Xtant Medical Announces Fourth Quarter and Full Year 2019 Financial Results

 

BELGRADE, MT, March 5, 2020 – Xtant Medical Holdings, Inc. (NYSE American: XTNT), a global medical technology company focused on surgical solutions for the treatment of spinal disorders, today reported financial and operating results for the fourth quarter and year ended December 31, 2019.

 

Fourth Quarter 2019 Financial Highlights and Recent Announcements:

 

  Revenue for the fourth quarter of 2019 was $17.0 million, compared to $18.3 million for the same prior-year period.
  Operating expenses in the fourth quarter of 2019 were $11.6 million, compared to $62.0 million for the same prior-year period. Excluding non-cash impairment charges, operating expenses were $13.8 million in the fourth quarter of 2018.
  Net loss incurred in the fourth quarter of 2019 was $1.6 million, compared to a net loss of $56.7 million for the same prior-year period. Excluding non-cash impairment charges and inventory reserves, net loss in the fourth quarter of 2018 was $3.9 million.
  Non-GAAP Adjusted EBITDA for the fourth quarter of 2019 was $1.2 million, compared to $1.7 million for the same prior-year period.

 

Sean Browne, President and CEO of Xtant Medical, said, “I am very pleased with the commitment and contributions made by each of our team members. It is their commitment that allowed us to execute numerous strategic and operational initiatives during the year and to fulfill our mission of ‘Honoring the gift of donation, by helping our patients live as full, and complete a life as possible.’ I am looking forward to 2020 to see what the team can accomplish as we roll out exciting new products that will update some current product lines and expand our product offerings. We understand our future success is tied to our ability to expand the breadth and depth of our product offerings, and these new products are a step in the right direction for our patients, surgeons, distribution network partners, and the Company.”

 

Fourth Quarter and Full Year 2019 Financial Results

 

Fourth-quarter 2019 revenue was $17.0 million, compared to $18.3 million for the same period in 2018. Full-year 2019 revenue was $64.7 million, compared to $72.2 million for 2018. Fourth-quarter 2019 revenues benefitted from sales growth from the Company’s key biologics customers, which was offset by discontinued distributor arrangements related to the Company’s hardware business and lower demand for certain hardware products.

 

Gross profit for the fourth quarter of 2019 was 66.8%, compared to 39.7% for the same period in 2018 and was 65.7% for 2019, compared to 60.2% in 2018. In the fourth quarter of 2018, the Company increased its inventory reserve by $4.6 million, primarily due to excess inventory in the spinal implant product line. Excluding the inventory reserve adjustment, gross profit in 2018 would have been 65.1% for the fourth quarter, and 67.1% for the full year.

 

Operating expenses for the fourth quarter of 2019 were $11.6 million, compared to $62.0 million for the fourth quarter of 2018, and were $44.8 million in 2019 compared to $103.6 million in 2018. In the fourth quarter of 2018, the Company incurred non-cash impairment charges to goodwill and intangibles attributed to the X-spine acquisition totaling $48.1 million. Excluding the non-cash impairment charge, operating expenses were $13.8 million in the fourth quarter of 2018 and $55.4 million in 2018. These decreases in operating expenses were primarily attributable to lower sales commissions, reduced restructuring expenses, and a decrease in amortization expense as a result of the impairment of intangible assets that occurred in the fourth quarter of 2018, which were partially offset by higher general and administrative expenses.

 

1
 

 

Fourth-quarter 2019 net loss was $1.6 million, or $0.12 per share, compared to the fourth quarter 2018 net loss of $56.7 million, or $4.31 per share. Net loss for 2019 was $8.2 million, or $0.62 per share, compared to $70.1 million, or $5.97 per share, in 2018. Excluding the non-cash impairment charges and the inventory reserve charges, the net loss was $3.9 million, or $0.30 per share, in the fourth quarter of 2018, and $17.0 million, or $1.45 per share, in 2018.

 

Non-GAAP Adjusted EBITDA for the fourth quarter of 2019 was $1.2 million compared to $1.7 million for the same period of 2018. Non-GAAP Adjusted EBITDA for 2019 was $3.9 million, compared to $5.4 million for 2018. The Company defines non-GAAP Adjusted EBITDA as net income/loss from operations before depreciation, amortization, and interest expense, and as further adjusted to add back in or exclude, as applicable, impairment of goodwill and intangible assets, provision for losses on accounts receivable and inventory, stock-based compensation, changes in warrant derivative liability, remediation expenses, separation-related expenses, litigation reserves, facility consolidation costs, and restructuring expenses. A calculation and reconciliation of non-GAAP Adjusted EBITDA to net loss and the other non-GAAP financial measures included in this release to their respective most comparable GAAP measures can be found in the attached financial tables.

