Axogen Inc

Previous wording

Our portfolio of products is currently available in the United States "(U.S."), Canada, Germany, United Kingdom, Spain and several other European, Asian and Latin American countries.

Current wording

Our portfolio of products is currently available in the United States ("U.S."), and 19 other countries including Canada, Germany, United Kingdom, Spain and several other European, Asian and Latin American countries.

Previous wording

•Net revenue was $159,012 for the year ended December 31, 2023, an increase of $20,428 or 14.7% compared to the year ended December 31, 2022.

Current wording

•Revenue was $187,338 for the year ended December 31, 2024, an increase of $28,326, or 17.8%, compared to the year ended December 31, 2023.

Previous wording

•Gross profit was $127,874 for the year ended December 31, 2023, an increase of $13,437 or 11.7% compared to the year ended December 31, 2022.

Current wording

•Gross profit was $141,977 for the year ended December 31, 2024, an increase of $20,108, or 16.5%, compared to the year ended December 31, 2023.

Previous wording

Revenues for the year ended December 31, 2023, increased, $20,428 or 14.7%, to $159,012 as compared to $138,584 for the year ended December 31, 2022. Revenue growth was driven by an increase in unit volume of approximately 8.6%, as well as the net impact of changes in price and product mix of approximately 3.7% and 2.5%, respectively. The unit volume increase was attributed to growth in our core and active accounts. As of December 31, 2023, we had 1,006 active accounts, an increase of 3.9% from 968 from the prior year and 376 core accounts, an increase of 13.3% from 332 at December 31, 2022.

Current wording

Revenues for the year ended December 31, 2023 increased $20,428, or 14.7%, to $159,012, as compared to $138,584 for the year ended December 31, 2022. Revenue growth was driven by an increase in unit volume of approximately 8.6%, as well as the net impact of changes in price and product mix of approximately 3.7% and 2.5%, respectively. The unit volume increase was attributed to growth in our core and active accounts. As of December 31, 2023, we had 1,006 active accounts, an increase of 3.9% from 968 at December 31, 2022 and 376 core accounts, an increase of 13.3% from 332 at December 31, 2022.

Previous wording

Gross profit for the year ended December 31, 2023, increased $13,437 or 11.7% to $127,874 as compared to $114,437 for the year ended December 31, 2022. Gross margin as a percentage of revenue decreased to 80.4% for the year ended December 31, 2023, as compared to 82.6% for the year ended December 31, 2022.

Current wording

Gross profit for the year ended December 31, 2023 increased $13,060, or 12.0%, to $121,869, as compared to $108,809 for the year ended December 31, 2022. Gross margin as a percentage of revenue decreased to 76.6% for the year ended December 31, 2023, as compared to 78.5% for the year ended December 31, 2022.

Previous wording

Total costs and expenses increased, $5,192 or 3.6%, to $149,336 for the year ended December 31, 2023, as compared to $144,144 for the year ended December 31, 2022. The increase in total operating costs was primarily attributable to the following (i) $5,083 in compensation costs; (ii) $1,277 in professional services; (iii) $1,243 in marketing programs costs; (iv) $852 in travel; (v) $185 in occupancy related costs partially offset by decreases of (i) $1,190 in research and development projects; (ii) $2,257 of other general business costs including insurance expenses of $1,033, bad debt recovery of $883, merchant fees of $727, other items administrative in nature of $355 offset by increased packaging, shipping and handling expenses of $741.

Current wording

Total costs and expenses increased $4,815, or 3.5%, to $143,331 for the year ended December 31, 2023, as compared to $138,516 for the year ended December 31, 2022. The increase in total operating costs and expenses was due to the following: (i) $5,469 in compensation costs; (ii) $1,243 in marketing program costs; (iii) $1,156 in professional services fees; (iv) $852 in travel costs; and (v) $326 in occupancy related costs; partially offset by decreases of (i) $1,190 in research and development projects and (ii) $3,041 of other general business costs, including insurance expenses of $1,033, bad debt recovery of $883, merchant fees of $727, and other items administrative in nature of $398.

