Francisco, our Chief Financial Officer. So, let me start with a brief agenda of what we’ll cover during our prepared remarks. I’ll start with an overview of our revenue performance in the second quarter, including a discussion of the key drivers of the strong growth and improving profitability our team delivered in Q2. After my opening remarks, Dave will provide you with a more in depth review of our second quarter financial results and the revised guidance for 2021 that we published in this afternoon’s press release, and then we’ll open it up for questions. Let me begin with a review of our second quarter revenue performance. And I am pleased to report that we delivered another quarter of strong financial performance while continuing to make excellent progress against our strategic priorities. During the second quarter, we reported revenue growth of 79% year-over-year to $123.2 million. Our growth in the period was driven by 87% growth in our sale of certain of our Advanced Wound Care products with strong contributions from our amniotic portfolio in the PuraPly brand. In Surgical & Sports Medicine, we grew revenue by 27% year-over-year. Despite the expected headwinds from our ReNu and NuCel product lines following the expiration of the FDA’s enforcement grace period for those products was ended on May 31 of this year. And for the avoidance of doubt, our strong second quarter growth is – not just a reflection of an easy comparison from the prior year, where we also grew revenue 6%. Rather, our second quarter total revenue results represents growth of 90% over the second quarter of 2019, driven primarily by 102% growth in the sale…

Thanks, Gary. I’ll begin with a review of our second quarter financial results unless otherwise specified all growth rates referenced during my prepared remarks on a year-over-year basis. That Gary mentioned we delivered another excellent quarter. Net revenue for the second quarter of 2021 was $123.2 million up 79%. Our Advanced Wound Care revenue for the second quarter of 2021 was $111.4 million up 87% with strong contribution to growth from all product groupings. Revenue from Surgical & Sports Medicine products for the second quarter of 2021 was $11.8 million up 27% with strong year-over-year contribution to grow from the amniotic portfolio, which more than offset the impact related to the expiration of the FDA enforcement grace period for ReNu and NuCel products on May 31. Revenue from PuraPly products for the second quarter of 2021 was $37.6 million up 32%. As Gary indicated earlier, we were pleased with the continued strong performance from the PuraPly brand. Net sales have increased 29% year-over-year over the first six months of 2021. Regarding our commercial footprint, we ended our quarter with 325 direct sales reps, and believe we are well positioned to achieve our goal of ending the year with over 340 direct sales representatives, compared to 290 as of March 31, 2021. Gross profit for the second quarter of 2021 was $93.3 million or approximately 76% of revenue, compared to 71% last year, an increase of approximately 480 basis points year-over-year, and up approximately 60 basis points quarter-over-quarter. The increase in gross profit resulted primarily from increased sales volume, as well as a shift in product mix to our higher gross margin products. Operating expenses for the second quarter of 2021 were $69.7 million, compared to $51.2 million last year, an increase of $18.5 million or 36%. The increase in operating…

Thank you, sir. [Operator Instructions] And our first question will come from Ryan Zimmerman with BTIG.

Good afternoon. Thanks for taking the questions. Congrats on the quarter. Maybe Gary to start on the guidance specifically within AWC, I’d love to get your perspective on your current capacity, your manufacturing capacity within amniotics, it’s – it continues to be a positive surprise for the business. I know you were constrained a little bit there. And then, my second question is around the non-PuraPly, the PMA and other products. And just, we’d love to understand how the dynamics that were driving that performance and then the softer guidance on that category of products? Thank you.

Sure. Thank you, Ryan. Yes, we did have a nice increase in capacity in Q2 for our Affinity in amnion products. So that was something that we were counting on. And we actually focused a lot of our attention commercially on driving and expanding our Affinity sales and expanding the launch of that product as a result of that capacity. So that was a nice bump for the quarter for us for sure. On the PMA product side, I mean, we’re still seeing growth in our non-PMA products. I mean, all our products are growing very nicely. We’re also seeing, obviously, some revenue from our CPN Bioscience as well, so combination of the acquisition in our legacy products doing well. The expansion of our TRS’s as our sales representatives have also been very, very powerful and helpful in the quarter. And we expect them to continue to provide results going forward, as we’ve seen their productivity increase fairly dramatically in the quarter as well, by selling the entire portfolio. Hopefully that answers your question?

That’s helpful. And then just a – sneak one in and follow-up for Dave, you mentioned the tight labor supply. I just – where are you seeing that specifically, because your sales force is growing nicely, so, just help us understand kind of where you are maybe a little more constrained on labor?

Yes, sure. It’s not really a constrained, it’s just the costs are going up. So, we’re seeing a kind of change in the dynamic of new reps coming in. And it’s beyond the commercial resources as well. So, we’re just feeling it a bit there. Just wanted to provide a little bit of color from that standpoint.

