Xtant Medical Announces Third Quarter 2020 Financial Results

Xtant Medical, Inc.
·13-min read

BELGRADE, Mont., Oct. 29, 2020 (GLOBE NEWSWIRE) -- 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 third quarter ended September 30, 2020.

Third Quarter 2020 Financial Highlights:

  • Revenue for the third quarter of 2020 was $14.0 million, up 33% from second quarter 2020 revenue and representing 89% of the $15.7 million revenue for the prior-year period

  • Operating expenses in the third quarter of 2020 were $8.5 million, compared to $11.1 million for the prior-year period

  • Income from operations was $0.8 million, compared to an operating loss of $0.7 million for the prior-year period

  • Net loss incurred in the third quarter of 2020 was $1.4 million, compared to a net loss of $1.9 million for the prior-year period

  • Adjusted EBITDA for the third quarter of 2020 was $1.6 million, compared to $0.6 million for the prior-year period

Xtant Medical’s President and CEO, Sean Browne, commented, “We made significant progress in three strategic areas:

1)

The completion of our debt restructuring is a significant event for Xtant since it will dramatically reduce the cost to service our debt and allow us to focus more of our capital and energy on supporting our future growth initiatives.

2)

The realignment of our teams and implementation of new operational procedures to better support our business contributed to our ability to generate operating income during third quarter. I have also challenged our senior management team to continue to look for opportunities to drive even greater efficiencies.

3)

The execution of an agreement with one of the largest group purchasing organizations (GPOs) in the country gives Xtant access to a strategically important new customer base that could contribute to our top line growth.

Our recent initiatives have Xtant well-positioned to focus on growth and market access enabling us to continue delivering on our mission of ‘honoring the gift of donation, so our patients can live as full a life as possible.’”

Third Quarter 2020 Financial Results

Total revenue for the three months ended September 30, 2020 was $14.0 million, representing a decrease of 10.9% compared to $15.7 million in the same quarter of the prior year. This decline in revenue was primarily attributed to the impact of the COVID-19 pandemic and the sudden drop in elective procedures that began in early March; these elective procedures have recovered to some extent as evident by third quarter 2020 revenue representing 89% of third quarter 2019 revenue.

Gross margin for the third quarter of 2020 was 66.0%, compared to 66.2% for the same period in 2019.

Operating expenses for the third quarter of 2020 were $8.5 million, compared to $11.1 million for the third quarter of 2019. The decrease was primarily due to reduced sales commissions, salaries and wages, legal and consulting fees, and executive recruiting fees.

Third quarter 2020 net loss was $1.4 million, or $0.10 per share, compared to third quarter 2019 net loss of $1.9 million, or $0.14 per share.

Adjusted EBITDA for the third quarter of 2020 was $1.6 million compared to $0.6 million for the same period in 2019. The Company defines Adjusted EBITDA as net income/loss from operations before depreciation, amortization and interest expense and provision for income taxes, and as further adjusted to add back in or exclude, as applicable, non-cash special charges, provision for losses on inventory and accounts receivable, non-cash compensation, change in warrant derivative liability, separation related expenses, and litigation settlement reserves. A calculation and reconciliation of Adjusted EBITDA to net loss can be found in the attached financial tables.

Proposed Rights Offering

Last week, the Company announced details for its proposed rights offering of up to $15 million of common stock. The Company intends to distribute to holders of its common stock as of the November 5, 2020 record date, at no charge, 0.194539 non-transferable subscription rights for each share of common stock held by such holders on such date. Each whole subscription right will entitle the holder to purchase one share of Xtant common stock for $1.07 in cash. In addition, such holders will have an over-subscription privilege, pursuant to which they may purchase additional shares, to the extent not all rights are exercised. The Company expects materials for the rights offering will be mailed on or about November 6, 2020 to holders of its common stock as of the record date, and that the rights offering will close as soon as practicable after the anticipated December 4, 2020 expiration date.

Conference Call

Xtant Medical will host a webcast and conference call to discuss the third quarter 2020 financial results on Thursday, October 29, 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.

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.

Cautionary Statement 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 “intends,” ‘‘expects,’’ ‘‘anticipates,’’ ‘‘plans,’’ ‘‘believes,’’ ‘‘estimates,’’ “continue,” “future,” ‘‘will,’’ “potential,” “going forward,” similar expressions or the negative thereof, and the use of future dates. Forward-looking statements in this release include the Company’s expectations that the COVID-19 pandemic will impact revenue for the remainder of 2020 and into 2021 and timing of the proposed rights offering. 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 effect of the COVID-19 pandemic on the Company’s business, operating results and financial condition; the Company’s future operating results and financial performance; the ability to increase or maintain revenue; 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 and comply with government regulations; the effect of product liability claims and other litigation to which the Company may be subject; the effect of product recalls and defects; 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, comply with its debt covenants and access additional indebtedness; the ability to obtain additional financing; risks associated with the rights offering; and other factors. Additional risk factors are contained in the Company’s Annual Report on Form 10-K for the year ended December 31, 2019 filed with the Securities and Exchange Commission (SEC) on March 5, 2020 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, 2020 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
Ph: 212-867-1762
Email: dcarey@finnpartners.com

XTANT MEDICAL HOLDINGS, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

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

As of September 30,
2020

As of December 31,
2019

ASSETS

Current Assets:

Cash and cash equivalents

$

2,741

$

5,237

Trade accounts receivable, net of allowance for credit losses of
$746 and doubtful accounts of $500, respectively