Previous wording

Sales and marketing expenses increased $5,833, or 7.3%, to $86,060 for the year ended December 31, 2023, as compared to $80,228 for the year ended December 31, 2022. The increase in sales and marketing was due to the following: (i) compensation costs of $1,969; (ii) $1,243 in marketing programs;(iii) $831 in travel costs; (iv) $745 in professional services, and (v) $1,034 of other costs which included packing, shipping and handling costs of $741 and other items administrative in nature of $293.

Current wording

Sales and marketing costs and expenses increased $5,597, or 7.8%, to $77,580 for the year ended December 31, 2023, as compared to $71,983 for the year ended December 31, 2022. The increase in sales and marketing costs and expenses was due to the following: (i) $2,497 in compensation costs; (ii) $1,243 in marketing program costs; (iii) $831 in travel costs; (iv) $625 in professional services fees; (v) other items administrative in nature of $251 and (vi) $150 in occupancy related costs.

Previous wording

Research and development expenses increased $1,175, or 4.3%, to $28,333 for the year ended December 31, 2023, as compared to $27,158 for the year ended December 31, 2022. The increase was primarily due to product development and clinical expenses. Product development costs include spending for a number of specific programs including the non-clinical expenses related to the BLA for Avance Nerve Graft. Product development expenses represented approximately 60% and 52% of total research and development expense for the years ended December 31, 2023, and 2022, respectively. Clinical trial expenses represented approximately 40% and 48% of total research and development expense for the years ended December 31, 2023, and 2022, respectively. The increase in research and development included increases in compensation costs of $1,635; $331 in professional fees; $287 in occupancy costs; and $98 in travel costs to support these clinical and non-clinical expenses.

Current wording

Research and development costs and expenses increased $1,712, or 6.7%, to $27,339 for the year ended December 31, 2023, as compared to $25,627 for the year ended December 31, 2022. The increase in research and development costs and expenses was primarily due to product development and clinical expenses. Product development costs include spending for a number of specific programs, including the non-clinical expenses related to the BLA for Avance Nerve Graft. Product development costs and expenses represented approximately 60% and 52% of total research and development costs and expenses for the years ended December 31, 2023 and 2022, respectively. Clinical trial costs and expenses represented approximately 40% and 48% of total research and development costs and expenses for the years ended December 31, 2023 and 2022, respectively. The increase in research and development costs and expenses was due to the following: (i) $2,171 in compensation costs; (ii) $331 in professional services fees; (iii) $287 in occupancy related costs; and (iv) $98 in travel costs to support these clinical and non-clinical expenses, partially offset by a decrease of $1,190 in research and development projects.

Previous wording

General and administrative expenses decreased $1,816, or 4.9%, to $34,943 for the year ended December 31, 2023, as compared to $36,758 for the year ended December 31, 2022. The decrease was primarily due to $1,033 in insurance costs, $833 in bad debt recovery, $727 in merchant fees, $330 in other services, and $205 in licenses and fees partially offset by an increase in compensation costs of $1,479.

Current wording

General and administrative costs and expenses decreased $2,494, or 6.1%, to $38,412 for the year ended December 31, 2023, as compared to $40,906 for the year ended December 31, 2022. The decrease in general and administrative costs and expenses was primarily due to the following: (i) $1,033 in insurance expenses, (ii) $883 in bad debt recovery, (iii) $727 in merchant fees, (iv) $330 in other services, (v) $205 in licenses and fees; (vi) other items administrative in nature of $128; (vi) $112 in occupancy related costs; and (vii) $78 in travel costs, partially offset by increases of (i) $801 in compensation costs and (ii) $201 in professional services fees.

Previous wording

Total other (expense) income decreased $1,013, or 133.5% to expense of $254 for the year ended December 31, 2023, as compared to income of $759 for the year ended December 31, 2022. The change was primarily due to the increase in interest expense of $2,211 and other expenses of $208, partially offset by the increase in investment income of $918 and the fair value of the derivative liability of $488. In connection with the Credit Facility, we recognized total interest charges of $8,083 and $6,721 for the years ended December 31, 2023, and 2022, respectively, and of this interest we capitalized to the construction of the APC Facility, interest charges of $5,285 and $6,155 for the years ended December 31, 2023, and 2022, respectively. The increase in investment income was primarily related to the Federal Reserve raising interest rates 100 basis points throughout 2023.

