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 third
quarter ended September 30, 2018.
Third Quarter 2018 Financial Highlights
and Recent Announcements:
- Revenue for the third quarter of 2018 was $17.3 million,
compared to $19.8 million for the third quarter of 2017
- Gross profit for the third quarter of 2018 was 66.7%, compared
to 57.5% for the same period in the prior year
- Net loss incurred in the third quarter 2018 was $3.2 million
compared to a loss of $8.5 million for the same period in the prior
year
- Non-GAAP Adjusted EBITDA was $1.5 million, compared to $1.4
million for the same period of the prior year
- As previously announced, the Company appointed Michael Mainelli
as Interim Chief Executive Officer and Kathie Lenzen as Senior Vice
President, Finance & Administration and Chief Financial
Officer
Xtant Interim CEO Michael Mainelli said “After
my first few weeks on the job, it’s clear to me that Xtant is a
company with great products, strong business partners, and talented
employees. We are pleased that we are starting to see the
benefits of the recent facility consolidation efforts and cost
reduction initiatives. At the same time, our sales
results are below our potential. We are working on plans that
are expected to improve sales through a combination of new
products, marketing programs, and more effective channel
management.”
Third Quarter 2018 Financial Results
Revenue for the third quarter of 2018 was $17.3
million, compared to $19.8 million in the same period last
year. This decrease occurred primarily due to
company-initiated discontinued distributor arrangements and channel
management challenges.
Gross profit for the third quarter of 2018 was
66.7%, up from 57.5% for the same period in 2017. This improvement
is largely due to expenses for inventory reserves and impairment of
surgical instrument asset values in the third quarter of 2017 that
did not recur in 2018, and favorable impacts from cost reduction
initiatives.
Operating expenses for the third quarter of 2018
were $13.0 million, a decrease of $3.1 million compared to $16.1
million in the quarter ended September 30, 2017. The reduction is
primarily due to lower commission expense as a result of lower
revenue due to discontinued distributor arrangements and channel
management challenges. In addition, the Company continued to
execute its cost reduction initiatives to consolidate facilities
used for biologics and fixation systems operations.
Net loss from operations for the third quarter
of 2018 was $3.2 million, or $0.24 per share, compared to a net
loss of $8.5 million, or $5.62 per share, for the same period in
the prior year, primarily the result of the reduced operating
expenses and lower interest expense, and in the case of the net
share decrease, increased shares outstanding during the current
year period.
Non-GAAP Adjusted EBITDA for the third quarter
of 2018 was $1.5 million compared to $1.4 million for the same
period during 2017. Non-GAAP Adjusted EBITDA for the nine-month
period ended September 30, 2018 was $3.4 million, compared to a
loss of $0.8 million in the same period in the prior year.
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, as applicable,
non-cash compensation, change in warrant derivative liability,
separation related expenses, litigation reserve, facility
consolidation costs and restructuring expenses. A calculation
and reconciliation of non-GAAP Adjusted EBITDA to net loss can be
found in the attached financial tables.
Amendments to Credit Facility and Issuance of
Warrants
On September 17, 2018, the Company announced the
execution of 24th and 25th amendments to its Amended and Restated
Credit Agreement, which, among other provisions, reduced interest
payable under the credit facility. In connection with the
25th amendment, the Company issued warrants for the purchase of 1.2
million shares of Xtant common stock with an exercise price of
$0.01 per share and an expiration date of August 1, 2028, to
OrbiMed Royalty Opportunities II, LP and ROS Acquisition Offshore
LP, which collectively own approximately 70% of Xtant’s outstanding
common stock and are the sole holders of the Company’s outstanding
long-term debt under the credit facility.
Conference Call
The Company will host a webcast and conference
call to discuss the third quarter 2018 financial results on
Wednesday, November 14, 2018 at 4:30 PM 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.
™ 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.
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.
Forward-looking statements in this release include the Company’s
plans to improve sales through a combination of new products,
marketing programs, and more effective channel management.