Okay. Thank you for taking the questions.

Thank you. The next question comes from Matt Miksic with Credit Suisse.

Hi, thanks so much for taking the question. So, just one on environmental, I know you put up a really strong quarter here. So it doesn’t seem like it’s something you’re seeing widely right now. But when you talk about being sort of mindful of some of the risks related to COVID or Delta? What – where are you seeing if you are seeing anything now? Where might we start to see that or help us understand how that might flow through and impact your business here in the back half? And then I had one follow up.

Sure. So, we are seeing impacts, particularly in the Missouri, Alabama, Oklahoma area. We started to see that in the last several weeks, we’re also seeing impacts in the Texas area, particularly Houston and in Florida. Florida was primarily in the northern area that was affecting us, but we’re now seeing it coming up the West Coast and the Naples, Fort Myers area, which is important area for us. So, we’re certainly monitoring it, those areas are important to us, particularly Texas, and Florida and the Advanced Wound Care side, and kind of the Midwest, as we’re pretty strong and in the South and the Midwest. So, we do expect, to have an impact. Fortunately for us, we’ve continued to expand our office presence where we did not see much of an impact and we continue to open additional channels in the surgical side. And, some of those areas like trauma, some really complex wounds, limb salvage are not as susceptible to elective surgery, kind of issues that you find in a COVID environment, but we’re definitely seeing the impact in the hospitals. We haven’t seen a revenue impact yet. But we are cautious about it. But those are the areas that we see things starting to get a little concerning.

Great. And then if I could just afraid I have two follow up if I could, one just on the cadence of you mentioned amniotic tissue products being an important part of the back half end of the year. And I just wondering if you could dovetail or reconcile your comments on that related – and the physician office channel. In other words, based on some of the things you mentioned, based on the channel, the accounts that you’re adding there, and the integration of CPN is any anything you can give us in terms of the magnitude or contribution to growth of that in the back half, maybe versus the rest of your business? And then I realized it’s not an operating question, but I do have to ask about the, shareholder agreement that you’ve been disclosed in the 8-K, just because of all the issues related to some of the disbursements and the pressure on the stock. I’d love to get your sense about, how you arrived at that? What you think it means in terms of your plans for further capital transactions? Again it’s a very complicated question, because it’s not – it’s nothing to do with your operating results. But obviously, for folks on the call, I think I understand that it’s an important topic to maybe highlight and hear out.

Sure, I’d be happy to address it. So, your first question regarding the amniotic contribution in the second half, we don’t expect to see a large contribution in Q3 for amnions, it’ll really be Q4. And the reason for that Matt is we did get a bump in Q2 as I mentioned in capacity, but that capacity is going to remain at the same level in Q3. We won’t see another bump in capacity until Q4, and then we expect a fairly significant increase in capacity. So, we expect more of a contribution in Q4 than in Q3. But collectively, we’ll still be a strong contributor to growth. We did commit to 2.5 times the capacity in 2021 versus 2020. And we definitely expect to see that. And you’ve seen the results in Q2 with the increase in capacity and those additional accounts, it really did drive revenue, as we expect it will in Q4. Related to the shareholder agreement, I think, as we stated in the 8-K our large legacy shareholders that hold over 40% of Organogenesis stock, which is Alan Ades, Alberta Erani, Dennis Erani, Glenn Nussdorf in related trusting companies that they control have agreed with the company, effective August 9, that they will not sell any shares of the company’s capital stock, that they hold until at least March 1, 2022 unless any such sale is completed in an orderly fashion as part of an underwritten secondary public offering. The company recognized and I wasn’t really happy with the sales, I’m sure most people weren’t. So, the board has agreed that they recognize that periodic and unexpected selling by them in the market may cause some volatility or disruption. So, their entry into the lockup reflects their commitment to conduct any of these sales, at least through March of 2022, in an orderly fashion. So, I think the recognition, that they could create some disruption in the market is certainly unintended and needs to be addressed. And we addressed it.

That’s great. Thank you.

Thank you. Our next question comes from Richard Newitter with SVB Leerink. Your line is open.

Hey, this is Ann on for Rich, thanks for taking our questions, and congrats on the quarter. I just have a quick one PuraPly trends. It looks like revenue took a step, slight step down in 2Q versus 1Q. But your guidance, which remains unchanged from the prior update, imply the acceleration the back half versus 2019 levels. I was just wondering if you could maybe talk about some of the trends that you’re seeing with this product. And then I’ll have another follow up as well.