Current wording

Total other expense increased $1,013, or 133.5%, to expense of $254 for the year ended December 31, 2023, as compared to income of $759 for the year ended December 31, 2022. The increase was primarily due to the increase in interest expense of $2,211 and other expenses of $208, partially offset by the increase in investment income of $918 and the fair value of the derivative liability of $488. In connection with the Credit Facility, we recognized total interest charges of $8,083 and $6,721 for the years ended December 31, 2023 and 2022, respectively, and of this interest we capitalized to the construction of the APC Facility, interest charges of $5,285 and $6,155 for the years ended December 31, 2023 and 2022, respectively. The increase in investment income was primarily related to the Federal Reserve raising interest rates 100 basis points throughout 2023.

Previous wording

As of December 31, 2023, our principal sources of liquidity were our cash and cash equivalents totaling $31,024. Our cash equivalents are comprised of a money market mutual fund and during the year ended December 31, 2022, we had investments comprised of short-term commercial paper and U.S. Treasuries. Our cash and cash equivalents and investments decreased $17,766 from $48,790 at December 31, 2022, primarily as a result of the renovations of our APC Facility, and general operating activities. On December 31, 2023,and 2022, our current assets exceeded our current assets liabilities by $57,574 and $74,322, respectively. Based on current estimates, we believe that our existing cash and cash equivalents and investments, as well as cash provided by sales of our products will allow us to fund our operations through at least through the next 12 months from the issuance of these financial statements.

Current wording

As of December 31, 2024, our principal sources of liquidity were our cash and cash equivalents and investments totaling $33,482. Our cash equivalent is comprised of a money market mutual fund and our investments are comprised of U.S. Treasuries. Our cash and cash equivalents and investments increased $2,458 to$33,482 from $31,024 at December 31, 2023, due to a reduction in capital expenditures and general operating activities. On December 31, 2024 and 2023, our current assets exceeded our current assets liabilities by $68,607 and $57,574, respectively. Based on current estimates, we believe that our existing cash and cash equivalents and investments, as well as cash provided by sales of our products will allow us to fund our operations through at least the next twelve months from the date of issuance of the accompanying financial statements.

Previous wording

Net Cash Provided by Investing Activities

Current wording

Net Cash Provided By (Used In) Operating Activities

Previous wording

Net cash used in operating activities was $5,716 and $16,066 during the years ended December 31, 2023, and 2022, respectively. The favorable change in net cash used in operating activities of $10,350 or 64.4% was due to the following: (i) the net favorable change of $5,172 in working capital accounts and (ii) the decrease in net loss of $7,232.

Current wording

Net cash provided by operating activities was $4,535 compared to net cash used in operating activities of $5,716 for the years ended December 31, 2024 and 2023, respectively. The favorable change in net cash provided by operating activities of $10,251 was due to the decrease in net loss of $11,751 and the favorable change in noncash accounts of $6,093, partially offset by an unfavorable change in working capital of $7,594.

Previous wording

Net cash provided by investing activities was $19,253 as compared to cash used in investing activities of $3,200 for the years ended December 31, 2023, and 2022, respectively, an increase of $22,453 or 702%. The change in net cash used in investing activities was due to the increase in the net purchase and proceeds of the sale of investments totaling $16,118 and net decrease in the capital expenditures, primarily related to the renovation of the APC Facility, of $6,206.

Current wording

Net cash used in investing activities was $10,297 compared to net cash provided by investing activities of $19,253 for the years ended December 31, 2024 and 2023, respectively. The unfavorable change in net cash used in investing activities of $29,550 was due to the decrease in proceeds from the sale of investments, net of investment purchases, totaling $39,944, partially offset by a net decrease in capital expenditures of $10,771, primarily related to the renovation of the APC Facility completed in 2023.

