Xtant Medical Announces Second Quarter 2018 Financial Results

 

BELGRADE, MT, Aug 7, 2018 — Xtant Medical Holdings, Inc. (NYSE American: XTNT), a leader in the development of regenerative medicine products and medical devices, today reported financial and operating results for the second quarter ended June 30, 2018.

 

Summary of Second Quarter 2018 Financial Highlights and Recent Announcements:

 

  Revenue for the second quarter of 2018 was $18.7 million, down from $21.4 million for the second quarter of 2017
  Gross Margin for the second quarter of 2018 was 66.6%, compared to 63.2% for the same period in the prior year
  Net loss incurred in the second quarter 2018 was $5.0 million compared to a loss of $9.7 million in the same period of the prior year
  Non-GAAP Adjusted EBITDA was $0.8 million, compared to a loss of approximately $2.1 million during the second quarter of 2017
  The Company expanded its executive management team with the appointment of Kevin Brandt as Chief Commercial Officer
  Xtant Medical stockholders approved the 2018 Equity Incentive Plan

 

“In reflecting on our performance through the first half of the year, I am very excited about our future as a Company,” said Carl O’Connell, Xtant Medical’s chief executive officer. “We have made very positive strides and changes so far in 2018, including the restructuring of our balance sheet with the recent debt conversion, improved gross margins, efficiencies in consolidation of operations to Belgrade, MT and now importantly, expansion of our leadership team with the recent addition of Kevin Brandt as chief commercial officer.”

 

Second Quarter 2018 Financial Results

 

Revenue for the second quarter of 2018 was $18.7 million, down from $21.4 million compared to the same period of the prior year. The decrease occurred in the Company’s fixation product lines due principally to competitive factors and a strategic focus on reducing unprofitable sales channel arrangements while improving gross margin and adjusted EBITDA. This strategic decision, which was implemented in the beginning of the third quarter last year, has contributed positively to many other areas of the business.

 

Gross margin for the second quarter of 2018 was 66.6%, up from 63.2% for the same period in 2017. This improvement was due to the Company’s focus on profitable sales channel relationships with higher margins, and from the benefits of restructuring some several operational areas of the organization for efficiencies and cost reduction.

 

 
 

 

Operating expenses for the second quarter of 2018 were $14.7 million, 78.6% of net revenue, down $5.2 million compared to $19.9 million in the quarter ended June 30, 2017, which was 92.9% of net revenue. The improvement occurred as the Company positions itself for future long-term growth through execution of its channel strategy, moving on from select high-commission sales arrangements, cost reduction and efficiency programs to streamline its operations, including consolidation of facilities, and lower restructuring expenses.

 

The net loss from operations for the second quarter of 2018 was $5.0 million compared to a loss of $9.7 million for the same period in the prior year, with a net loss per share of $0.38 compared to a net loss of $6.43 per share for the same quarter in the prior year.

 

Non-GAAP Adjusted EBITDA for the second quarter of 2018 was approximately $0.8 million compared to a loss of $2.1 million for the same period during 2017. The Company defines Adjusted EBITDA as net income/loss from operations before depreciation, amortization and interest expense, and as further adjusted to add back in or exclude non-cash stock-based compensation, change in warrant derivative liability, separation related expenses, Dayton transition costs and restructuring expenses. A calculation and reconciliation of net loss to non-GAAP Adjusted EBITDA can be found in the attached financial tables.

 

Appointment of Kevin Brandt to Executive Management Team

 

Kevin Brandt recently joined Xtant as the chief commercial officer. He is responsible for executing the Company’s sales and marketing initiatives, and driving the commercial strategy of the organization. Mr. Brandt brings over 28 years of orthopedic experience in the commercial space, most recently as the chief commercial officer of RTI Surgical, where he led all domestic direct lines of business. Prior to joining RTI Surgical he spent 18 years at Stryker Corporation in various senior commercial leadership positions.

 

Stockholders Approved the 2018 Equity Incentive Plan

 

The Xtant Medical stockholders approved the Xtant Medical Holdings, Inc. 2018 Equity Incentive Plan (the “2018 Plan”). The approval occurred at the 2018 annual meeting of stockholders on August 1, 2018, upon recommendation from the Board of Directors.

