Organogenesis (ORGO) Q4 2025 Earnings Transcript

Image source: The Motley Fool.

DATE

Feb. 26, 2026 at 5:00 p.m. ET

CALL PARTICIPANTS

• President and Chief Executive Officer — Gary S. Gillheeney
• Chief Financial Officer — David C. Francisco

TAKEAWAYS

• Total Net Product Revenue -- $225.1 million, a 78% increase year over year and up 50% sequentially from the prior quarter, surpassing the highest end of guidance.
• Advanced Wound Care Net Product Revenue -- $217.2 million, marking an 83% year-over-year increase, driven by execution and underlying demand for PMA products.
• Surgical and Sports Medicine Product Revenue -- $7.9 million, reflecting a 2% year-over-year decrease, but with 12% full-year segment growth fueled by PuraPly.
• Gross Profit -- $175.2 million, or 78% of net product revenue, compared to 75% the previous year, primarily due to product mix shifts.
• Total Operating Expenses -- $162.3 million for the quarter, a year-over-year increase of $45.9 million, or 39%, driven by higher SG&A and nonrecurring write-downs; non-GAAP operating expenses were $112.4 million, up 32%.
• GAAP Operating Income -- $63.3 million, up from $10.2 million, reflecting a 519% increase.
• Non-GAAP Operating Income -- $75.9 million, a 549% increase over last year’s $11.7 million.
• GAAP Net Income -- $43.7 million, up from $7.7 million in the prior year, with net income to common of $31.5 million.
• Adjusted Net Income -- $52.9 million, compared to $8.8 million last year, with adjustments detailed for various nonrecurring and noncash items.
• Adjusted EBITDA -- $84.2 million, or 37% of total revenue, compared to $18.2 million, or 14% last year.
• Cash Position -- $94.3 million in cash, cash equivalents, and restricted cash at quarter-end, with no outstanding debt.
• 2026 Outlook — Revenue Guidance -- The company expects total net revenue to decline 25%-38% year over year, driven by clinician confusion and utilization headwinds following CMS’s December 30 commentary.
• First Quarter Revenue Expectation -- Management forecasts a decline of approximately 50% year over year, primarily due to "significant clinician confusion and related impact on utilization of our PMA-approved product."
• Gross Margin Guidance -- Management expects to achieve positive adjusted EBITDA for 2026, with high-teen adjusted EBITDA margins specifically targeted in the fourth quarter.
• Strategic Investments -- Construction and advancement of a new manufacturing and R&D center in Smithfield, Rhode Island, positioned to expand Apligraf and PuraPly production and relaunch Dermagraft.
• Key Policy Shift -- CMS policy changes in 2025 shifted reimbursement toward high-quality, evidence-backed PMA products while reducing payments for non-PMA products.
• Market Disruption -- Clinical confusion and utilization disruption stemmed from the December 24 withdrawal of LCD coverage policies and the December 30 CMS comments about discarded products.
• Pipeline Progress -- The company initiated a rolling BLA submission for ReNu in late 2025, targeting completion and potential approval in 2026 for knee osteoarthritis indications.

Need a quote from a Motley Fool analyst? Email pr@fool.com

RISKS

• Management explicitly expects a "25% to 38% year over year" revenue decline in 2026, stating "the operating environment remains highly uncertain given clinician confusion surrounding CMS's comments on December 30."
• First quarter revenue is projected to drop "approximately 50% year over year," attributed to "significant clinician confusion and related impact on utilization of our PMA-approved product as a result of CMS's commentary on December 30."
• Management warns of "clinical confusion and material disruption in the market" from recent CMS policy shifts and comments, resulting in forecasted negative impacts on utilization of PMA-approved products.

SUMMARY

Organogenesis Holdings (NASDAQ:ORGO) reported record fourth quarter financial results, driven by extraordinary year over year and sequential revenue growth in Advanced Wound Care, despite a minor decline in the Surgical and Sports Medicine segment. The company attributed its performance to strategic execution and favorable high-quality product positioning, though management highlighted the impact of recent regulatory shifts, particularly CMS’s commentary on December 30, which has sparked widespread clinical confusion and utilization disruption entering 2026. The firm is making substantial capital and R&D investments, including ramping a new manufacturing and research facility. Its rolling BLA submission for ReNu represents an anticipated entry into new therapeutic markets. The company projects immediate financial headwinds for 2026, primarily concentrated in the first half, but expects sequential recovery and positive adjusted EBITDA by year-end.

