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Xtant Medical Holdings, Inc. (NYSE:XTNT) This autumn 2022 Earnings Convention Name March 7, 2023 9:00 AM ET
Firm Individuals
Matt Steinberg – IR, FINN Companions
Sean Browne – President and Chief Govt Officer
Scott Niels – Chief Monetary Officer
Convention Name Individuals
Operator
Greetings and welcome to the Xtant Medical Fourth Quarter and Full 12 months 2022 Monetary Outcomes Convention Name [Operator Instructions]. As a reminder, this convention is being recorded.
I might now like to show the convention over to Matt Steinberg of FINN Companions. Please go forward.
Matt Steinberg
Thanks, operator, and welcome to Xtant Medical’s fourth quarter and full yr 2022 monetary outcomes name. Becoming a member of me immediately is Sean Browne, President and Chief Govt Officer; and Scott Niels, Chief Monetary Officer. In the present day’s name is being webcast and might be posted on the corporate’s web site for playback.
Through the course of this name, administration could make sure forward-looking statements relating to future occasions and the corporate’s anticipated future efficiency. These forward-looking statements replicate Xtant’s present perspective on present tendencies and data and may be recognized by such phrases as anticipate, plan, will, could, anticipate, imagine and different phrases with comparable which means. Such forward-looking statements usually are not ensures of future efficiency and contain dangers and uncertainties, together with these famous within the Danger Elements part of the corporate’s annual report on Type 10-Okay filed with the SEC on March 7, 2023, and in subsequent SEC studies and press releases. Precise outcomes could differ materially.
The corporate’s monetary outcomes press launch and immediately’s dialogue embrace sure non-GAAP monetary measures. Please consult with the non-GAAP to GAAP reconciliations which seem within the tables of our press launch and are in any other case out there on our web site. Word that our Type 8-Okay filed with our monetary outcomes press launch supplies an in depth narrative that describes our use of such measures. For the good thing about these of you who could also be listening to the replay, this name was held and recorded on Tuesday, March 7, at roughly 9 a.m. Japanese Customary Time. The corporate disclaims any obligation to replace its forward-looking statements, besides as required by relevant legislation.
Now I might like to show the decision over to Sean Browne.
Sean Browne
Thanks, Matt. I am excited to share with you immediately the numerous progress made by Xtant Medical in latest months. We achieved a number of main milestones centered round our 4 key progress initiatives that strengthened our long run enterprise prospects. Notably, we introduced final week the acquisition of the Coflex product line from Surgicaline. That is Xtant’s first acquisition since 2015 and is essential to our success because it not solely provides scale to our enterprise, but in addition enhances our margin profile. I will focus on this acquisition extra shortly. However first, turning to our fourth quarter efficiency.
We closed 2022 on a constructive word, producing fourth quarter income progress of practically 10%, pushed by continued energy of our biologics enterprise which continued to understand sturdy demand led by our new merchandise. Biologics grew by 14% in This autumn and 12% year-over-year. Legacy {hardware} gross sales declined by 16% for the yr, however solely down 7% for the fourth quarter exhibiting that our new concentrate on the ASC markets are beginning to make an influence.
One among our greatest challenges within the biologics section for our enterprise all through fiscal yr 2022 was our potential to provide sufficient product to maintain up with demand. Extra pointedly, we needed to stroll away from a big quantity of enterprise in fiscal yr ’22 as a result of we didn’t have sufficient labor to construct a product we would have liked.
With the intention to meet this demand, one of the crucial impactful issues we’ve got carried out was hiring Mark Schallenberger to be our Chief Operations Officer. Mark is an trade veteran that brings a ton of expertise to our firm. Moreover, we targeted on ramping up our manufacturing workforce. We began this course of earlier in 2022, however given the size of onboarding time to recruit and practice our processing workforce, there was a gradual development to achieve our focused capability ranges.
Supported by these efforts, we’re beginning to see enhancements in our provide chain. Concurrent with these efforts, we’re laser targeted on managing our prices prudently whereas enhancing our operational efficiencies. Mark will drive higher efficiencies for our operations, together with the modernization of our manufacturing, optimization of our processes, and the diversification and improvement of latest product traces.
