Good afternoon, ladies and gentlemen, and welcome to the Fourth Quarter 2019 Earnings Conference Call for Organogenesis Holdings Inc. At this time, all participants have been placed in listen-only mode. Please note that this conference call is being recorded and the record 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 Form 10-K for the year ending December 31, 2019, which was filed this afternoon.You are cautioned not to place undue reliance upon any forward-looking statements, which speak only as of the date made. Although it is – may voluntary 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, further events or otherwise except as required by applicable securities laws.This call will also include references to certain financial measures that are not calculated in accordance with the 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 present in accordance with the GAAP are available in the earnings press release on Investor Relations portion of the website.I would like to turn the conference over to Mr. Gary S. Gillheeney, Sr., Organogenesis Holdings President and Chief Executive Officer. Sir, you may begin.

Thank you, and welcome everyone to Organogenesis Holdings' Fourth Quarter 2019 Earnings Conference Call. I'm joined on the call today by Tim Cunningham, our Chief Financial Officer.Let me start with a brief agenda of what we'll be covering during our prepared remarks today. I will start off with a high-level overview of our revenue performance in the fourth quarter and fiscal year 2019. After my remarks, Tim will provide you with a more in-depth review of our quarterly and fiscal year financial results, as well as an overview of our financial guidance for 2020, which we introduced today in our earnings press release.Following Tim's discussion of our financial results and outlook, I will then share some thoughts on why we believe we are well positioned for solid long-term growth in 2020 and beyond, and then we'll open it up for questions.Our performance through 2019 has been very strong and our revenue and financial results reflect the solid execution of our commercial and operating strategies this year. Our total revenue increased 35% in 2019. Our gross profit increased 48%, and we reported strong improvements in profitability with our operating loss and our adjusted EBITDA loss decreasing 43% and 50% respectively, year-over-year.Turning to a review of the fourth quarter revenue performance, we reported total revenue growth of 17% year-over-year in the fourth quarter driven by sales of our Advanced Wound Care products of 16% and sales growth of our Surgical & Sports Medicine products of 25% growth year-over-year.We were pleased to deliver Q4 growth above the high end of the guidance range provided on our third quarter call and our fourth quarter performance was a strong finish to a year where we delivered better-than-expected growth and increased the midpoint of our full year guidance range in each quarter of 2019, our first…

Thank you, 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. Revenue for the fourth quarter of 2019 was $74.6 million compared to $63.6 million for the fourth quarter of 2018, an increase of $11 million or 17%.Fourth quarter revenue results came in above the high end of the guidance range provided on our third quarter earnings call. Revenue from Advanced Wound Care products for the fourth quarter of 2019 was $63.4 million compared to revenue of $54.6 million for the fourth quarter of 2018, an increase of $8.8 million or 16%.The increase in Advanced Wound Care net revenue was primarily attributable to additional sales personnel; PuraPly regaining pass-through reimbursement status for the 2-year period effective October 1, 2018, and the continued growth in the adoption of our amniotic products despite the suspension of Affinity sales beginning in the first quarter of 2019.Revenue from Advanced Wound Care products represented 85% of total revenue in the fourth quarter of 2019 compared to 86% of total revenue in the prior year period. Revenue from Surgical & Sports Medicine products for the fourth quarter of 2019 was $11.3 million compared to $9 million for the fourth quarter of 2018, an increase of $2.3 million or 25%.The increase in Surgical & Sports Medicine revenue was primarily due to the expansion of our sales force and penetration of new and existing customer accounts. Revenue from Surgical & Sports Medicine products represented 15% of total revenue in the fourth quarter compared to 14% of total revenue in the prior year period.Revenue from PuraPly products for the fourth quarter of 2019 was $39.9 million compared to $28.5 million in the fourth quarter of 2018, an increase of…

Yeah. Thanks Tim. As I mentioned, 2019 was a very productive year for Organogenesis and it was the direct result of the hard work and strong execution of our team. Our focused commercial strategy resulted in 35% revenue growth this year, driven by a strong adoption and utilization of our comprehensive and differentiated product portfolio in solutions for both advanced wound care and our surgical and sports medicine markets.We've also made notable progress towards our goal of continuing to develop our new product pipeline, enhancing our portfolio of clinical evidence and to improve our overall profitability profile.As we look forward to fiscal 2020, we are very confident in our ability to continue to drive strong performance. Our 2020 revenue guidance calls for growth of 5% to 6% over the next year despite the anticipated headwinds from PuraPly's transition into the high-cost bundle in the fourth quarter.Our total revenue -- company revenue growth will be driven primarily by strong sales of our portfolio of non-PuraPly products, which together we expect will increase approximately 16% in 2020. We expect our amnion products to drive the majority of this growth, but we also expect solid growth from our PMA and other products as well.With respect to PuraPly specifically, our guidance for the year calls for sales to decline approximately 6%, primarily driven by lower ASP for the products sold in the hospital outpatient setting beginning in Q4. Importantly we believe we are better positioned to navigate the transition to the high-cost bundle in Q4 2020 compared to when PuraPly last transitioned to the high cost bundle in the first quarter of 2018. We have a targeted commercial strategy informed by the valuable experience from 2018; and more importantly, the profile of Organogenesis is significantly different than it was at the end of 2017,…

Thank you, sir. [Operator Instructions] And our first question will come from Matt Miksic of Credit Suisse. Your line is open.