Previous wording

Net cash provided by financing activities was $1,954 as compared to $1,794 for the years ended December 31, 2023, and 2022, respectively, an increase of $161 or 9%. The change in net cash provided by financing activities was primarily due to an increase of $159 in proceeds from the exercise of stock options and ESPP purchases year-over-year.

Current wording

Net cash provided by financing activities was $2,290 as compared to $1,954 for the years ended December 31, 2024 and 2023, respectively, an increase of $335, or 17%. The increase in net cash provided by financing activities was primarily due to an increase of $336 in proceeds from the exercise of stock options and Employee Stock Purchase Plan (“ESPP”) purchases year-over-year.

Previous wording

Our expected future capital requirements may depend on many factors including expanding our customer base and sales force and timing and extent of spending in obtaining regulatory approval and introduction of new products. Additional sources of liquidity available to us include issuance of additional equity securities through public or private equity offerings, debt financings or from other sources. The sale of additional equity may result in dilution to our shareholders. There is no assurance that we will be able to secure funding on terms acceptable to us, or at all. The increasing need for capital could also make it more difficult to obtain funding through either equity or debt. Should additional capital not become available to us as needed,

Current wording

Our expected future capital requirements may depend on many factors including expanding our customer base and sales force and timing and extent of spending in obtaining regulatory approval and introduction of new products. Additional sources of liquidity available to us include issuance of additional equity securities through public or private equity offerings, debt financings or from other sources. The sale of additional equity may result in dilution to our shareholders. There is no assurance that we will be able to secure funding on terms acceptable to us, or at all. The increasing need for capital could also make it more difficult to obtain funding through either equity or debt. Should additional capital not become available to us as needed, we may be required to take certain actions, such as slowing sales and marketing expansion, delaying regulatory approvals, or reducing headcount.

Previous wording

As of December 31, 2023, we had $50,000 outstanding in indebtedness under a credit facility; $35,000 maturing on June 30, 2027, and 15,000 maturing on June 30, 2028. Quarterly interest only and revenue participation payments are due through each of the maturity dates. Interest is calculated as 7.5% plus the greater of the Adjusted SOFR or 2.0% (12.99% as of December 31, 2023). Revenue participation payments are calculated as a percentage of our net revenues, up to $70,000 in any given year, adding approximately 1.5% per year of additional interest payments on the outstanding indebtedness. Upon each maturity date or upon such date earlier repayment occurs, we will repay the principal balance and provide a make-whole payment calculated to generate an internal rate of return to the lender equal to 11.5%, less the total of all quarterly interest and revenue participation payments previously paid. See Note 9 - Long-Term Debt, Net of Debt Discount and Financing Fees and Note 14 - Commitments and Contingencies in the Notes to the Consolidated Financial Statements Part II, Item 8 of this Form 10-K.

Current wording

As of December 31, 2024, we had $50,000 outstanding in indebtedness under a credit facility; $35,000 maturing on June 30, 2027 and $15,000 maturing on June 30, 2028. Quarterly interest only and revenue participation payments are due through each of the maturity dates. Interest is calculated as 7.5% plus the greater of the forward-looking term rate based on the secured overnight financing rate as set by the Federal Reserve Bank of New York plus 0.10% ("Adjusted SOFR") or 2.0% (12.19% as of December 31, 2024). Revenue participation payments are calculated as a percentage of our net revenues, up to $70,000 in any given year, adding approximately 1.5% per year of additional interest payments on the outstanding indebtedness. Upon each maturity date or upon such date earlier repayment occurs, we will repay the principal balance and provide a make-whole payment calculated to generate an internal rate of return to the lender equal to 11.5%, less the total of all quarterly interest and revenue participation payments previously paid. See Note 9 - Long-Term Debt, Net of Debt Discount and Financing Fees and Note 15 - Commitments and Contingencies in the Notes to the Consolidated Financial Statements Part II, Item 8 of this Form 10-K.

Previous wording

(1)See Note 9. Long-term Debt and Note 14. Commitments and Contingencies in Part II, Item 8 of this Form 10-K.