 

Conference Call

 

Xtant Medical will host a webcast and conference call to discuss the fourth quarter and full-year 2019 financial results on Thursday, March 5, 2020, at 9:00 AM ET. To access the webcast, Click Here. To access the conference call, dial 877-407-6184 within the U.S. or 201-389-0877 outside the U.S. A replay of the call will be available at www.xtantmedical.com, under “Investor Info.”

 

About Xtant Medical Holdings, Inc.

 

Xtant Medical Holdings, Inc. (www.xtantmedical.com) is a global medical technology company focused on the design, development, and commercialization of a comprehensive portfolio of orthobiologics and spinal implant systems to facilitate spinal fusion in complex spine, deformity and degenerative procedures. Xtant people are dedicated and talented, operating with the highest integrity to serve our customers.

 

The symbols ™ and ® denote trademarks and registered trademarks of Xtant Medical Holdings, Inc. or its affiliates, registered as indicated in the United States and in other countries. All other trademarks and trade names referred to in this release are the property of their respective owners.

 

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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, net loss excluding non-cash impairment charges and inventory reserve charges, operating expenses excluding non-cash impairment charges and gross profit excluding inventory reserve adjustment. 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 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 ‘‘expects,’’ ‘‘anticipates,’’ ‘‘intends,’’ ‘‘plans,’’ ‘‘believes,’’ ‘‘estimates,’’ “continue,” “future,” ‘‘will,’’ “potential” similar expressions or the negative thereof, and the use of future dates. The Company cautions that its forward-looking 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 Company’s future operating results and financial performance; the ability to increase or maintain revenue, including the success of the Company’s initiatives to stabilize and increase revenues; the ability to remain competitive; the ability to innovate and develop new products; the impact of certain current supply constraints; the effect of management changes and the ability to attract, engage and retain qualified personnel; the ability to obtain and maintain regulatory approvals and comply with government regulations; government and third-party coverage and reimbursement for Company products; the effect of product liability claims and other litigation to which the Company may be subject; the effect of future 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 retain and recruit independent sales agents; the ability to service Company debt and comply with debt covenants; the ability to raise additional financing and other factors. Additional risk factors are contained in the Company’s Annual Report on Form 10-K for the year ended December 31, 2018 filed with the Securities and Exchange Commission (SEC) on April 1, 2019 and subsequent SEC filings by the Company, including without limitation its most recent Quarterly Report on Form 10-Q for the quarter ended September 30, 2019 filed with the SEC on November 7, 2019 and its Annual Report on Form 10-K for the year ended December 31, 2019 anticipated to be filed with the SEC. 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 the Company or persons acting on its behalf are expressly qualified in their entirety by this cautionary statement.

 

Investor Relations Contact

 

David Carey

Lazar FINN Partners

Ph: 212-867-1762

Email: david.carey@finnpartners.com

 

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XTANT MEDICAL HOLDINGS, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

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

 

   As of December 31, 2019   As of December 31, 2018 
         
ASSETS          
Current Assets:          
Cash and cash equivalents  $5,237   $6,797 
Trade accounts receivable, net of allowance for doubtful accounts of $500 and $2,140, respectively   10,124    9,990 
Inventories   16,101    17,301 
Prepaid and other current assets   784    589 
Total current assets   32,246    34,677 
           
Property and equipment, net   4,695    7,174 
Right-of -use asset, net   2,100    - 
Goodwill   3,205    3,205 
Intangible assets, net   515    573 
Other assets   394    793 
Total Assets  $43,155   $46,422 
           
LIABILITIES & STOCKHOLDERS’ EQUITY (DEFICIT)          
Current Liabilities:          
Accounts payable  $2,188   $6,465 
Accrued liabilities   6,625    5,150 
Warrant derivative liability   7    10 
Current portion of lease liability   394    - 
Current portion of financing lease obligations   176    426 
Total current liabilities   9,390    12,051 
Long-term Liabilities:          
Lease liability, less current portion   1,726    - 
Financing lease obligation, less current portion   -    204 
Long-term debt, less issuance costs   76,244    77,939 
Total Liabilities   87,360    90,194 
           