Now that our newly carried out Enterprise Useful resource Planning, or ERP system has been activated and below Mark’s management, we’re assured that our enterprise is poised to realize our key progress and operational aims. We sit up for Mark’s contributions.
Now, earlier than discussing what Coflex provides to our enterprise in additional element, I might prefer to remind you of our 4 key progress pillars. One, new product introductions; two, distribution community growth; three, adjoining market penetration and 4 strategic acquisitions.
Including Coflex to our enterprise touches on all of this stuff, making it a stable match with our main backbone model providing. Particularly, this transaction is extremely complementary to our spinal fixation enterprise whereas enhancing our providing within the ASC and outpatient markets.
We bought the worldwide and mental property rights of Coflex and Cofix for $17 million with roughly $14 million in annual revenues, Cofix provides practically 25% in annual income to Xtant. It has a beautiful gross margin profile, making it instantly accretive to our enterprise and positioning us to turn into a money circulation constructive within the close to future.
Furthermore, it bolsters an already spectacular non-acute care providing for our spinal fixation enterprise, coupled with our much less invasive axle in our spinous system and our Silex Si Fusion product line, the Coflex and Cofix merchandise full our providing within the quick rising section of ASC and outpatient procedures. With the Coflex product line we’re including two gadgets with this acquisition. First, the Coflex Interlaminer Stabilization Gadget, a posterior nonpedical supplemental fixation system that’s the solely FDA PMA permitted implant with stage one medical proof for the remedy of average to extreme lumbar spinal stenosis, or in any other case referred to as LSS.
Second, we added Cofix a supplemental fixation system that’s minimally invasive system supposed to be used on all ranges of lumbar backbone. What’s most necessary about Coflex is that it addresses a severe medical want. LSS is the narrowing of the spinal canal, which places strain on the nerves and causes ache. This may result in ache throughout bodily exercise and simply on a regular basis dwelling total. Furthermore, this can be a movement preservation system versus a spinal fusion.
With spinal fusion, a affected person’s fluid regular movement is drastically diminished after most spinal fusions in only some years that very same affected person has to then have extra ranges of the backbone fused or what’s referred to as adjoining stage fusion. With a Coflex system, a affected person may purchase a few years of wholesome dwelling with most of their regular vary of movement preserved.
In 2021, the variety of sufferers recognized with LSS was roughly 2.4 million and represents the biggest single rising affected person demographic in backbone. In whole, the LSS market is predicted to achieve $5.6 billion this yr rising at 8.4% yearly is the primary cause a affected person over the age of 65 may have lumbar surgical procedure. Coflex is uniquely designed to deal with this situation as rising in reputation for the next causes.
First, Coflex is clinically confirmed, as is the primary and solely lumbar backbone system with stage one proof from two potential randomized trials towards two completely different management teams in two completely different nations. It’s broadly adopted with over 2000 implementations and is clinically validated with greater than 90 peer reviewed publications.
Second, it is easy to combine for surgeons, coaching is fast and simple the Coflex system is a single piece, sterile packed titanium implant that requires minimal instrumentation with just one small tray. Third, affected person suggestions has been extraordinarily constructive with many skilled ache aid of their leg and again and improved bodily perform.
As a part of the transaction, we’re including a workforce of 14 skilled gross sales reps and help workers from Surgalign, which is able to allow a seamless transition and guarantee we are able to hit the bottom working. Moreover, we’ve got expanded our footprint with extra new distributors and a big variety of new physicians/surgeons added to our community.
In abstract, the Coflex acquisition is a serious milestone achievement for Xtant. We’re bigger and extra numerous, with an improved margin profile with a brand new product line that brings transformative remedy choices to a big and rising affected person inhabitants. Importantly, it now positioned Xtant on a path to realize profitability within the close to future.
Our group is hitting on every of our pillars that helps our progress aims, enabling us to realize scale quicker and work in the direction of profitability. This acquisition, mixed with the sturdy demand setting for our new biologic merchandise and actions taken to boost our working efficiencies, are all a testomony to our early success and a broader aim of maximizing shareholder worth.