 

The 2018 Plan permits the Board, or a committee thereof, to grant to eligible employees, non-employee directors and consultants of the Company non-statutory and incentive stock options, restricted stock, restricted stock units and other stock-based awards. The Board may select 2018 Plan participants and determine the nature and amounts of awards to be granted. Subject to adjustment as provided in the 2018 Plan, the number of shares of Company common stock available for issuance under the 2018 Plan is 1,307,747 shares.

 

The 2018 Plan replaces the Amended and Restated Xtant Medical Equity Incentive Plan and will expire on July 31, 2028.

 

 
 

 

Convertible Debt Restructuring

 

In the first quarter ended March 31, 2018, the Company entered into a restructuring and exchange agreement with holders of Xtant's then outstanding 6% convertible senior unsecured notes due 2021. Pursuant to that agreement, all outstanding convertible notes, constituting $71.9 million in outstanding principal amount, plus accrued and unpaid interest, were converted into 10.6 million shares of Xtant common stock. Most of the conversions occurred on February 14, 2018, after the receipt of stockholder approval of aspects of the restructuring transaction and the effectiveness of a 1-for-12 reverse stock split, which occurred at the close of business on February 13, 2018. On February 14, 2018, the Company issued 945,819 shares of common stock in a private placement at a price per share of $7.20 for cash proceeds of $6.8 million.

 

Conference Call

 

The Company will host a conference call to discuss the second quarter 2018 financial results and business developments on Wednesday, August 8, 2018 at 9:00 AM EDT. Please refer to the information below for conference call dial-in information and webcast registration:

 

Conference date: August 8, 2018, 9:00 AM ET

Conference dial-in: 877-407-6184

International dial-in: 201-389-0877

Conference Call Name: Xtant Medical's Second Quarter 2018 Results Call

Webcast Registration: Click Here

 

Following the live call, a replay will be available on the Company’s website, www.xtantmedical.com, under “Investor Info.”

 

About Xtant Medical

 

Xtant Medical develops, manufactures and markets regenerative medicine products and medical devices for domestic and international markets. Xtant Medical products serve the specialized needs of orthopedic and neurological surgeons, including orthobiologics for the promotion of bone healing, implants and instrumentation for the treatment of spinal disease, tissue grafts for the treatment of orthopedic disorders, and biologics to promote healing following cranial, and foot and ankle surgeries. With core competencies in both biologic and non-biologic surgical technologies, Xtant Medical can leverage its resources to successfully compete in global neurological and orthopedic surgery markets. For further information, please visit www.xtantmedical.com.

 

 
 

 

Non-GAAP Financial Measures

 

To supplement the Company’s consolidated financial statements prepared in accordance with U.S. generally accepted accounting principles (GAAP), the Company uses certain non-GAAP financial measures in this release, including Adjusted EBITDA. Reconciliations of the non-GAAP financial measures used in this release to the most comparable GAAP measures for the respective periods can be found in tables later in this release. The Company's management believes that the presentation of these measures provides useful information to investors. These measures may assist investors in evaluating the company's operations, period over period. Management uses the non-GAAP measures in this release internally for evaluation of the performance of the business, including the allocation of resources. Investors should consider non-GAAP financial measures only as a supplement to, not as a substitute for or as superior to, measures of financial performance prepared in accordance with GAAP.

 

Important Cautions Regarding Forward-looking Statements

 

