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Organogenesis Holdings Inc. (ORGO)·Q2 2025 Earnings Summary

Executive Summary

  • Q2 2025 revenue declined 23% year over year to $101.0M amid Advanced Wound Care (AWC) weakness, while Surgical & Sports Medicine (SSM) grew 16%; GAAP diluted EPS was -$0.10, and Adjusted EBITDA was -$3.6M .
  • Versus S&P Global consensus, ORGO missed on revenue ($101.0M vs $104.8M*) and Primary EPS (Primary EPS actual -$0.059* vs -$0.045*), and EBITDA (-$6.3M* vs $4.4M*), reflecting competitive pricing and inventory expiry headwinds in the quarter (see Estimates Context) .
  • FY25 guidance was narrowed/lowered: revenue $480–$510M (from $480–$535M), GAAP net income (loss) $(6.4)–$16.4M (from $4.7–$34.0M), Adjusted EBITDA $31.1–$61.9M (from $43.6–$83.2M), with gross margin outlook cut to 74–76% (from 78–79%) -.
  • Management framed 2026 CMS coverage/payment proposals as a “watershed moment” likely to stabilize pricing and expand access to PMA products (Apligraf, Dermagraft), while near‑term (2025) remains pressured by aggressive competitor pricing and formulary resets -.
  • Liquidity remains solid ($73.7M cash, no debt), but the Q2 credit amendment suspends new revolver draws pending a covenant reset by 9/30/25—failure constitutes default; ORGO can terminate the facility and believes liquidity is sufficient for 12+ months .

What Went Well and What Went Wrong

What Went Well

  • SSM momentum: SSM revenue grew 16% YoY in Q2 (to $8.1M) and 13% for 1H25; management highlighted portfolio transitions and hybrid rep coverage supporting continued strength - .
  • Strategic policy setup: “This is a watershed moment for this industry,” with CMS proposals recognizing PMA differentiation and moving toward per‑cm payments—expected to level the field and expand access for PMA products like Apligraf and Dermagraft -.
  • Execution/momentum exiting Q2: Despite AWC headwinds, management cited improving account/revenue trends late in Q2 and new product launches aiding 2H25 .

What Went Wrong

  • Core top‑line/margin pressure: Q2 revenue fell 23% YoY to $101.0M on AWC -25% YoY; gross margin fell from 78% to ~73% (as reported) due to lower volume over fixed costs and product expiry linked to LCD delays .
  • Competitive pricing drag: CMS delay to 2026 spurred “even more aggressive pricing strategies” by competitors, intensifying near‑term pressure (especially late 2025) .
  • Guidance cuts: FY25 revenue (midpoint -$12.5M), profit/margin ranges, and gross margin were lowered; Q3 modeled at $130–$145M but full‑year profitability bands moved down materially .

Financial Results

MetricQ2 2024Q1 2025Q2 2025
Total Revenue ($M)$130.2 $86.7 $101.0
GAAP Diluted EPS ($)-$0.13 -$0.17 -$0.10
Gross Profit ($M)$101.0 $63.0 $73.1
Gross Margin % (as reported)78% 73% 73%
Operating Income ($M)-$13.9 -$26.7 -$12.6
Net Income ($M)-$17.0 -$18.8 -$9.4
Adjusted EBITDA ($M)$15.6 -$12.5 -$3.6
Non-GAAP Operating Income ($M)$9.7 -$19.3 -$10.0

Segment revenue (mix and trend):

SegmentQ2 2024 ($M)Q1 2025 ($M)Q2 2025 ($M)
Advanced Wound Care$123.2 $79.9 $92.7
Surgical & Sports Medicine$7.0 $6.8 $8.1
Total Net Product Revenue$130.2 $86.7 $100.8

KPIs and liquidity:

KPIQ4 2024Q1 2025Q2 2025
Cash, Cash Equivalents & Restricted Cash ($M)$136.2 $110.5 $73.7
Debt OutstandingNone None None

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Net RevenueFY2025$480–$535M -$480–$510M Narrowed/Lowered
AWC RevenueFY2025$450–$500M $450–$475M Lowered top end
SSM RevenueFY2025$30–$35M $30–$35M Maintained
GAAP Net Income (Loss)FY2025$4.7–$34.0M $(6.4)–$16.4M Lowered
Adjusted Net IncomeFY2025$15.3–$44.6M $5.5–$28.3M Lowered
EBITDAFY2025$20.0–$59.6M $6.2–$37.0M Lowered
Adjusted EBITDAFY2025$43.6–$83.2M $31.1–$61.9M Lowered
Gross Margin %FY202578–79% (modeling) 74–76% (modeling) Lowered
OpEx ex‑COGS (GAAP)FY2025Up low single digits YoY Flat to up ~1% YoY Lowered
OpEx (non‑GAAP)FY2025+5–7% YoY (ex amort., FDA fee, write‑down) +3–4% YoY (same exclusions) Lowered
Q3 Revenue (modeling)Q3 2025—~$130–$145M New modeling detail