• Management confirmed that Q4 revenue upside was not primarily driven by inventory pull-forward but was attributed partly to "aggressive pricing tactics" at the end of the year.
• Operating income and adjusted EBITDA both demonstrated pronounced year-over-year gains, showing strong margin leverage from revenue outperformance.
• The Rhode Island Life Sciences Hub grant contributed $0.5 million to the quarter, offsetting Smithfield employee costs, a new item absent in the previous year.
• Prolonged "freeze in the market" and low-cost competitor pressure are seen as transitory, with management working to resolve confusion around reimbursement and product utilization.

INDUSTRY GLOSSARY

• PMA (Premarket Approval): FDA regulatory pathway requiring evidence of safety and efficacy, applicable to advanced wound care products such as Apligraf and Dermagraft.
• LCD (Local Coverage Determination): Medicare administrative policy establishing payment eligibility for specific products or procedures within localities.
• BLA (Biologics License Application): FDA application process for permission to introduce a biologic product, required for market approval of innovations such as ReNu.

Full Conference Call Transcript

Gary S. Gillheeney: Thank you, operator. And welcome, everyone, to Organogenesis Holdings Inc.’s fourth quarter 2025 earnings conference call. I am joined on the call today by David C. Francisco, our Chief Financial Officer. Let me start with a brief agenda of what we are going to cover during our prepared remarks. I will begin with an overview of our fourth quarter revenue results and provide an update on key developments in recent months. David 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 outlook for 2026, which we introduced in our press release this afternoon.

And I will provide some closing comments before we open up the call for questions. Let us begin with a review of our revenue results in Q4. We delivered record sales results, which exceeded the high end of the guidance range outlined on our third quarter conference call, driven primarily by better-than-expected growth in sales of our Advanced Wound Care products, which increased 83% year over year. Sales of our Surgical and Sports Medicine products decreased 2% year over year, which was within the range of our guidance assumptions.

The record revenue performance we delivered in the fourth quarter reflects our team's strong execution and commitment to our strategy to build upon our deep customer relationships and promoting our existing and recently launched products. I want to acknowledge and thank our team for continuing to show up every day for our patients amidst the very challenging environment in 2025. 2025 was a significant year for the industry with CMS announcing the most meaningful health policy changes in decades. We continue to believe these changes are favorable to our portfolio and to our mission.

CMS shifted reimbursement to support high-quality, evidence-backed PMA products while reducing payment for non-PMA products that have not undergone the most rigorous type of review, so that more patients have access to products that go beyond simple wound coverings. CMS has cited the clinical differentiation of PMA products and supports higher payment for the category to encourage innovation in the space. Their comments indicate that PMA products were never part of the problem and understand the higher development and manufacturing costs require sufficient reimbursement, not only to sustain the market availability of Apligraf and other high-value PMA products, but also to introduce new PMA products in the future.

As discussed on our earnings calls last year, Organogenesis Holdings Inc. has actively participated in bringing about these changes, and we remain committed to working with CMS and other stakeholders to further expand access to life-saving technologies, as well as incentivize investment in innovation in the space and achieve long-term stability in the market. Unfortunately, withdrawal of LCD coverage policies for skin substitutes announced on December 24 and comments regarding discarded product on December 30 have resulted in clinical confusion and material disruption in the market. We do not believe these actions by CMS signal any step back from the original goals outlined to reform coverage and payment of skin substitutes.

We believe the comments on December 30 regarding discarded product were intended to proactively address activity from certain competitors in the market that were attempting to exploit the new payment policies by focusing on larger-size skin products, specifically amniotic products. Unfortunately, these comments have resulted in significant clinical confusion impacting utilization of our PMA-approved product in the first two months of 2026. We do not believe the agency's commentary on discarded products should apply to PMA products. CMS's commentary and actions in recent years have indicated that PMA products were never part of the fraud and abuse.