This press release contains certain disclosures that may be deemed forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements include statements that are predictive in nature, that depend upon or refer to future events or conditions, or that include words such as ‘‘continue,’’ ‘‘expects,’’ ‘‘anticipates,’’ ‘‘intends,’’ ‘‘plans,’’ ‘‘believes,’’ ‘‘estimates,’’ ‘‘strategy,’’ “future,” ‘‘will,’’ “can” or similar expressions or the negative thereof. Statements of historical fact also may be deemed to be forward-looking statements. The Company cautions that these statements by their nature involve risks and uncertainties, and actual results may differ materially depending on a variety of important factors, including, among others: the ability to increase revenue; the ability to achieve expected results; the ability to remain competitive; the ability to innovate and develop new products; the ability to engage and retain qualified personnel; government and third-party coverage and reimbursement for Company products; the ability to obtain and maintain regulatory approvals; government regulations; product liability claims and other litigation to which we may be subject; product recalls and defects; timing and results of clinical studies; the ability to obtain and protect Company intellectual property and proprietary rights and operate without infringing the rights of others; the ability to service Company debt and comply with debt covenants; the ability to raise additional financing and other factors. Additional risk factors are listed in the Company’s Annual Report on Form 10-K for the year ended December 31, 2017 filed with the Securities and Exchange Commission (SEC) on April 2, 2018 and subsequent SEC filings by the Company, including without limitation its Quarterly Reports on Form 10-Q for the quarters ended March 31, 2018 and June 30, 2018. Investors are encouraged to read the Company’s filings with the SEC, available at www.sec.gov, for a discussion of these and other risks and uncertainties. The Company undertakes no obligation to release publicly any revisions to any forward-looking statements to reflect events or circumstances after the date hereof or to reflect the occurrence of unanticipated events, except as required by law. All forward-looking statements attributable to us or persons acting on our behalf are expressly qualified in their entirety by this cautionary statement.

 

 
 

 

XTANT MEDICAL HOLDINGS, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands, except number of shares and par value)

 

   As of   As of 
   June 30, 2018   December 31, 2017 
   (Unaudited)     
ASSETS          
Current Assets:          
Cash and cash equivalents  $6,049   $2,856 
Trade accounts receivable, net of allowance for doubtful accounts of $2,118 and $1,923, respectively   10,404    12,714 
Current inventories, net   22,446    22,229 
Prepaid and other current assets   801    1,706 
Total current assets   39,700    39,505 
Non-current inventories, net   -    194 
Property and equipment, net   8,928    9,913 
Goodwill   41,535    41,535 
Intangible assets, net   12,106    13,826 
Other assets   516    732 
Total Assets  $102,785   $105,705 
           
LIABILITIES & STOCKHOLDERS’ EQUITY (DEFICIT)          
Current Liabilities:          
Accounts payable  $7,526   $9,316 
Accounts payable – related party   -    160 
Accrued liabilities   4,310    15,845 
Warrant derivative liability   90    131 
Current portion of capital lease obligations   469    366 
Total current liabilities   12,395    25,818 
Long-term Liabilities:          
Capital lease obligation, less current portion   353    623 
Long-term convertible debt, less issuance costs   -    70,854 
Long-term debt, less issuance costs   79,429    67,109 
Total Liabilities   92,177    164,404 
Commitments and Contingencies          
Stockholders’ Equity (Deficit):          
Preferred stock, $0.000001 par value; 10,000,000 shares authorized; no shares issued and outstanding   -    - 
Common stock, $0.000001 par value; 50,000,000 shares authorized; 13,145,305 shares issued and outstanding as of June 30, 2018 and 1,514,899 shares issued and outstanding as of December 31, 2017   -    - 
Additional paid-in capital   165,809    86,247 
Accumulated deficit   (155,521)   (144,946)
Total Stockholders’ Equity (Deficit)   10,608    (58,699)
Total Liabilities & Stockholders’ Equity (Deficit)  $102,785   $105,705 

 

 
 

 

XTANT MEDICAL HOLDINGS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited, in thousands, except number of shares and per share amounts)

 

   Three Months Ended June 30,   Six Months Ended June 30, 
   2018   2017   2018   2017 
               (Restated) 
Revenue                    
Orthopedic product sales  $18,653   $21,371   $36,483   $43,367 
Other revenue   88    37    191    124 
Total Revenue   18,741    21,408    36,674    43,491 
                     
Cost of sales   6,266    7,880    11,968    15,056 
                     
Gross Profit   12,475    13,528    24,706    28,435 
                     
Operating Expenses                    
General and administrative   3,402    4,527    6,425    8,655 
Sales and marketing   8,545    11,137    16,894    22,134 
Research and development   418    640    832    1,339 
Depreciation and amortization   1,041    1,470    2,045    2,751 
Restructuring expenses   1,234    1,632    1,968    1,632 
Separation related expenses   55    381    55    605 
Non-cash compensation expense   41    92    405    237 
Total Operating Expenses   14,736    19,879    28,624    37,353 
                     
Loss from Operations   (2,261)   (6,351)   (3,918)   (8,918)
                     