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; its ability to increase revenue,
remain competitive and innovate and develop new products; the
effect of management changes and ability to engage and retain
qualified personnel; government and third-party coverage and
reimbursement for Company products, ability to obtain and maintain
regulatory approvals; government regulations; product liability
claims and other litigation to which the Company 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 contained 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 most recent Quarterly Report on Form 10-Q
for the quarter ended June 30, 2018 filed with the SEC on August 8,
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 the Company
or persons acting on its 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 |
|
|
|
September 30,
2018 |
|
|
December 31,
2017 |
|
|
|
(Unaudited) |
|
|
|
|
ASSETS |
|
|
|
|
|
|
|
|
Current Assets: |
|
|
|
|
|
|
|
|
Cash and cash
equivalents |
|
$ |
5,064 |
|
|
$ |
2,856 |
|
Trade accounts
receivable, net of allowance for doubtful accounts of $2,108 and
$1,923, respectively |
|
|
9,869 |
|
|
|
12,714 |
|
Current inventories,
net |
|
|
22,187 |
|
|
|
22,229 |
|
Prepaid and other
current assets |
|
|
738 |
|
|
|
1,706 |
|
Total current
assets |
|
|
37,858 |
|
|
|
39,505 |
|
Non-current
inventories, net |
|
|
- |
|
|
|
194 |
|
Property and equipment,
net |
|
|
8,069 |
|
|
|
9,913 |
|
Goodwill |
|
|
41,535 |
|
|
|
41,535 |
|
Intangible assets,
net |
|
|
11,248 |
|
|
|
13,826 |
|
Other assets |
|
|
560 |
|
|
|
732 |
|
Total Assets |
|
$ |
99,270 |
|
|
$ |
105,705 |
|
|
|
|
|
|
|
|
|
|
LIABILITIES &
STOCKHOLDERS’ EQUITY (DEFICIT) |
|
|
|
|
|
|
|
|
Current
Liabilities: |
|
|
|
|
|
|
|
|
Accounts payable |
|
$ |
5,918 |
|
|
$ |
9,316 |
|
Accounts payable –
related party |
|
|
- |
|
|
|
160 |
|
Accrued
liabilities |
|
|
3,976 |
|
|
|
15,845 |
|
Warrant derivative
liability |
|
|
48 |
|
|
|
131 |
|
Current portion of
capital lease obligations |
|
|
478 |
|
|
|
366 |
|
Total current
liabilities |
|
|
10,420 |
|
|
|
25,818 |
|
Long-term
Liabilities: |
|
|
|
|
|
|
|
|
Capital lease
obligations, less current portion |
|
|
251 |
|
|
|
624 |
|
Long-term convertible
debt, less issuance costs |
|
|
- |
|
|
|
70,853 |
|
Long-term debt, less
issuance costs |
|
|
75,944 |
|
|
|
67,109 |
|
Total Liabilities |
|
|
86,615 |
|
|
|
164,404 |
|
Commitments and
Contingencies (note 10) |
|
|
|
|
|
|
|
|
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; 13,171,347 shares issued
and outstanding as of September 30, 2018 and 1,514,899 shares
issued and outstanding as of December 31,2017 |
|
|
- |
|
|
|
- |
|
Additional paid-in
capital |
|
|
171,008 |
|
|
|
86,247 |
|
Accumulated
deficit |
|
|
(158,353 |
) |
|
|
(144,946 |
) |
Total Stockholders’
Equity (Deficit) |
|
|
12,655 |
|
|
|
(58,699 |
) |
Total Liabilities &
Stockholders’ Equity (Deficit) |
|
$ |
99,270 |
|
|
$ |
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 September
30, |
|
|
Nine Months Ended September
30, |
|
|
|
2018 |
|
|
2017 |
|
|
2018 |
|
|
2017 |
|
Revenue |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Orthopedic product