Further, CMS expressly stated in the final Medicare Physician Fee Schedule for calendar year 2026 announced on 10/31/2025 that PMA products are clinically differentiated and deserve payment at a higher rate. We believe the significant clinician confusion, which is impacting utilization of our PMA-approved product, is a result of the agency's comments on December 30 and will be resolved in a way that is consistent with the policy CMS set by grouping products based on their FDA classification. As discussed on our earnings call last year, this was a key focus of our feedback and policy recommendations to the agency. CMS has consistently indicated one of their goals in policy reform was to increase access to PMA products.

While 2026 is off to a difficult start, I want to make it clear that I am very optimistic about our future. We believe CMS’s efforts to overhaul coverage and payment for our category represent a watershed moment for the industry, and the final Medicare Physician Fee Schedule for calendar year 2026 announced on 10/31/2025 represents the most meaningful step forward towards payment reform in more than a decade. I believe our overall position is very strong, and it is from this strong position that we are making capital investments that will support our company's future growth and continued leadership in the space. A new manufacturing and R&D center in Smithfield, Rhode Island is advancing well.

This state-of-the-art facility, once completed, will allow us to scale manufacturing of Apligraf and PuraPly AM, re-commercialize Dermagraft, strengthening our portfolio with another clinically proven PMA product, and give us the capacity to expand our product portfolio to treat burns with FortiShield and Transcyte, which is another PMA product. We are increasing our focus on clinical evidence by investing in trials and published studies because science and evidence have always been core to our foundation. And as coverage policies evolve, evidence will be the currency of credibility, and we intend to remain in the lead. Looking beyond wound care, we are closer than ever to expanding our mission into entirely new markets with our ReNu program.

Late last year, we initiated our rolling BLA submission, which we expect to complete in 2026, and if approved by the FDA, ReNu represents a transformational opportunity not just for Organogenesis Holdings Inc., but for the millions of Americans living with knee osteoarthritis pain, particularly those whose only alternative today is a total knee replacement. We can change the treatment paradigm and improve the lives of these patients as part of our vision to be a force for meaningful change and set a higher expectation in healing and recovery.

With more than 40 years in regenerative medicine and a 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 highly innovative, highly efficacious products that deliver on our mission of advancing healing and recovery beyond our customers' expectations. With that, I will turn it over to David.

David C. Francisco: Thanks, Gary. I will begin with a review of our fourth quarter financial results. Unless otherwise specified, all growth rates referenced during my prepared remarks are on a year-over-year basis. Net product revenue for the fourth quarter was $225.1 million, up 78% year over year and up 50% sequentially. As Gary mentioned, these results came in above the high end of expectations we provided on our Q3 call, which called for a total revenue range of $162 million to $187 million. Our Advanced Wound Care net product revenue for the fourth quarter was $217.2 million, up 83%. Net revenue from Surgical and Sports Medicine products for the fourth quarter was $7.9 million, down 2% year over year.

Surgical and Sports Medicine product sales were up 12% for the full year 2025 period, fueled by continued strong growth in sales of our PuraPly family of products. Our total revenue results for the fourth quarter included $0.5 million of grant income related to the grant issued from the Rhode Island Life Sciences Hub offsetting our employee-related costs in our Smithfield facility. This compares to no impact in the prior-year period. Gross profit for the fourth quarter was $175.2 million, or 78% of net product revenue, compared to 75% last year. The change in gross profit was primarily due to a shift in product mix.

Operating expenses for the fourth quarter were $162.3 million, compared to $116.4 million last year, an increase of $45.9 million, or 39%. Excluding cost of goods sold of $49.9 million for the fourth quarter, and $31.1 million last year, our non-GAAP operating expenses for the fourth quarter were $112.4 million, compared to $85.4 million last year, an increase of $27.0 million, or 32%. The year-over-year change in operating expenses excluding cost of goods sold was driven by a $26.3 million, or 36%, increase in SG&A expenses, and a $1.9 million write-down of certain nonrecurring expenses, offset partially by a $1.2 million, or 11%, decrease in research and development expenses.

Operating income for the fourth quarter was $63.3 million, compared to operating income of $10.2 million last year, an increase of $53.1 million, or 519%. Excluding noncash amortization and certain nonrecurring costs in both periods, our non-GAAP operating income was $75.9 million, compared to $11.7 million last year, an increase of $64.2 million, or 549% year over year. GAAP net income for the fourth quarter was $43.7 million, compared to net income of $7.7 million last year, an increase of $36.0 million. Net income to common for the fourth quarter was $31.5 million, compared to net income of $5.1 million last year.