Hey, good afternoon. Thanks for taking the questions.

Hi, Matt.

Hi. So, nice job on the -- getting to the high end of the range, and helpful guide and color for 2020. Gary, I was wondering if you could maybe flush out some of the comments you made about -- and I guess this plays into your thinking on the trends for PuraPly for 2020, but the line extensions you mentioned, some of which are priced into the low-cost bundle, which will be supplemented over the next few quarters. Just that strategy and how you see that effectively helping to soften the blow of the pass-through change in the back half of the year. And then I’ve one follow-up.

Sure. Well, fortunately the overall business of the PuraPly brand is just stronger being on the market for five years, significant clinical adoption now, a lot more clinical information and data is available. So, we've added north of 20% of new PuraPly accounts. Same-store sales of the PuraPly customers have increased over 17% and we're seeing, and this part of our portfolio strategy that sales of our non-PuraPly products to our PuraPly customers have increased close to 30%. So, as we continue to expand our portfolio with line extensions and additional sizes under the bundle, we expect that the product will continue to sell well in all sites of care.So, when we first came off pass-through, we had virtually no clinical data. We expect to have eight clinical publications by the time we come off of pass-through. We only had one size of PuraPly in the office, which is a major focus for us with PuraPly. We'll have five sizes for that office that will be sized and priced appropriately. Reimbursement in the office-based setting will be improved when we come off pass-through this time than last time and we do have those line extensions, PuraPly XT.We also have Affinity coming back online, which is a major component of our amnion strategy which will help absorb some of the PuraPly ASP decline. And we have PuraForce and later in 2021 we have TransCyte. So, the brand itself is stronger. It's well positioned, and the additional products that I just mentioned will also help.

Sure. And just to maybe clarify and understand, is it that some of those products -- and I don't know if it's XT or some of these others. On a per cc -- per square centimeter basis, will fit into an economic slot that works for these centers, whereas if you were for example to continue to price all of these lines no matter what the size or at the current price per square centimeter that it would force some of those accounts to move away from using PuraPly in a given case or to come to you and look for a much bigger price concession, so is that kind of in a high level sort of some of the strategy that you're describing?

It is in the outpatient center for sure. Those additional sizes and prices that I mentioned will fit under the bundle but what's also helpful is in the office-based setting where pass-through is not impacted, that's ASP plus six. The products and the sizes are also priced appropriately. So, the value proposition in the office is also better than it was last time. So, you have both of those dynamics, but yes, our products fit in both.

That's helpful. And it's complex strategy. I appreciate the color. And then the follow-up just was on some of the amnion products. So, NuShield and I apologize if I missed it, but just your -- where you are in terms of supply there and sort of what steps and hoops hurdles you need to sort of get through to sort of get Affinity capacity to where you want it to be to be back in the market at the end of Q2?

Sure, I'll start with NuShield. So, we solved the NuShield capacity issue right at the end of Q3 and have been building inventory, and we have a significant number of months of inventory today. So, NuShield is back at full capacity and we now have our entire sales force selling NuShield which was not the case in the first half last year.Regarding Affinity, we do have our new manufacturer in Tampa validated and is doing -- providing runs as we speak. So, we're very confident that by Q2 and we expect to be ramped up by the end of Q2 from a capacity standpoint, and then we'll launch and expect to get to historical run rates of Affinity by Q4. But we're feeling very confident in our Affinity manufacturing situation right now.

Our next question comes from Richard Newitter of SVB Leerink. Your line is open.

Hi, thanks for taking the question. Just two on the -- on your longer term guidance chart or the update rather to the interim and longer term. I guess on the interim first because it's a CAGR on the revenue side, when you say adjusted EBITDA margin single-digit percent loss, how are we supposed to interpret that on a percent basis for each of the years?

Tim, you want to handle that?

Yes. Yes, I can. So, the way I would interpret that Rich, we're not giving formal guidance for 2021. But I think if you look at what we're saying a single-digit loss, I'd point you on by the end of this three year period 2021, we'll be half of what last year. So in 2019, we lost $18 million. If you do the math, we'll be sub-$10 million on a loss.

On a dollar basis?

Yes, that's right.

Yes. In 2021. Okay. And then we ramp that. Got it. So that single-digit percent loss is kind of a target for 2021 and that's kind of how we should look at the percentages as -- R&D as a percent of revenue, SG&A as a percent of revenue by 2021. That's how we should interpret that?

Yes.

Yes.

Okay. Helpful. And then just 2022 plus as a long-term goal that's also something that obviously you don't hit in 2022 correct? This is something that sometime after 2022, you aspire to get to correct?

Yes. I mean, we update this model every quarter pretty much, so as we get closer that will get a little bit more refinement. But I'd say, given it's the beginning of 2020, it's more our aspiration or our goal where we're going to get the company to and it's our longer-term model which our -- longer term for us starts in 2022.