sales |
|
$ |
17,139 |
|
|
$ |
19,618 |
|
|
$ |
53,622 |
|
|
$ |
62,986 |
|
Other revenue |
|
|
127 |
|
|
|
171 |
|
|
|
319 |
|
|
|
294 |
|
Total Revenue |
|
|
17,266 |
|
|
|
19,789 |
|
|
|
53,941 |
|
|
|
63,280 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of sales |
|
|
5,743 |
|
|
|
8,416 |
|
|
|
17,711 |
|
|
|
23,472 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross Profit |
|
|
11,523 |
|
|
|
11,373 |
|
|
|
36,230 |
|
|
|
39,808 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating Expenses |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
General and
administrative |
|
|
2,505 |
|
|
|
3,330 |
|
|
|
8,931 |
|
|
|
11,985 |
|
Sales and
marketing |
|
|
7,847 |
|
|
|
8,904 |
|
|
|
24,742 |
|
|
|
31,038 |
|
Research and
development |
|
|
347 |
|
|
|
504 |
|
|
|
1,179 |
|
|
|
1,843 |
|
Depreciation and
amortization |
|
|
1,029 |
|
|
|
1,354 |
|
|
|
3,074 |
|
|
|
4,105 |
|
Restructuring
expenses |
|
|
614 |
|
|
|
1,194 |
|
|
|
2,582 |
|
|
|
2,814 |
|
Separation related
expenses |
|
|
436 |
|
|
|
792 |
|
|
|
490 |
|
|
|
1,396 |
|
Non-cash compensation
expense |
|
|
180 |
|
|
|
(20 |
) |
|
|
585 |
|
|
|
217 |
|
Total Operating
Expenses |
|
|
12,958 |
|
|
|
16,058 |
|
|
|
41,583 |
|
|
|
53,398 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss from
Operations |
|
|
(1,435 |
) |
|
|
(4,685 |
) |
|
|
(5,353 |
) |
|
|
(13,590 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other (Expense)
Income |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest expense |
|
|
(1,790 |
) |
|
|
(3,809 |
) |
|
|
(8,156 |
) |
|
|
(10,538 |
) |
Change in warrant
derivative liability |
|
|
42 |
|
|
|
(20 |
) |
|
|
83 |
|
|
|
136 |
|
Other (expense)
income |
|
|
30 |
|
|
|
- |
|
|
|
18 |
|
|
|
- |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Other (Expense)
Income |
|
|
(1,718 |
) |
|
|
(3,829 |
) |
|
|
(8,055 |
) |
|
|
(10,402 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Loss from
Operations |
|
$ |
(3,153 |
) |
|
$ |
(8,514 |
) |
|
$ |
(13,408 |
) |
|
$ |
(23,992 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss per
share: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic |
|
$ |
(0.24 |
) |
|
$ |
(5.62 |
) |
|
$ |
(1.19 |
) |
|
$ |
(15.94 |
) |
Dilutive |
|
$ |
(0.24 |
) |
|
$ |
(5.62 |
) |
|
$ |
(1.19 |
) |
|
$ |
(15.94 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares used in the
computation: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic |
|
|
13,158,326 |
|
|
|
1,514,126 |
|
|
|
11,262,642 |
|
|
|
1,505,493 |
|
Dilutive |
|
|
13,158,326 |
|
|
|
1,514,126 |
|
|
|
11,262,642 |
|
|
|
1,505,493 |
|
XTANT MEDICAL HOLDINGS,
INC.CONDENSED CONSOLIDATED STATEMENTS OF CASH
FLOWS(Unaudited, in thousands)
|
|
Nine Months Ended September
30, |
|
|
|
2018 |
|
|
|
2017 |
|
|
|
|
|
|
|
|
Operating
activities: |
|
|
|
|
|
|
|
|
Net loss |
|
$ |
(13,408 |
) |
|
|
$ |
(23,992 |
) |
Adjustments to
reconcile net loss to net cash used in operating activities: |
|
|
|
|
|
|
|
|
Depreciation and
amortization |
|
|
4,943 |
|
|
|
|
7,433 |
|
Non-cash interest |
|
|
7,853 |
|
|
|
|
9,966 |
|
(Gain) loss on disposal
of fixed assets |
|
|
(15 |
) |
|
|
|
1,909 |
|
Non-cash compensation
