ORGO - NASDAQ

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 $18.2 million or 14.4% of net revenue compared to $7.5 million or 7.5% of net revenue last year. We're pleased with the financial results we delivered in the fourth quarter, where we leveraged the better-than-expected revenue results to drive adjusted EBITDA, that we exceeded the high end of our guidance range by more than $2 million. Turning to a brief review of our financial results for the 12 months ended December 31, 2024. Net revenue was $482 million compared to $433.1 million for the year ended December 31, 2023, an increase of $48.9 million or 11%. The increase in net revenue was driven by an increase of $48.1 million or 12% in the net revenue of Advanced Wound Care products and an increase of $0.8 million or 3% in net revenue of Surgical & Sports Medicine products. Adjusted EBITDA was $49.8 million or 10.3% of net revenue compared to adjusted EBITDA of $42.6 million or 9.8% of net revenue for the year ended December 31, 2023. Turning to the balance sheet. As of December 31, 2024, the company had $136.2 million in cash, cash equivalents and restricted cash and no outstanding debt obligations. This compared to $104.3 million in cash, cash equivalents and restricted cash and $66.2 million in net debt obligations as of December 31, 2023. As discussed on our third quarter call, the private placement of Series A convertible preferred stock to Avista Healthcare Partners in November 2024, provided important capital to execute our long-term growth strategies and substantially enhanced our balance sheet and financial condition. We used a portion of the $122.7 million of net proceeds from this transaction to pay off the outstanding borrowings of $66.6 million on our long-term debt facility. We appreciate the support from a leading health care investor and believe it reflects Avista's confidence in the compelling opportunity investing in Organogenesis presents. Turning now to a review of our 2025 financial guidance, which we introduced in this afternoon's press release. For the 12 months ended December 31, 2025, the company expects net revenue between $480 million and $535 million, representing year-over-year change in the range of roughly flat to an increase of 11%. The 2025 net revenue guidance range assumes net revenue from Advanced Wound Care products between $450 million and $500 million, representing a year-over-year change in the range of a decline of 1% to an increase of 10%. Net revenue from Surgical & Sports Medicine products of between $30 million and $35 million, representing a year-over-year increase of 6% to 23%. With respect to our GAAP profitability and EBITDA guidance for the company, the company expects GAAP net income in the range of $9.5 million to $38.8 million, EBITDA in a range of $27 million to $66.6 million, non-GAAP adjusted net income in the range of $15.3 million to $44.6 million, and adjusted EBITDA in the range of $43.6 million to $83.2 million. In addition to our formal financial guidance for 2025, we’re providing some considerations for modeling purposes. As Gary mentioned, we introduced our financial guidance for 2025 with the assumption that the final LCD will be effective on April 13, 2025. Given this implementation date delay, we expect the environment will be very challenging throughout the first half of 2025 followed by a significant improvement in our business trends beginning in the third quarter. For modeling purposes, we expect the first quarter revenue in the range of $85 million to $95 million. And our profitability guidance for 2025 assumes gross margins in the range of 76% to 78%, GAAP operating expenses will be down 2% to flat year-over-year and excluding non-cash intangible amortization of approximately $3.3 million and a non-recurring FDA payment related to our renewed BLA filing of $4.6 million, our total non-GAAP operating expenses will increase approximately 3% to 6% year-over-year. Note, the expected increase in non-GAAP operating expenses this year is primarily related to incremental investments in clinical studies and regulatory-related spending in preparation for our renew BLA efforts as well as strategic investments to support key commercial and organizational efficiency initiatives. Finally, our full year profitability guidance range also assumes total interest and other income of approximately $4 million compared to expense of $1.5 million last year. A GAAP tax rate and non-GAAP tax rate of 26% and 27%, respectively, non-cash depreciation of approximately $14.8 million, non-cash stock compensation expense of approximately $12 million, capital expenditures of approximately $45 million and a weighted average diluted share of approximately $134 million. With that, I’ll turn the call over to the operator to open your call to your questions.

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.

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.

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

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.

Yes. Very helpful, Gary. Yes.