Please standby. Welcome, ladies and gentlemen, to the Fourth Quarter and Fiscal Year 2024 Earnings Conference Call for Organogenesis Holdings, Inc. At this time, all participants have 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 may speak only as of the date made. Although it may voluntarily do so from time to time the company undertakes no commitments 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 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 these 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 Organogenesis Holdings fourth quarter fiscal year 2024 earnings conference call. I'm joined on the call today by Dave 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 an overview of our fourth quarter revenue results and provide an update on key operating and strategic developments in recent months. Dave will then provide you with an in depth review of our fourth quarter financial results, our balance sheet and financial condition at quarter end, as well as our financial guidance for 2025, which we introduced in our press release this afternoon and then we will open the call up for questions. Beginning with a review of our revenue results for Q4, we delivered sales results above the high end of the guidance range outlined on our third quarter call, growing 27% in the period. Our fourth quarter results reflect strong momentum in underlying business trends and customer demand in excess of what our guidance had assumed. As discussed in our recent investor calls, our fourth quarter and fiscal year 2024 guidance reflected the expectation that the final ruling from the MACs on the proposed LCDs would be announced in the fourth quarter with an effective date of January 1, 2025. The LCD was finalized in the fourth quarter, however, the stated effective date of February 12, 2025 was later than we had assumed. We believe the stronger customer demand we experienced in the second half of the fourth quarter is a direct result of less disruption in the marketplace related to the delayed effective date for the final LCD ruling from the MAC. As mentioned on previous earnings calls, we applaud the MAC for continuing to prioritize coverage with demonstrated…

Thanks, Gary. I’ll begin with a review of our fourth quarter financial results and unless otherwise specified, all growth rates referenced during my prepared remarks are on a year-over-year basis. Net revenue for the fourth quarter was $126.7 million, up 27%. As Gary mentioned, these results were ahead of the expectations we provided on our Q3 call, which called for a total fourth quarter revenue in the range of $100 million to $125 million. Our Advanced Wound Care net revenue for the fourth quarter was $119 million, up 27%, and net revenue from surgical and sports medicine products for the fourth quarter was $8 million, up 24%. Gross profit for the fourth quarter was $96 million, or 75.5% of net revenue, compared to 72.1% last year. Operating expenses for the fourth quarter were $85.4 million, compared to $73.2 million last year, an increase of $12.2 million or 17%. This year-over-year change in operating expenses was driven by a $12.5 million or 20% increase in selling, general and administrative expenses, compared to the prior year period. Research and development expenses declined 3% year-over-year, but increased 11% sequentially due to the timing of expenses associated with clinical trials and research. Operating income for the fourth quarter was $10.2 million compared to an operating loss of $1.3 million last year, an increase of $11.5 million. GAAP net income for the fourth quarter was $7.7 million, compared to a net loss of $0.6 million last year, an increase of $8.3 million. And net income to common for the fourth quarter was $5.9 million compared to a net loss of $0.6 million last year. Net income to common includes the impact of both the cumulative dividend and the noncash accretion to redemption value on our convertible preferred stock. Adjusted EBITDA for the fourth quarter was…

Thank you. [Operator Instructions] And our first question will come from the line of Brooks O'Neil of Lake Street Capital Markets. Your line is open.

Thank you very much. Good afternoon. I guess, I'd like to start by just asking if – you mentioned you expect the first half to be very competitive. Can you just give us a feel for what you're seeing in the marketplace right now from competitors? And maybe importantly, also sort of the typical behavior you're seeing from doctors as it relates to loading up inventory of your products or competitors' products, et cetera?

Yes. Sure, Brooks. This is Dave. Thanks for the question. So we're not really seeing a major change in the competitive environment. It's really more customer buying behavior. As you recall, we had anticipated that the LCD would be implemented on the 1st of January, and so we expected some disruption in the fourth quarter. When that didn't happen, and got pushed to February and now actually pushed out to mid-April. We're seeing some kind of changing in buying behaviors with our customers. When any kind of time that there's a reimbursement dynamic change then customers pause, oftentimes test the reimbursement, need to get comfortable with it. And what we're seeing right now is exactly that. And as far as what you said about stocking and such, obviously, some of our technologies, as you know, that are on the covered list are living technologies. So with that short shelf life, we don't have that option with customers.

Okay. Interesting. And then I'm curious, you thought or Gary talked a little bit about the process of moving forward with ReNu. And I'm just curious if you could update us on what you're currently thinking the time line would look like after submission of your application? And how quickly do you think you might hear back and be able to put to market – the product on the market?

Sure. So we're expecting to file the BLA submission at the end of 2025. We would expect to hear from the FDA probably in Q4 of 2026, with expectation of getting approval at the end of 2026, perhaps the beginning of 2027. That's our current time line, Brooks.

Okay, great. Thank you very much.

You’re welcome.

Thank you. One moment for the next question. And our next question will be coming from the line of Ross Osborn of Cantor Fitzgerald. Your line is open.