expense/stock option expense |
|
|
585 |
|
|
|
|
593 |
|
Provision for losses on
accounts receivable and inventory |
|
|
298 |
|
|
|
|
1,711 |
|
Change in derivative
warrant liability |
|
|
(83 |
) |
|
|
|
(136 |
) |
Changes in operating
assets and liabilities: |
|
|
|
|
|
|
|
|
Accounts
receivable |
|
|
2,842 |
|
|
|
|
4,135 |
|
Inventories |
|
|
(508 |
) |
|
|
|
1,718 |
|
Prepaid and other
assets |
|
|
1,138 |
|
|
|
|
(211 |
) |
Accounts payable |
|
|
(3,557 |
) |
|
|
|
(3,418 |
) |
Accrued
liabilities |
|
|
(867 |
) |
|
|
|
(897 |
) |
Net cash used in
operating activities |
|
|
(779 |
) |
|
|
|
(1,189 |
) |
|
|
|
|
|
|
|
|
|
Investing
activities: |
|
|
|
|
|
|
|
|
Purchases of property
and equipment and intangible assets |
|
|
(308 |
) |
|
|
|
(1,456 |
) |
Proceeds from sale of
fixed assets |
|
|
251 |
|
|
|
|
- |
|
Net cash used in
investing activities |
|
|
(57 |
) |
|
|
|
(1,456 |
) |
|
|
|
|
|
|
|
|
|
Financing
activities: |
|
|
|
|
|
|
|
|
Proceeds from long-term
debt |
|
|
- |
|
|
|
|
12,787 |
|
Payments on capital
leases |
|
|
(260 |
) |
|
|
|
(203 |
) |
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 |
|
|
3,044 |
|
|
|
|
2,136 |
|
|
|
|
|
|
|
|
|
|
Net change in cash and
cash equivalents |
|
|
2,208 |
|
|
|
|
(509 |
) |
|
|
|
|
|
|
|
|
|
Cash and cash
equivalents at beginning of period |
|
|
2,856 |
|
|
|
|
2,578 |
|
Cash and cash
equivalents at end of period |
|
$ |
5,064 |
|
|
|
$ |
2,069 |
|
XTANT MEDICAL HOLDINGS,
INC.CALCULATION OF NON-GAAP CONSOLIDATED EBITDA
AND ADJUSTED EBITDAAND RECONCILIATION TO NET LOSS
FOR THE PERIODS ENDEDSEPTEMBER 30, 2018 AND
2017(Unaudited, in thousands)
|
Three Months Ended September
30, |
|
Nine Months Ended September
30, |
|
|
|
2018 |
|
|
2017 |
|
|
2018 |
|
|
2017 |
|
|
|
|
|
|
|
|
|
Net loss |
$ |
(3,153 |
) |
|
$ |
(8,514 |
) |
|
$ |
(13,408 |
) |
|
$ |
(23,992 |
) |
|
|
|
|
|
|
|
|
Other expense |
(30 |
) |
|
- |
|
|
(18 |
) |
|
- |
|
Depreciation and
amortization |
1,655 |
|
|
2,797 |
|
|
4,943 |
|
|
7,037 |
|
Interest expense |
1,790 |
|
|
3,810 |
|
|
8,156 |
|
|
10,538 |
|
|
|
|
|
|
|
|
|
Non-GAAP EBITDA
gain (loss) |
262 |
|
|
(1,907 |
) |
|
(327 |
) |
|
(6,417 |
) |
|
|
|
|
|
|
|
|
Non-GAAP EBITDA/Total
revenue |
1.5 |
% |
|
-9.6 |
% |
|
-0.6 |
% |
|
-10.1 |
% |
|
|
|
|
|
|
|
|
NON-GAAP
ADJUSTED EBITDA CALCULATION |
|
|
|
|
|
|
|
Non-cash
compensation |
180 |
|
|
(20 |
) |
|
585 |
|
|
217 |
|
Change in warrant
derivative liability |
(42 |
) |
|
20 |
|
|
(83 |
) |
|
(136 |
) |
Separation related
expenses |
436 |
|
|
792 |
|
|
490 |
|
|
1,396 |
|
Litigation reserve |
- |
|
|
1,342 |
|
|
- |
|
|
1,342 |
|
Facility consolidation
costs |
9 |
|
|
- |
|
|
195 |
|
|
- |
|
Restructuring
expenses |
614 |
|
|
1,194 |
|
|
2,582 |
|
|
2,814 |
|
|
|
|
|
|
|
|
|
Non-GAAP
Adjusted EBITDA gain (loss) |
$ |
1,459 |
|
|
$ |
1,421 |
|
|
$ |
3,442 |
|
|
$ |
(784 |
) |
|
|
|
|
|
|
|
|
Non-GAAP Adjusted
EBITDA/Total revenue |
8.5 |
% |
|
7.2 |
% |
|
6.4 |
% |
|
-1.2 |
% |
ContactKathie Lenzen, Senior Vice President, Finance &
Administration and Chief Financial Officer406.388.0480Email:
klenzen@xtantmedical.com
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