XTNT Xtant Medical Holdings Inc

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.

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.

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 CareyLazar FINN PartnersPh: 212-867-1762Email: david.carey@finnpartners.com

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

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

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

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	%

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