Thank you. Our next question comes from Ryan Zimmerman of BTIG. Your line is open.

Great. Can you guys, hear me okay?

Yes. Hi, Ryan.

Yes. Hi.

Congrats. Hi. Congrats on the quarter and appreciate all the commentary for 2020. Just to follow up on Matt's earlier question on the components of guidance, the PuraPly dynamics are certainly clear. On the other products, particularly with amniotics -- and I think Matt was talking about this. You talked about it a little bit Gary on NuShield and Affinity, but on the PMA and other products, can you just give us a little more color on kind of what those drivers are maybe on a product level that you're thinking about for 2020 that certainly helps you get to achieve your 2020 guidance? And then I have a follow-up. Thank you.

Sure. I'll start and then Tim you can jump in with some of the actual numbers. So our PMA products grow as the general market grows and as our commercial infrastructure grows. So fortunately, our PMA products Apligraf and Dermagraft specifically have commercial insurance coverage with over 1,500 commercial payers. And in the doctor office that's an extremely valuable asset to have. So as we get a stronger reach in the office and as the market expands generally, those products grow very nicely with the market in our commercial expansion. So they're strong support for our growth. They also anchor a lot of our customers as well, because we have a significant number of our customers that buy more than one of our products and many times our PMA products are the anchors to those customer accounts. So Tim, I don't know if there's any more color you can add.

Sure. Yes. I mean the revenue components from a product perspective in that Ryan our Apligraf, Dermagraft, Matrix and PuraForce.

Very helpful. Thank you.

Apligraf is the biggest component. Dermagraft is the second biggest today for this year in that bucket.

That's very helpful. I appreciate that. And then Gary, no one's asked about the wound care market dynamics. I'd love to just step back for a second. There's multiple players in this space. Love to get your sense for kind of where some of your competitors are at and what you're seeing and just overall market growth rates I think will be very helpful for everyone. Thank you.

Sure. I mean we're seeing the overall advanced wound care market growing in the 6% to 7% range. Some estimates are a little higher. The skin substitute, sub segment that we play in is growing double-digit as well around 10%. Historically has grown about 15%. So we're still seeing that growth and enjoying that growth. For us what's interesting is if you look at the advanced wound care market about 17% represent the biologic space where skin substitutes play. About 54% are more the advanced dressings in antimicrobials, hydrocolloids and others. What we're seeing is that our PuraPly product which is obviously a skin substitute is starting to eat into that market as well which is helping to drive our growth. So we're still very excited about the market and its growth.If you look at these dynamics within the market, we still haven't seen much of a change as a result of some of the consolidation and some of the other issues that have gone on in the market. We're starting to see a little bit more on that messaging and advertising from one of our competitors, but we're not seeing a large commercial investment feet on the ground. We're not seeing strong commercial – excuse me, clinical data coming out for any products that have been recently announced. So we're feeling pretty comfortable with the market right now.

Thank you. [Operator Instructions] Our next question comes from Steven Lichtman of Oppenheimer & Co. Your line is open.

Thank you. Hi, guys. Gary you've provided a lot of detail relative to PuraPly and the work you guys have done to soften after pass-through goes away. I'm wondering, how you're thinking about how that franchise will grow after we anniversary the pass-through going away. Understanding you're not giving 2021 guidance, but just generally how you think about potential there over the medium and long term?

Sure. Well, PuraPly still has a long way to go as it relates to market penetration. The beauty of the product as well is that it's available from head to toe. The product's indicated for all wounds except third degree burns. So we see the product continuing to grow double-digit, once we get past this pass-through decline and we're working off of a similar normalized base. But it'll be a double-digit grower for the foreseeable future.If you think about PuraPly, there's so many additional physician specialties that have been exposed to the product. So I mean, we see PuraPly used on most surgery on the crown of the skull as well as the bottom of a foot for a DFU. So the market for that product is significantly different than it is for some of the other skin substitutes.

Great. Thanks. And then just secondly, obviously in 2019 you expanded both the sales force and distributor relationships significantly. As you think about 2020 strategically will that be – will this be another year of doing that? Or will we see you a transition? I know in your slide deck you talk about pursuing M&A and in-licensing. Will we see that as a slowdown in terms of the addition of just feet on the street and more from you guys looking to put more product in the bag?

Well, both actually. We expect to expand our direct sales force again in 2020. Our goal is to get 300 to 310 is where we expect to be. And yes, we have several potential acquisitions of products that we would like to add to the bag. We don't have anything finalized but we're looking at several opportunities and want to continue to expand the product portfolio.And if you think about some of the other additional pipeline products we have like TransCyte, which is a burn product, when we launched that product we'd also be launching a burn franchise. So it won't be the only product that we would like to have in the bag. So if we're going to enter that market, we want to enter that market in a very strong fashion and with some diversification in the portfolio. So we certainly want to add more products to the bag as we do want to add more reps on the street.

Thank you. That does conclude our conference for today. Thank you for your participation.