Stockholders’ Equity (Deficit)          
Preferred stock   -    - 
Common stock   -    - 
Additional paid-in capital   179,061    171,273 
Accumulated deficit   (223,266)   (215,045)
Total Stockholders’ Equity (Deficit)   (44,205)   (43,772)
           
Total Liabilities & Stockholders’ Equity (Deficit)  $43,155   $46,422 

 

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XTANT MEDICAL HOLDINGS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

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

 

   Three Months Ended December 31,   Twelve Months Ended December 31, 
   2019   2018   2019   2018 
Revenue                    
Orthopedic product sales  $16,942   $18,192   $64,516   $71,814 
Other revenue   22    70    166    389 
Total revenue   16,964    18,262    64,682    72,203 
                     
Cost of sales   5,639    11,006    22,166    28,717 
Gross profit   11,325    7,256    42,516    43,486 
                     
Gross profit %   66.8%   39.7%   65.7%   60.2%
                     
Operating expenses                    
General and administrative   4,540    3,801    17,936    14,277 
Sales and marketing   6,832    7,139    25,843    31,464 
Research and development   257    523    932    1,702 
Amortization   14    859    58    3,437 
Impairment of goodwill and intangible assets   -    48,146    -    48,146 
Restructuring expenses   -    435    -    2,970 
Separation related expenses   -    1,078    -    1,568 
Total operating expenses   11,643    61,981    44,769    103,564 
                     
Loss from operations   (318)   (54,725)   (2,253)   (60,078)
                     
Other (expense) income                    
Interest expense   (1,268)   (1,990)   (5,772)   (10,145)
Change in warrant derivative liability   11    38    3    121 
Other (expense) income   -    (14)   (101)   3 
Total Other (Expense) Income   (1,257)   (1,966)   (5,870)   (10,021)
Net Loss from Operations Before Provision for Income Taxes   (1,575)   (56,691)   (8,123)   (70,099)
                     
Provision for income taxes                    
Current and deferred   (30)   -    (98)   - 
Net Loss from Operations  $(1,605)  $(56,691)  $(8,221)  $(70,099)
                     
Net loss per share:                    
Basic  $(0.12)  $(4.31)  $(0.62)  $(5.97)
Dilutive  $(0.12)  $(4.31)  $(0.62)  $(5.97)
                     
Shares used in the computation:                    
Basic   13,161,762    13,158,326    13,163,931    11,740,550 
Dilutive   13,161,762    13,158,326    13,163,931    11,740,550 

 

5
 

 

XTANT MEDICAL HOLDINGS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited, in thousands)

 

   Twelve Months Ended December 31, 
   2019   2018 
Operating activities:          
Net loss  $(8,221)  $(70,099)
Adjustments to reconcile net loss to net cash provided by operating activities:          
Depreciation and amortization   3,143    6,590 
Goodwill and intangible impairment   -    48,146 
(Gain) loss on disposal of fixed assets   (61)   103 
Non-cash interest   5,726    9,848 
Non-cash rent expense   20    - 
Stock-based compensation   515    694 
Change in warrant derivative liability   (3)   (121)
Provision for reserve on accounts receivable   513    188 
Provision for excess and obsolete inventory   509    4,932 
Changes in operating assets and liabilities:          
Accounts receivable   (647)   2,536 
Inventories   692    40 
Prepaid and other assets   204    1,055 
Accounts payable   (4,278)   (3,011)
Accrued liabilities   1,475    311 
Net cash provided by (used in) operating activities   (413)   1,212 
Investing activities:          
Purchases of property and equipment   (879)   (624)
Proceeds from sale of fixed assets   335    257 
Net cash used in investing activities   (544)   (367)
Financing activities:          
Payments on financing leases   (455)   (359)
Costs associated with Second Amended and Restated Credit Agreement   (148)   - 
Costs associated with private placement and convertible debt exchange   -    (3,356)
Proceeds from equity private placement   -    6,810 
Proceeds from issuance of stock   -    1 
Net cash provided by (used in) financing activities   (603)   3,096 
           
Net change in cash and cash equivalents   (1,560)   3,941 
Cash and cash equivalents at beginning of period   6,797    2,856 
Cash and cash equivalents at end of period  $5,237   $6,797 

 

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XTANT MEDICAL HOLDINGS, INC.