Earnings Call Themes & Trends

TopicPrevious Mentions (Q4’24, Q1’25)Current Period (Q2’25)Trend
CMS coverage/payment reformCollaboration with policymakers; industry reform needed “Watershed moment”; per‑cm payments, PMA recognition; engagement continues -Increasingly constructive for 2026
Competitive pricing/marketQ1: confusion, audits, contraction post LCD delay -“Even more aggressive pricing” due to delay; later 2025 could worsen Near‑term headwind intensifying
Portfolio/PMA productsQ1: portfolio optionality emphasized PMA differentiation (Apligraf, Dermagraft) likely to benefit under proposed rule Positive setup into 2026
ReNu (knee OA)On track for BLA by YE25; topline data Sept 2025 “Transformational potential”; top line data in Sept; BLA modular submission 4Q25 On track
Manufacturing/SmithfieldFacility build to support Dermagraft/TransCyte/FortiShield Expansion highlighted; Dermagraft reintro targeted by 2027 Progressing
Outlook/guidanceInitial FY25 guide; reaffirmed Q1 - -Narrowed/lowered FY25; Q3 revenue modeling added More cautious near term

Management Commentary

  • “This is a watershed moment for this industry and the most impactful development in more than a decade...a per square centimeter payment methodology based on FDA classification...” — CEO Gary Gillheeney on CMS proposals .
  • “CMS has recognized the clinical differentiation of PMA products...Apligraf and Dermagraft...The proposed rules will encourage the continued development of PMA products...” .
  • “Gross profit was unfavorably impacted...due primarily to lower revenue over our fixed costs as well as the expiration of excess product resulting from the delayed implementation of the LCD and related uncertainty.” — CFO David Francisco .
  • “For modeling purposes, we expect third quarter revenue in the range of approximately $130M to $145M...gross margins ~74% to 76%...Adjusted EBITDA $31.1M to $61.9M.” — CFO David Francisco .
  • “We remain confident in the transformational potential of ReNu for knee OA and look forward to sharing top line data from our second phase three study this September.” — CEO statement in release .

Q&A Highlights

  • CMS per‑cm rate context: CEO noted proposal near ~$125/sq cm would be “a significant change,” eliminating disincentives to use Apligraf and leveling the field for dehydrated amnion; expects continued aggressive pricing in late 2025 but views 2026 as “extremely positive” .
  • Guidance framing: Management believes guidance reduction accounts for late‑year competitive behavior; sees contribution from recently launched products and momentum exiting Q2 .
  • Dermagraft timing: Target to reintroduce Dermagraft “by 2027” once Smithfield is ready .
  • ReNu positioning: Management cited robust data including KL‑4 performance comparable to KL‑2/3 in prior study; expects strong competitive profile vs HA and steroids .
  • SSM drivers: Strong performance from key products and hybrid rep model spanning wound care and surgical .

Estimates Context

Comparison to S&P Global consensus for Q2 2025:

MetricConsensusActualSurprise
Revenue ($M)$104.8*$101.0 -$3.8
Primary EPS (S&P definition)-$0.045*-$0.059*-$0.014
GAAP Diluted EPS—-$0.10 —
EBITDA ($M)$4.4*-$6.3*-$10.7

Notes:

  • Values marked with * are retrieved from S&P Global. Actuals for “Primary EPS” and “EBITDA” reflect S&P Global standardized definitions and may differ from company-reported GAAP EPS and Adjusted EBITDA [Values retrieved from S&P Global].
  • Company-reported Adjusted EBITDA for Q2 2025 was -$3.6M .

Key Takeaways for Investors

  • 2025 remains a transition year: competitive pricing and formulary resets are pressuring AWC volumes and margins; watch for sequential improvement into Q3 (management model: $130–$145M revenue) and gross margin recovery toward 74–76% H2 run‑rate .
  • 2026 policy setup is a potential positive inflection: per‑cm payment and PMA recognition could favor ORGO’s PMA assets (Apligraf, Dermagraft) and level the field against dehydrated amnion, potentially expanding access and mix quality -.
  • ReNu is a medium‑term catalyst: top‑line Phase 3 data in September and BLA submission by year‑end could unlock a new knee OA franchise if approved; monitor data quality and regulatory milestones .
  • Liquidity vs. covenant mechanics: cash of $73.7M and no debt provide buffer, but revolving credit draws are paused pending covenant reset by 9/30/25; failure would be an event of default—mitigated by option to terminate the facility and management’s 12‑month liquidity outlook .
  • Mix and inventory execution are key near‑term drivers: reducing expiry risk and shifting mix toward higher‑margin brands and SSM can support margin stabilization; any acceleration in AWC recovery would be upside .
  • Guidance credibility: reduced ranges appear to reflect late‑2025 competitive pressures; hitting Q3 modeling and demonstrating sequential improvement should help rebuild confidence .