Net income to common includes the impact of the cumulative dividend, the noncash accretion to redemption value of our convertible preferred stock, and undistributed earnings allocated to participating redeemable convertible preferred stock. Adjusted net income for the fourth quarter was $52.9 million, compared to $8.8 million last year. Adjusted net income excludes after-tax impacts of intangible amortization, write-down of assets held for sale, disposal of construction in progress, FDA BLA fees for ReNu, PFS regulation-related charges, specifically nonrecurring inventory write-down adjustments for excess and obsolete inventory, and upfront licensing costs resulting from the shift in product lines, and additional inventory write-downs related to a one-time loss of a key distributor in a certain international location.

We have included a detailed reconciliation of GAAP to non-GAAP adjusted income in our press release this afternoon. Adjusted EBITDA for the fourth quarter was $84.2 million, or 37% of total revenue, compared to adjusted EBITDA of $18.2 million, or 14% of total revenue last year. Turning to the balance sheet. As of 12/31/2025, the company had $94.3 million in cash, cash equivalents, and restricted cash, with no outstanding debt obligations, compared to $136.2 million in cash, cash equivalents, and restricted cash, with no outstanding debt obligations, as of 12/31/2024.

We believe that we are well capitalized with our cash on hand and other components of working capital, availability under our revolving credit facility of up to $75 million, and net cash flows from product sales. Turning to our 2026 outlook, which we introduced in this afternoon's press release. As Gary mentioned earlier, last year, CMS announced the most meaningful health policy changes in decades, and we continue to believe these changes are advantageous to our portfolio and mission. As a leader in the industry, we expect to gain share in this new environment as we leverage the largest, most comprehensive portfolio across multiple FDA classifications.

However, we are experiencing near-term challenges as we enter 2026, and the operating environment remains highly uncertain given clinician confusion surrounding CMS's comments on December 30. As a result, we expect total net revenue to decline in the range of 25% to 38% year over year for the full-year 2026 period. We expect these challenges to impact our financial results in 2026, with meaningful improvement in clinician confusion and the overall operating environment, together with the strength and breadth of our portfolio, to result in substantial market share gains over 2026.

Specifically, our current expectations assume first quarter revenue declines approximately 50% year over year, driven primarily by the significant clinician confusion and related impact on utilization of our PMA-approved product as a result of CMS's commentary on December 30. We expect to drive strong sequential growth in the second quarter, resulting in first-half revenue declines of approximately 30% to 35%. We expect to deliver strong sequential revenue growth in both the third and fourth quarters of 2026, which we expect will result in positive adjusted EBITDA, particularly in the fourth quarter, where we expect to drive high-teens adjusted EBITDA margins. With that, I will turn the call back over to Gary for closing remarks.

Gary S. Gillheeney: Thank you, David. 2025 was a challenging year, but we are proud of the team's commitment to our long-term growth strategies. Our team's strong execution resulted in total revenue and profitability for fiscal year 2025 that exceeded the high end of our initial financial guidance ranges we introduced in our fourth quarter call last year. We also advanced our strategic priorities, most notably with our ReNu program and securing our new manufacturing facility in Rhode Island to support future growth. We expect continued strong execution and operational progress as we work through the challenging year this year.

While we expect 2026 to be impacted as the skin substitute market adapts to sweeping changes from CMS to reform coverage and payment for skin substitutes, we expect to drive significant market share gains in 2026 and remain confident in the long-term opportunity for Organogenesis Holdings Inc. After a period of transition in the market in 2026, we expect to return to normalized annual growth in 2025. We continue to believe we are well positioned to win in the future. We expect to remain a leader in the space with highly innovative, highly efficacious products that deliver on our mission to provide integrated healing solutions that substantially improve outcomes while lowering the overall cost of care.

With that, I will turn the call over to the operator to open the call up for questions.

Operator: Thank you. At this time, if you would like to ask a question, please signal by pressing 11 on your telephone keypad. If you are using a speakerphone, please make sure your mute function is turned off to allow your signal to reach our equipment. One moment while we queue for the first question. And our first question is coming from the line of Ryan Zimmerman of BTIG. Your line is open.