Sure. So, we are happy with the growth – 32% growth in PuraPly. As I mentioned earlier in addressing Matt’s question the – our Affinity capacity increased dramatically in the second quarter as planned, and our commercial focus shifted dramatically to expanding the launch of our Affinity products in the geographies in which we sell it today. So that was a committed effort. And that had an impact on PuraPly sales. Now, that we’ve kind of got through that launch period or expanded launch period, we expect the product to continue to grow nicely in the back half of the year. So that was something that we planned, which is why we’ve reconfirmed our guidance for PuraPly we haven’t changed it at all, it was what we did expect. So second – Dave, you can jump in second half, we expect PuraPly to grow quite nicely.

Yes, I think you’re right, Gary, I mean, 32% of the quarter and 29% first six months of the year and holding the guidance, we feel good about the trajectory there.

Thank you.

Okay, great, thanks. And then I was just wondering if maybe you could provide an update on some of the pipeline products, like Novachor and TransCyte. And then also just, if you wouldn’t mind walking us through kind of the BLA timelines for ReNu, and what to expect in terms of timelines for the trial and submission?

Sure. So, we’re still expecting to launch TransCyte in 2022, it’d be more of a soft launch and a full launch at the end of 2023. Our Novachor product we’re expecting to have on the market by the end of this year, but really won’t be a contributor until 2022. But that launches moving forward quite nicely. On the ReNu front, we are still expecting that we will complete the enrollment of the study by Q1 of 2022. We’re expecting that our interim analysis will be available around the end of the first quarter, beginning of the second quarter. We expect to complete the study in mid-2023 and submit for approval and hopefully get approval in mid-to-end of 2024. Again, assuming one Phase 3 trial is all that’s required.

Okay, great. Thanks for taking our question.

You’re welcome.

Thank you [Operator Instructions] Our next question comes from Steve Lichtman with Oppenheimer & Co.

Thanks. Hi, guys, congratulations on the quarter. Gary, I know early day, but now that we’re pass the FDA enforcement grace period, I’m wondering what you’re seeing on the ground relative to the impact your competitors. Have you seen a big enough impact to smaller competitors, given more exposure to the impacted products has that you’ve been able to take share overall, I mean obviously are going ahead in the market. But do you see that as one factor?

Yes. I think it’s a little too early to tell at this point. Obviously, we’re not selling the product. There are competitors out there that have similar products that may be still on the market. I’m not sure. So, we’re trying to figure that all out right now. We don’t have enough data at this point to see what the real impact has been.

Fair enough. And then just secondly, thanks for the update on ReNu and NuCel, can you talk a little bit more about what you’re seeing out of ReNu that giving you the confidence of the broader applicability of the product? And that’s why you decided to not pursue the trial and on NuCel?

Yes, I think what’s important in our decision for NuCel is, we assumed that NuCel would be on the market remain on the market, and would help fund that study. It’s a good product, a strong product. But without being able to sell the product and fund that study, we thought a better return would be looking at additional indications of ReNu. And we do have several that we’re studying now that we’re pretty excited about. We haven’t made any final decisions, but we think the market potential for ReNu indications significantly higher than what NuCel may be. So it’s worth the additional investment without the obviously associated revenue compared to NuCel.

Got it. Great, thanks Gary.

Sure.

Thank you. Our next question comes from Ryan Zimmerman with BTIG.

I had a couple follow up, sorry, didn’t get rid of me sooner, but just a couple questions. Dave, these EBITDA margins, you’re north of 20% and so I know you’re in a very important growth phase, and certainly the top-line is the focus. But now I’d love to get your thoughts just on the EBITDA margins over time, and your ability to generate cash here, is increasing and just how you think about the use of cash, I think it’d be helpful for investors to get your perspective on that. Thanks for taking the follow up.

Yes, sure. I mean, obviously, you know, the back half of last year, we had a big step up in revenue, and then COVID-related kind of savings. And so we didn’t flow a lot to the bottom line, we saw the same thing in Q1, and then had great performance in Q2. So, I think it does illustrate the level of profitability the business has and the operating leverage the potential. But I think, as we mentioned we still need to build out the infrastructure. It’s not just the commercial teams, it’s beyond that to really function as a high growth company. So you’re right. We’re focused very much on the top-line, and ensuring that we continue to invest in that. But that level of profitability is going to generate a lot of cash flow in the future. So, we’ve been talking a lot about that internally about how to deploy that capital. I think there was a question earlier as to whether or not we needed any more equity capital. And I think at this stage, the answer is no. But we’ll continue to look for opportunities to add to the portfolio through potential growth acquisitions. Anything add to that Gary?

No. Well said.

Appreciate it very much. Thank you.

Thank you, Ryan.

We’re kindly showing no remaining questions in the queue at this time. That does conclude our conference for today. Thank you for your participation.

Thank you very much.