Hey guys congrats on the strong quarter and thanks for taking our questions. Maybe starting off on your sales force. I would be curious to hear if you experience any heightened levels of attrition or if retention has been pretty good through the quarter and how that's trended year-to-date?

Yes. Actually, we did see some attrition in the quarter, but it wasn't really that significant, Ross. And we've done a nice job of backfilling those heads and seeing some good talent out there. So we feel good about where we are right now. And again, the team executed extraordinarily well obviously in 2024. So we're pleased.

Yes, glad to hear. And then in terms of your products that were not on the covered list, any update on how those RCTs are going? [Indiscernible]

Could you repeat the question?

Yes. Just curious how your progress on your RCTs are going for the products not on the covered list?

Sure. So our PuraPly study, which we started, we expect to have an interim analysis in Q4 and we expect to have a publication in Q1 of 2026 for that study, with the expectation of having it ready and available for reconsideration by the MACs by Q1 of 2026 when we believe they'll be considering, assuming the LCD goes forward in reconsideration of products.

Okay. Got it. Thank you for taking our questions.

You are welcome.

Thank you. [Operator Instructions] And our next question will be coming from the line of Ryan Zimmerman of BTIG. Your line open.

Yes. Thank you. Good afternoon, everyone. Thanks for taking our question. Congrats on the quarter.

Thank you.

Maybe you just start, Gary, listening to one of your competitors last night, they expect LCDs to go through as written. You've made the statement that it's your prevailing assumption – current operating assumption. I just want to be – I mean, you have no reason to believe it would be changed at this point. I know this is your assumption, but is there anything you can say from your perspective, having had those discussions – you're operating under the view that nothing is changing as written right now?

That's correct. I mean, I think it's clear to CMS in the MACs that the costs are continuing to spiral. And though the LCD is not perfect, we think it's a good step, and it's a mechanism to gain some of the savings that they're looking to gain. So we think from that perspective, it's likely – more likely than not that it would go forward. I don't think it will be delayed. That's not something that I think could happen. I mean, it's possible it could be rescinded because delaying it again is cause – would cause significant confusion in the market. And I think CMS is hearing how confusing the market is and patients are not being served appropriately with all of the confusion going on. So that's another reason to implement it in April. It's certainly another reason not to delay it. But if for some reason they weren't happy with it, it would be rescinded is probably a better answer quite honestly at this point in time and start again, but I think it will be implemented.

Okay. Very helpful. And then as we think about it in the context of the guidance, I appreciate that you're giving a wider range on guidance for the year given some of the unknowns that are going to play out here in the first half of the year. But maybe Dave and Gary, take us through kind of your assumption on both the low end and the high end. And what I really want to kind of understand is what's convertible in your mind from a product standpoint? What's at risk from a product standpoint as you try and move product usage or sales to the products that are on the covered list?

Yes, sure. I think the idea there on the first half really is the fact that because it got delayed from February to mid-April was the kind of issue there that just extends that confusion and ambiguity in the marketplace. So our expectation was back when it was going to happen in the middle of February that we would start to see some switching and transition in February. Now that's obviously pushed to the second quarter. So we've got a longer period of this uncertainty. When we think about the back half though, so I think back to your question about low end versus high end, the one question is how quickly do you convert those products in the back half of Q2, so it goes into place in April 13; that's one component. How successful are we? And then I think as you think about the back half and as we talked about the business trends changing once we get to the third quarter. As Gary mentioned in his prepared remarks, we're three products out of 18. So we see a major, major shift in the competitive dynamics in the back half and see a lot of opportunity for share gains amongst ourselves and other traditional players in the market. And us as a market leader, we think we'll take a proportionate share of that. So we see the back half being stronger than the first.

Okay.

So in addition, Ryan, to converting our own products, obviously, there's significant market share available, as Dave mentioned. I mean, this a very large component of the market, particularly just DFU and VLU is available. What we're also finding out is some customers are only using products that are on that approved list even for non-DFU and VLU to avoid any potential confusion of using a product inappropriately and not getting reimbursed. So, we feel that the DFU, VLU open market is substantial, but there's also non-DFU and VLU that we're seeing now with covered products.

And but just maybe to follow-up on this point, I think one of the big components of the advanced wound care business is PuraPly, right? And as of today, it's not on the list. But just to remind everyone, not necessarily all PuraPly usage is strictly relegated to DFU and VLU. I guess what I'm trying to understand is that entire business line isn't going away come April 13, and some of that is preserved outside of potentially what's included in the LCD.

No, that's completely accurate. Just as a benchmark, about 55% of the market is DFU/VLU. The rest of it is non-DFU/VLU. So as a guide, that's generally what we've seen in the space. I think our PuraPly product relationship to non-DFU is a little higher. It's used a lot in dermatology and other wounds, so PuraPly has a better ratio than that for us. So you're right, Ryan. There's a lot of revenue still available.

Very clear.

Including the surgical side.

Yes. Very helpful, Gary. Yes.

Thank you. And at this time, I'm not showing any more questions in the queue. And at this time, we thank you for participating in today's conference call. You may all disconnect.

Thank you very much.