Q2 2020 Xtant Medical Holdings Inc Earnings Call

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Greetings and welcome to the extent Medicals second quarter 2020 financial results Conference call. At this time all participants are in listen only mode. If anyone should require operator assistance. During the conference. Please press star zero on your telephone keypad as a reminder, this conference is being recorded.

I would now like to turn the conference over to my Steinberg of what's our fans partners. Please go ahead.

Thank you operator, and welcome to exit Medicals second quarter 2020 financial results call. Joining me today, as Sean Brown, President and Chief Executive Officer.

Greg Johnson, Vice President Finance, and Chief Financial Officer.

Todays call is being webcast and will be posted on the company's website for playback.

During the course of this call management may make certain forward looking statements regarding future events and the company is expected future performance.

These forward looking statements reflect extends current perspective on existing trends and information and can be identified by such words as expect plan will may anticipate believe should intends and other words with similar meaning I.

Any such forward looking statements are not guarantees of future performance and involve risks and uncertainties, including those noted in the risk factor section of the company's annual report on form 10-K filed with the FCC on March 5th 2020, and as supplemented by the Companys subsequent.

C C filings actual results may differ materially.

A companys financial results press release, and today's discussion includes certain non-GAAP financial measures. Please refer to non-GAAP to GAAP reconciliations, which appear in the tables of our press release and or otherwise available on our website.

Note that our form 8-K filed with our financial results press release provides a detailed narrative that describes our use of such measures for the benefit of those of you who maybe listening to the replay. This call was held and recorded on Monday August 3rd at approximately 430 PM Eastern daylight time the company Dick.

Lines any obligation to update its forward looking statements, except as required by applicable law now I'd like to turn the call over to Sean Brown.

Thank you, Matt and good afternoon to everyone listening.

Second quarter 2020 was truly an unprecedented and you need time not only in our company's history, but also in the healthcare sector and global economy at the start of the quarter pandemic outbreak search across the country, creating restrictions on elective procedures that put the majority of spinal procedures on hold throughout the second.

Quarter, we saw a dramatic uptick in the month to month spinal Electra procedures and supported by pent up demand, we generated revenues of 10.5 million in the second quarter. The spine market tends to be the least elective of elective procedures since patients aren't such still debilitating pain and as such these proceeds.

Just were among the first or is it.

Beginning in March the start of the pandemic, we implemented a series of strategic actions to adapt to the new environment and maintain business continuity opposition to the company to emerge from the pandemic had a position of strength.

As we previously announced in the first quarter, we focused on four areas to achieve those objectives and our results in the second quarter reflect early positive returns first and foremost we focused on and we continue to prioritize keeping our employees and their families safe and healthy through social distancing and work.

I'm home procedures, where possible second to conserve our cash we initiate extensive cost reductions at the end of the first quarter. This included significant workforce reductions and across the board pay decrease for all employees as well as our board of Directors. In addition, we enacted deep cuts and discretionary spending and capital expenditures.

These swift actions to reduce expenses enabled us to conserve cash and rightsize our cost structure. During this uncertain environment going forward, we would remain prudent in our expense management as we continue to adapt to a new economic reality and health care.

Third we use this time to catch up on production shortfalls, we rebuilt inventory levels continue to focus on optimizing our inventory position.

This will enable us to adequately meet current and future demand needs and finally due to the slowdown and procedures, we were able to focus on areas of business that needed to be fixed in particular, a fire production processing was not meeting our demand needs and our materials management function has become outdated over the course the last three months we've dramatically.

Improve the business for the future to improve overall efficiency.

Overall I'm extremely pleased with the performance of our team under such difficult circumstances, and we're now well positioned to take on current and future challenges. We remain vigilant in monitoring the market for regions that are impacted by coated and we'll continue to be flexible and managing our business going forward, we believe operating as a leaner organization.

Proving our overall efficiencies will allow us to live our mission of honoring that gift of donation Saar patients can live as full life as possible.

Now I'd like to turn the call over to Greg Johnson for a discussion of our second quarter 2020 financial results.

Thanks, John and good afternoon, everyone.

Total revenue for the second quarter of 2020 was 10.5 million compared to 15.3 million for the same period and 29 team for the first half of 2020 total revenue was 25.3 million compared to 32 million for the first half of 2019.

Decreases are attributed to the impacted cobot 19, and the sudden drop in elective procedures beginning in early March as Sean mentioned earlier sales gradually improve throughout the second quarter driven by the resumption of elective procedures.

Gross margin for the second quarter of 2020 was 62.2% compared to 64.9% for the same period in 2019 gross margin for the first half of 2020 was 63.9% compared to 64.8% for the first half of 2019.

The decrease in gross margin as a percentage of sales is attributed to the decrease in second quarter sales.

Second quarter 2020, operating expenses were 6.9 million compared to 10.5 million in the same period a year ago for the first six months of 2020 operating expenses were 17.9 million compared to 22 million in 2019.

As a percentage of total revenue operating expenses were 65.9% and 70.8% for the three and six months ended June Thirtyth 2020, respectively compared to 68.6% for both the three and six month periods ended June Thirtyth 2019.

Okay.

General and administrative expenses decreased by 1.3 million to 2.9 million for the three months ended June Thirtyth 2020, compared to the same period in 2019 and decreased by 1.4 million to 7.3 million for the first half of 2020 compared to the same period.

In 2019.

These decreases were primarily due to a reduction in salary and wages lower legal and consulting fees and reduced legal settlement expenses, partially offset by additional stock based compensation expense and severance related expenses from the workforce reductions we enacted due to covert 19.

Sales and marketing expenses were 3.9 million and 10.3 million for the three and six month periods ended June Thirtyth 2020, respectively.

Decrease of 36% and 20% for the three and six month periods respectively.

These decreases were primarily attributable to lower sales commissions due to lower sales and reduce salaries and wages due to the workforce reductions at the end of first quarter 2020.

Research and development expenses were approximately $110000 for the second quarter of 2020, a decrease of 47% compared with the same period in 2019 and for the six month period, ending June Thirtyth 2020, R&D expenses decreased by $120000.

Or 25% due to reduce salaries compared to the prior year. These reductions are attributed to our cash conserving strategies during the corporate 19 pandemic.

The net loss for the business was 2.5 million or 19 cents per share for the second quarter in 2020 compared to a loss of 1.9 million or 15 cents per share in the comparable 2019 period.

The year to date net loss for 2020 was $5 million or 38 cents per share compared to 4.7 million or 36 cents per share in 2019.

Adjusted EBITDA for the second quarter of 2020 was $712000 compared to 1.1 million for the same period of 2019 adjusted EBITDA for the first six months of 2020 was 1.2 million compared to 2.1 million for the same period of 2019.

As of June Thirtyth, 2020, we had $3 million of cash and cash equivalents 7.6 million of net accounts receivable $19.9 million of inventory and $12.2 million available under our credit facility now I'll turn the call back to Sean for additional common.

Yes.

Thank you Greg in closing against a difficult backdrop facing the healthcare industry entering the second quarter the month by month uptick in spinal elective procedures combined with pent up demand enable us to deliver a solid revenue performance that only months earlier, but far bleaker. Unfortunately, the pandemic continues.

To create regional uncertainties, especially in areas of the country, where we are strongest.

We will remain vigilant on managing our expenses and improving operations. So that we can adapt our business to the new environment.

I look forward to providing updates on our progress on future calls, which all those listening on today's call. Good health. Thank you for your continued support.

This concludes today's conference. Thank you for your participation you may disconnect your lines at this time.

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