Other (Expense) Income                    
Interest expenses   (2,820)   (3,328)   (6,366)   (6,729)
Change in warrant derivative liability   79    (14)   41    156 
Other (expense) income   -    -    (12)   11 
Total Other (Expense) Income   (2,741)   (3,342)   (6,337)   (6,562)
                     
Net Loss From Operations  $(5,002)  $(9,693)  $(10,255)  $(15,480)
                     
Net loss per share:                    
Basic  $(0.38)  $(6.43)  $(1.00)  $(10.31)
Dilutive  $(0.38)  $(6.43)  $(1.00)  $(10.31)
                     
Shares used in the computation:                    
Basic   13,085,668    1,507,716    10,299,090    1,501,079 
Dilutive   13,085,668    1,507,716    10,299,090    1,501,079 

 

 

 
 

 

XTANT MEDICAL HOLDINGS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited, in thousands)

 

   Six Months Ended June 30, 
   2018   2017 
       (Restated) 
Operating activities:          
Net loss  $(10,255)  $(15,477)
Adjustments to reconcile net loss to net cash used in operating activities:          
Depreciation and amortization   3,228    4,171 
Non-cash interest   6,205    6,211 
Loss on disposal of fixed assets   205    1,586 
Non-cash compensation expense/stock option expense   405    397 
Provision for losses on accounts receivable and inventory   83    1,063 
Change in derivative warrant liability   (41)   (156)
Changes in operating assets and liabilities:          
Accounts receivable   2,152    2,544 
Inventories   (388)   1,202 
Prepaid and other assets   1,120    12 
Accounts payable   (1,949)   (2,372)
Accrued liabilities   (421)   63 
Net cash provided by (used in) operating activities   344    (756)
Investing activities:          
Purchases of property and equipment and intangible assets   (288)   (1,068)
Net cash used in investing activities   (288)   (1,068)
           
Financing activities:          
Proceeds from long-term debt   -    11,387 
Payments on capital leases   (167)   (28)
Payments on revolving line credit   -    (10,448)
Expenses associated with private placement and convertible debt conversion   (3,507)   - 
Proceeds from equity private placement   6,810    - 
Proceeds from issuance of stock   1    - 
Net cash provided by financing activities   3,137    911 
           
Net change in cash and cash equivalents   3,193    (914)
           
Cash and cash equivalents at beginning of period   2,856    2,578 
Cash and cash equivalents at end of period  $6,049   $1,665 

 

 
 

 

 

XTANT MEDICAL HOLDINGS, INC.

CALCULATION OF CONSOLIDATED EBITDA AND ADJUSTED EBITDA FOR THE PERIODS ENDED JUNE 30, 2018

(Unaudited, in thousands)

 

   Three Months Ended June 30,   Six Months Ended June 30, 
Unaudited  2018   2017   2018   2017 
Net loss  $(5,002)  $(9,693)  $(10,255)  $(15,480)
Other expense        -    12    - 
Depreciation & amortization   1,671    2,100    3,289    4,171 
Interest expense   2,820    3,328    6,365    6,729 
EBITDA (loss)   (511)   (4,265)   (589)   (4,580)
EBITDA/Total revenue   (2.7)%   (19.9)%   (1.6)%   (10.5)%
ADJUSTED EBITDA CALCULATION                    
Change in warrant derivative liability   (79)   14    (41)   (156)
Separation related expenses   55    381    55    605 
Non-cash compensation   41    92    405    237 
Dayton transition costs   120    -    233    - 
Restructuring expenses   1,187    1,632    1,921    1,633 
ADJUSTED EBITDA gain (loss)  $813   $(2,146)   1,984   $(2,261)
ADJUSTED EBITDA/Total revenue   4.3%   (10.0)%   5.4%   (5.2)%

 

Company Contact

 

Xtant Medical

Molly Mason

mmason@xtantmedical.com

Xtant Medical Holdings, Inc.

SOURCE: Xtant Medical Holdings, Inc.

 

 
 

 


The following information was filed by Xtant Medical Holdings, Inc. (XTNT) on Tuesday, August 7, 2018 as an 8K 2.02 statement, which is an earnings press release pertaining to results of operations and financial condition. It may be helpful to assess the quality of management by comparing the information in the press release to the information in the accompanying 10-Q Quarterly Report statement of earnings and operation as management may choose to highlight particular information in the press release.

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