7,317

10,124

Inventories

20,671

16,101

Prepaid and other current assets

1,656

784

Total current assets

32,385

32,246

Property and equipment, net

4,122

4,695

Right-of-use asset, net

1,799

2,100

Goodwill

3,205

3,205

Intangible assets, net

471

515

Other assets

412

394

Total Assets

$

42,394

$

43,155

LIABILITIES & STOCKHOLDERS' EQUITY (DEFICIT)

Current Liabilities:

Accounts payable

$

2,814

$

2,188

Accrued liabilities

6,043

6,632

Current portion of lease liability

415

394

Current portion of financing lease obligations

59

176

Total current liabilities

9,331

9,390

Long-term Liabilities:

Lease liability, less current portion

1,417

1,726

Long-term debt, plus premium and less issuance costs

79,627

76,244

Total Liabilities

90,375

87,360

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; 75,000,000 shares authorized;
13,240,831 shares issued and outstanding as of September 30, 2020
and 13,161,762 shares issued and outstanding as of December 31,
2019

-

-

Additional paid-in capital

181,649

179,061

Accumulated deficit

(229,630

)

(223,266

)

Total Stockholders’ Equity (Deficit)

(47,981

)

(44,205

)

Total Liabilities & Stockholders’ Equity (Deficit)

$

42,394

$

43,155


XTANT MEDICAL HOLDINGS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

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

Three Months Ended

Nine Months Ended

September 30,

September 30,

2020

2019

2020

2019

Revenue

Orthopedic product sales

$

13,980

$

15,691

$

39,207

$

47,574

Other revenue

36

30

115

144

Total revenue

14,016

15,721

39,322

47,718

Cost of sales

4,768

5,310

13,913

16,613

Gross profit

9,248

10,411

25,409

31,105

Gross profit %

66.0

%

66.2

%

64.6

%

65.2

%

Operating expenses

General and administrative

3,042

4,228

10,293

12,866

Sales and marketing

5,270

6,685

15,578

19,499

Research and development

176

203

529

675

Total operating expenses

8,488

11,116

26,400

33,040

Income (Loss) from operations

760

(705

)

(991

)

(1,935

)

Other (expense) income

Interest expense

(2,097

)

(1,185

)

(5,258

)

(4,504

)

Other (expense) income

-

34

-

(109

)

Total Other (Expense)

(2,097

)

(1,151

)

(5,258

)

(4,613

)

Net Loss Before Provision for Income Taxes

(1,337

)

(1,856

)

(6,249

)

(6,548

)

Provision for income taxes

Current and deferred

(23

)

(23

)

(68

)

(68

)

Net Loss

$

(1,360

)

$

(1,879

)

$

(6,317

)

$

(6,616

)

Net loss per share:

Basic

$

(0.10

)

$

(0.14

)

$

(0.48

)

$

(0.50

)

Dilutive

$

(0.10

)

$

(0.14

)

$

(0.48

)

$

(0.50

)

Shares used in the computation:

Basic

13,231,823

13,161,762

13,210,386

13,164,694

Dilutive

13,231,823

13,161,762

13,210,386

13,164,694


XTANT MEDICAL HOLDINGS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited, in thousands)

Nine Months Ended

September 30,

2020

2019

Operating activities:

Net loss

$

(6,317

)

$

(6,616

)

Adjustments to reconcile net loss to net cash provided by operating activities:

Depreciation and amortization

1,658

2,338

Gain on disposal of fixed assets

(307

)

(27

)

Non-cash interest

5,245

4,467

Non-cash rent expense

12

16

Stock-based compensation

726

256

Provision for reserve on accounts receivable

296

453

Provision for excess and obsolete inventory

429

517

Changes in operating assets and liabilities:

Accounts receivable

2,463

417

Inventories

(4,999

)

760

Prepaid and other assets

(890

)

240

Accounts payable

626

(4,216

)

Accrued liabilities

(589

)

1,053

Net cash used in operating activities

(1,647

)

(342

)

Investing activities:

Purchases of property and equipment

(907

)

(403

)

Proceeds from sale of fixed assets

173

241

Net cash used in investing activities

(734

)

(162

)

Financing activities:

Payments on financing leases

(115

)

(395

)

Costs associated with Second Amended and Restated Credit Agreement

-

(149

)

Net cash used in financing activities

(115

)

(544

)

Net change in cash and cash equivalents

(2,496

)

(1,048

)

Cash and cash equivalents at beginning of period

5,237

6,797

Cash and cash equivalents at end of period

$

2,741

$

5,749


XTANT MEDICAL HOLDINGS, INC.

CALCULATION OF NON-GAAP CONSOLIDATED EBITDA AND ADJUSTED EBITDA

(Unaudited, in thousands)

Three Months Ended September 30,

Nine Months Ended September 30,

2020

2019

2020

2019

Net Loss

$

(1,360

)

$

(1,879

)

$

(6,317

)

$

(6,616

)

Other expense

(1

)

(30

)

5

101

Depreciation and amortization

504

779

1,658

2,338

Interest expense

2,097

1,185

5,258

4,504

Tax expense

23

23

68

68

Non-GAAP EBITDA

1,263

78

672

395

Non-GAAP EBITDA/Total revenue

9.0

%

0.5

%

1.7

%

0.8

%

NON-GAAP ADJUSTED EBITDA CALCULATION

Provision for losses on accounts receivable

92

221

296

453

Provision for excess and obsolete inventory

53

(1

)

429

517

Non-cash compensation

237

95

726

256

Change in warrant derivative liability

-

(4

)

(7

)

8

Separation-related expenses

(50

)

-

699

-

Field action expenses

-

182

-

307

Litigation reserve

5

-

5

800

Non-GAAP Adjusted EBITDA

$

1,600

$

571

$

2,820

$

2,736

Non-GAAP Adjusted EBITDA/Total revenue

11.4

%

3.6

%

7.2

%

5.7

%