Iseult McMahon: Hi, Gary, David. This is Izzy on for Ryan. Thanks for taking the questions. Just to start out, I wanted to focus on your fourth quarter results. For Advanced Wound Care, that 83% was definitely really strong and much stronger than you were anticipating. So I was curious how much of that growth you believe is due to customers maybe pulling forward some of the inventory ahead of the January 1 reimbursement changes.

David C. Francisco: There is really not a tremendous amount of opportunity for that because, obviously, products are going on to patients. So we do not think there was a tremendous amount of that. What we did see at the back end of that was an increase in aggressive pricing tactics, which we assumed was going to happen. But as you said, we beat our midpoint of our guidance by about $50 million, so it was an amazing quarter for us. We were quite pleased.

Iseult McMahon: Got it. That is helpful. And as we start to think about 2026, can you help us kind of bridge the gap between what we saw in the fourth quarter and the decline that you are forecasting for the rest of the year? I mean, how much is that purely mathematical with the reduced price of $127, or is that more of lower unit volumes due to the confusion that you are seeing in the market?

David C. Francisco: No. We expect to gain share in 2026, so we are quite pleased with that. We think there are a couple of things that will happen as we move through the year. And then in addition to that, obviously, we had indicated that Q1 will be quite challenging based on the customer confusion, based on all of the elements that happened late in 2025. Obviously, the $127 is an element there. We planned for that. We expected that. So we felt that we could perform quite well with that. Also, with the LCD being pulled late last year, we figured that would be something that we could overcome without any question.

And then the last piece was the comments that were made on December 30, which really put some pressure on clinicians overall and really has pulled back quite considerably. So it is really that major factor that is happening there from that standpoint.

Iseult McMahon: Got it. That is helpful. And then last one for me. I know we are about two months into the quarter as of right now, so I was curious if you are starting to see anything that is giving you confidence in those share gains as we move throughout the year. Are you seeing any of the smaller competitors maybe exiting the market? Supply issues? If you can provide us any color there, that would be really helpful. Thanks for taking the questions.

Gary S. Gillheeney: Yeah. Sure. I—

David C. Francisco: Well, as I mentioned, we are seeing some aggressive pricing pressure in the quarter, which I think means that exactly what we anticipated might happen in the fourth quarter—people trying to clear out their inventory and that type of thing. So we are seeing some early signs of that potential change in the competitive dynamics as we move forward.

Gary S. Gillheeney: And just to follow up with David's comment, these issues that we see are transitory. We do think that the flood of low-cost products will not sustain throughout the year, which is one of the reasons the back half, we believe, will be better. We think the clinician confusion as it relates to the comments on December 30—we are working our customers through that process and how to use our products with that issue. And we also think that there is just kind of a freeze in the market, that folks are just generally confused by the health policy changes, and they were sweeping.

They basically have reduced the reimbursement for non-PMA products and shifted them to PMA products, and folks are trying to follow the reimbursement process and what that means for pricing and overall reimbursement. So there is just a lot of information, and those types of issues are transitory that we can work through. As David mentioned, $127 is something that we contemplated and have no issues with; we feel we can grow nicely at $127. It is more the confusion that we have to work ourselves through.

Iseult McMahon: Appreciate it. Thanks for taking the questions.

Gary S. Gillheeney: Of course.

Operator: Thank you. As a reminder, if you would like to ask a question, please press 11 on your telephone. We are currently showing no remaining questions in the queue at this time. This does conclude our conference for today. Thank you for your participation. You may now disconnect.

This article is a transcript of this conference call produced for The Motley Fool. While we strive for our Foolish Best, there may be errors, omissions, or inaccuracies in this transcript. Parts of this article were created using Large Language Models (LLMs) based on The Motley Fool's insights and investing approach. It has been reviewed by our AI quality control systems. Since LLMs cannot (currently) own stocks, it has no positions in any of the stocks mentioned. As with all our articles, The Motley Fool does not assume any responsibility for your use of this content, and we strongly encourage you to do your own research, including listening to the call yourself and reading the company's SEC filings. Please see our Terms and Conditions for additional details, including our Obligatory Capitalized Disclaimers of Liability.

The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.