Organogenesis Q1 2025: Navigating Contradictions in Market Dynamics, Revenue Outlook, and CMS Impact

Market dynamics and customer behavior, LCD implementation timeline and impact on revenue, revenue stabilization and market uncertainty, revenue and market dynamics, effect of CMS LCD on revenue and growth strategy are the key contradictions discussed in Organogenesis's latest 2025Q1 earnings call.



Revenue Performance and Market Conditions:
- Organogenesis Holdings reported net revenue of $86.7 million for Q1 2025, down 21% year-over-year.
- The decline was primarily due to disruptions in customer demand and ordering patterns caused by uncertainties related to the effective date of the final LCD for skin substitute grafts and cellular/tissue-based products.

Gross Margin and Inventory Impact:
- The gross profit for Q1 2025 was $63 million or 72.6% of net revenue, down slightly from 73.9% last year.
- The decrease was largely due to lower revenue over fixed costs and the expiration of excess product resulting from the delayed implementation of the LCD, leading to a mix shift in the product portfolio.

Operating Expenses and Adjustments:
- Operating expenses for Q1 2025 were $89.7 million, an increase of $4.6 million or 5% year-over-year.
- This increase was driven by a $6.6 million write-down of certain assets held for sale and partially offset by a $2.2 million reduction in research and development expenses.

2025 Financial Guidance and Market Stabilization:
- Organogenesis reaffirmed its financial guidance for 2025, expecting net revenue between $480 million and $535 million.
- The company anticipates stabilization in customer buying behavior and market trends beginning in the third quarter, driven by the availability of the full portfolio of products for all indications and the delay in the LCD implementation until January 1, 2026.