CALCULATION OF NON-GAAP CONSOLIDATED EBITDA AND ADJUSTED EBITDA

(Unaudited, in thousands)

 

   Three Months Ended December 31,   Twelve Months Ended December 31, 
   2019   2018   2019   2018 
                 
Net Loss  $(1,605)  $(56,691)  $(8,221)  $(70,099)
                     
Other expense   -    14    101    (3)
Depreciation and amortization   807    1,646    3,143    6,589 
Interest expense   1,268    1,990    5,772    10,145 
Tax expense   30    -    98    - 
Non-GAAP EBITDA   500    (53,041)   893    (53,368)
                     
Non-GAAP EBITDA/Total revenue   2.9%   -290.4%   1.4%   -73.9%
                     
NON-GAAP ADJUSTED EBITDA CALCULATION                    
Impairment of goodwill and intangible assets   -    48,146    -    48,146 
Provision for reserve on accounts receivable   60    185    513    188 
Provision for excess and obsolete inventory   (8)   4,636    509    4,932 
Stock-based compensation   259    108    515    694 
Change in warrant derivative liability   (11)   (38)   (3)   (121)
Separation-related expenses   -    1,078    (37)   1,568 
Remediation expenses   253    -    560    - 
Litigation reserve   119    195    919    195 
Facility consolidation costs   -    1    -    241 
Restructuring expenses   -    435    -    2,970 
Non-GAAP Adjusted EBITDA  $1,172   $1,705   $3,869   $5,445 
                     
Non-GAAP Adjusted EBITDA/Total revenue   6.9%   9.3%   6.0%   7.5%

 

7
 

 

XTANT MEDICAL HOLDINGS, INC.

CALCULATION ON NON-GAAP ADJUSTED NET INCOME, NON-GAAP ADJUSTED GROSS PROFIT AND NON-GAAP ADJUSTED OPERATING EXPENSES AND RECONCILIATION TO GAAP NET INCOME, GAAP GROSS PROFIT AND GAAP OPERATING EXPENSES

 

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

 

   Three Months Ended December 31,   Twelve Months Ended December 31, 
   2019   2018   2019   2018 
Revenue                    
Orthopedic product sales  $16,942   $18,192   $64,516   $71,814 
Other revenue   22    70    166    389 
Total revenue   16,964    18,262    64,682    72,203 
                     
Cost of Sales   5,639    11,006    22,166    28,717 
Reverse Inventory Reserve   8    (4,636)   (509)   (4,932)
Adjusted Total Cost of sales   5,647    6,370    21,657    23,785 
                     
Adjusted Gross profit   11,317    11,892    43,025    48,418 
                     
Gross profit %   66.7%   65.1%   66.5%   67.1%
                     
Operating expenses                    
General and administrative   4,540    3,801    17,936    14,277 
Sales and marketing   6,832    7,139    25,843    31,464 
Research and development   257    523    932    1,702 
Amortization   14    859    58    3,437 
Goodwill & Intangible Asset impairment   -    48,146    -    48,146 
Reverse impairment charges   -    (48,146)   -    (48,146)
Restructuring expenses   -    435    -    2,970 
Separation related expenses   -    1,078    -    1,568 
Total Adjusted Operating Expenses   11,643    13,835    44,769    55,418 
                     
Loss from operations   (326)   (1,943)   (1,744)   (7,000)
                     
Other Income (Expense)                    
Interest expense   (1,268)   (1,990)   (5,772)   (10,145)
Change in warrant derivative liability   11    38    3    121 
Other (expense) income   -    (14)   (101)   3 
Total Other (Expense) Income   (1,257)   (1,966)   (5,870)   (10,021)
                     
Net Loss from Operations Before Provision for Income Taxes   (1,583)   (3,909)   (7,614)   (17,021)
                     
Provision for Income Taxes                    
Current and Deferred   (30)   -    (98)   - 
                     
 Adjusted Net Loss  $(1,613)  $(3,909)  $(7,712)  $(17,021)
                     
Net loss per share:                    
Basic  $(0.12)  $(0.30)  $(0.59)  $(1.45)
Dilutive  $(0.12)  $(0.30)  $(0.59)  $(1.45)
                     
Shares used in the computation:                    
Basic   13,161,762    13,158,326    13,163,931    11,740,550 
Dilutive   13,161,762    13,158,326    13,163,931    11,740,550 

 

8
 

 


The following information was filed by Xtant Medical Holdings, Inc. (XTNT) on Thursday, March 5, 2020 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-K Annual Report statement of earnings and operation as management may choose to highlight particular information in the press release.

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