Current wording

(1)See Note 9 - Long-Term Debt, Net of Debt Discount and Financing Fees and Note 15 - Commitments and Contingencies in Part II, Item 8 of this Form 10-K.

Previous wording

(2)Calculated at 13.0%; the interest rate as of December 31, 2023.

Current wording

(2)Calculated at 12.19%; the interest rate as of December 31, 2024.

Previous wording

(4)Includes CEO's 2023 bonus to be paid in March 2024, 2024 Salary, 2024 bonus to paid in March of 2025, accrued PTO through January 4, 2025, nine months of senior advisory fees, and eighteen months of COBRA payments. Actual timing of payments are subject to the determination of the end of CEO Term per the Transition and Separation Agreement. See Note 14 - Commitments and Contingencies in Part II, Item 8 of this Form 10-K.

Current wording

(4)Includes former CEO's 2024 bonus to be paid in March of 2025, senior advisory fees through May 2025, eighteen months of Consolidated Omnibus Budget Reconciliation Act ("COBRA") payments and related employer paid taxes. See Note 15 - Commitments and Contingencies in Part II, Item 8 of this Form 10-K.

Previous wording

See Note 8 - Leases and Note 14 - Commitments and Contingencies in the Notes to the Consolidated Financial Statements Part II, Item 8 of this Form 10-K, for further information.

Current wording

See Note 8 - Leases, Note 9 - Long-Term Debt, Net of Debt Discount and Financing Fees, and Note 15 - Commitments and Contingencies in the Notes to the Consolidated Financial Statements in Part II, Item 8 of this Form 10-K, for further information.

Previous wording

In preparing our financial statements in accordance with generally accepted accounting principles, there are certain accounting policies, which may require substantial judgment or estimation in their application. We believe these accounting policies and the others set forth in Note 2 - Summary of Significant Accounting Policies in the Notes to the Consolidated Financial Statements Part II Item 8 of this Form 10-K are critical to understanding our results of operations and financial condition. Actual results could differ from our estimates and assumptions, and any such differences could be material to our results of operations and financial condition.

Current wording

In preparing our financial statements in accordance with generally accepted accounting principles, there are certain accounting policies, which may require substantial judgment or estimation in their application. We believe these accounting policies and the others set forth in Note 2 - Summary of Significant Accounting Policies in the Notes to the Consolidated Financial Statements in Part II, Item 8 of this Form 10-K are critical to understanding our results of operations and financial condition. Actual results could differ from our estimates and assumptions, and any such differences could be material to our results of operations and financial condition.

Previous wording

Inventories consist of purchased materials, direct labor and manufacturing overhead, are stated at the lower of cost or net realizable value, as determined by the first-in, first-out method.

Current wording

Inventories consist of purchased materials, direct labor and manufacturing overhead, and are stated at the lower of cost or net realizable value, as determined by the first-in, first-out method.

Previous wording

As of December 31, 2023, we have reserved $1,342 for potential losses relating to inventory. If our actual product life cycles, product demand or acceptance of new product introductions are less favorable than projected by management, additional inventory write downs may be required, which could unfavorably affect future operating results.

Current wording

As of December 31, 2024, we have reserved $1,630 for potential losses relating to inventory. If our actual product life cycles, product demand or acceptance of new product introductions are less favorable than projected by management, additional inventory write downs may be required, which could unfavorably affect future operating results.

Previous wording

We review debt instruments to determine whether there are embedded derivative instruments, which are required to be bifurcated and accounted for separately as a derivative financial instrument. Embedded derivatives that are not clearly and closely related to the debt host are bifurcated and are recognized at fair value on the consolidated balance sheet with changes in fair value recognized as either a gain or loss on the consolidated statement of operations each reporting period.

Current wording

We review debt instruments to determine whether there are embedded derivative instruments, which are required to be bifurcated and accounted for separately as a derivative financial instrument. Embedded derivatives that are not clearly and closely related to the debt host are bifurcated and recognized at fair value on the Consolidated Balance Sheets with changes in fair value recognized as either a gain or loss on the Consolidated Statements of Operations for each reporting period.