Now I might like to show the decision over to Scott who will focus on our fourth quarter and full yr 2022 monetary outcomes.
Scott Niels
Thanks, Sean, and good morning everybody. Complete income for the fourth quarter of 2022 is $15.3 million in comparison with $14 million for the fourth quarter of 2021. For the complete yr 2022 whole income was $58 million in comparison with $55.3 million for 2021, a rise of 5%. That is attributed primarily to income from new merchandise launched throughout 2021.
Gross margin for the fourth quarter in 2022 was 54.4%, in comparison with 55.1% for a similar interval in 2021. Gross margin for the complete yr 2022 was 55.4%, in comparison with 58.8% for a similar interval in 2021. These decreases are primarily as a result of increased manufacturing price with elevated costs for extra and out of date stock additionally contributing to the complete yr decline.
Fourth quarter 2022 working bills have been $10 million, in comparison with $9.6 million in the identical interval a yr in the past. For the complete yr 2022, working bills have been $38.9 million in comparison with $36.3 million for 2021. As a proportion of whole income, working bills have been 65.7% and 67.1% for the three and 12 month intervals ended December 31, 2022, respectively, in comparison with 68.8% and 65.8% for the three and 12 month intervals ended December 31, 2021, respectively.
Normal and administrative bills have been $4 million and $15.5 million for the three and 12 months ended December 31, 2022, representing a lower of 4% and a rise of seven%, respectively, over the prior yr intervals. The lower for the quarterly comparability resulted from decreased severance expense, whereas the rise for the annual comparability is primarily attributable to extra bills associated to varied compensation plans, product registrations and prices associated to ERP system upgrades partially offset by authorized settlement bills in the course of the prior yr.
Gross sales and advertising and marketing bills have been $5.8 million and $22.5 million for the three and 12 months ended. December 31, 2022, respectively, a rise of 10% for the three months interval, and a rise of seven% for the 12 months interval. The year-over-year enhance included extra unbiased agent fee expense ensuing from increased gross sales, and a higher mixture of unbiased agent gross sales and extra bills related to commerce reveals and associated journey.
Web loss within the fourth quarter of 2022 was $2.2 million, or $0.02 per share, in comparison with a lack of $2.3 million, or $0.03 per share, within the comparable 2021 interval. Web loss for the complete yr, 2022 was $8.5 million, or $0.09 per share, in comparison with $4.8 million, or $0.06 per share, in 2021.
Adjusted EBITDA for the fourth quarter of 2022 was a $0.8 million loss in comparison with a lack of $0.9 million for a similar interval in 2021. For the complete yr, 2022, adjusted EBITDA was a lack of $3 million, in comparison with adjusted EBITDA of $0.3 million for the yr ended December 31, 2021. As of December 31, 2022, we had $20.3 million of money and money equivalents, $10.9 million in web accounts receivable, $17.3 million of stock, and $4.6 million out there below auto revolver.
Now, I will flip the decision again to Sean for closing remarks.
Sean Browne
Thanks, Scott. In closing, we exited 2022 on a constructive word with stable income progress supported by sturdy demand for our main backbone merchandise and began 2023 on an thrilling word with the acquisition of the Coflex product line. Including Coflex supplies us with the property, expertise and community we have to add scale and develop profitably. Our enterprise is now 25% bigger and we’re on a path to realize profitability within the close to time period. Trying ahead, we plan to proceed to be lively in buying different companies that align with our technique, however will stay diligent in our method.
Lastly, later this afternoon, I might be presenting on the Canaccord Musculoskeletal Convention at 06:30 PM Japanese Time or 03:30 PM Pacific Time. A dwell webcast to my presentation might be out there on the Investor Relations part of our web site at www.xtantmedical.com. We hope a lot of you possibly can tune in. Thanks for becoming a member of us immediately and in your continued help. I’ll now flip it again over to the operator.
Operator
Thanks. That concludes our name. All events could now disconnect.
Query-and-Reply Session
Finish of Q&A
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