Previous wording

The fair value of embedded derivatives are measured based on equity markets and interest rates, as well as an estimate of our nonperformance risk adjustment. This estimate includes an option adjusted spread and an estimate of our discount rate.

Current wording

The fair value of embedded derivatives is measured based on equity markets and interest rates, as well as an estimate of our nonperformance risk adjustment. This estimate includes an option adjusted spread and an estimate of our discount rate.

Previous wording

As of December 31, 2023, we recorded a derivative liability of $2,987. However, if the discount rate were to change by 1%, it would have a less than $50 effect on our derivative liability.

Current wording

As of December 31, 2024, we recorded a derivative liability of $2,400. However, if the discount rate were to change by 1%, it would have a less than $50 effect on our derivative liability fair value.

Previous wording

Share-based compensation is in the form of stock options, restricted stock units ("RSU") and performance stock units ("PSU"). The estimated grant date fair value of stock options held by employees is determined using a multiple-point Black-Scholes option valuation method. The fair value of RSUs and PSUs is determined based on the fair value of our common stock on the date of grant. The estimated fair value of the options related to the Employee Stock Purchase Plan are based on the Black-Scholes option pricing model.

Current wording

Stock-based compensation is in the form of stock options, restricted stock units ("RSU") and performance stock units ("PSU") granted to employees and directors. Stock-based compensation expense is based on the fair value of the stock options, RSUs and PSUs.

Previous wording

We estimate the grant date fair value of each stock option award on the date of grant using a multiple-point Black-Scholes option-pricing model. In addition, we measure stock options granted to employees at a premium price based on market conditions, such as the trading price of our common stock, using a Monte Carlo Simulation option-pricing model in estimating the fair value at the grant date. Key assumptions in determining fair value include volatility, risk-free interest rate, dividend yield and expected term. As a result, if factors change and different assumptions are used, the stock-based compensation expense could be materially different in the future.

Current wording

We estimate the grant date fair value of each stock option award on the date of grant using a multiple-point Black-Scholes option-pricing model. In addition, we estimate the grant date fair value of stock options granted to employees at a premium price based on market conditions, such as the trading price of our common stock, using a Monte Carlo simulation option-pricing model. The value of the portion of the award that is ultimately expected to vest is recognized as expense over the requisite service periods.

Previous wording

The fair value of the PSU grants is based on our closing stock price on the grant date. The number of PSU's that will ultimately be earned is based upon our performance as measured against specified targets over the measurement period. Expectations related to the achievement of performance goals associated with PSU grants is assessed at each reporting period and is used to determine whether PSU grants are expected to vest. If performance-based milestones related to PSU grants are not met or not expected to be met, any compensation expense recognized associated with such grants will be reversed.

Current wording

The fair value of the PSU grants tied to revenue goals (the "Revenue PSUs")is determined based on the fair value of our common stock on the date of grant and our estimate of achieving the applicable revenue goals. Compensation expense for the Revenue PSUs is recorded as the milestones are achieved. The number of shares delivered to recipients and the related compensation cost recognized as an expense will be based on the actual performance metrics as set forth in the applicable Revenue PSU award agreement. The amount actually awarded will be based upon achievement of the performance measures. Expectations related to the achievement of the revenue goals associated with the Revenue PSU grants is assessed at each reporting period and is used to determine whether any of the Revenue PSU grants are expected to vest. If the performance-based milestones related to the Revenue PSU grants are not met or not expected to be met, any compensation expense recognized associated with such grants is reversed.

Previous wording

We recognize compensation expense related to the Employee Stock Purchase Plan (“ESPP”) based on the estimated fair value of the options on the date of grant. We estimate the grant date fair value, and the resulting stock-based compensation expense, using the Black-Scholes option pricing model for each purchase period. The grant date fair value is expensed on a straight-line basis over the offering period.

Current wording

We recognize compensation expense related to the ESPP based on the estimated fair value of the options on the date of grant. We estimate the grant date fair value using a Black-Scholes option pricing model for each purchase period. The grant date fair value is expensed on a straight-line basis over the offering period.