Q4 2020 Xtant Medical Holdings Inc Earnings Call

[music].

Greetings and welcome to the X 10 medical fourth quarter and full year 'twenty 'twenty financial results Conference call.

At this time all participants are in a 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 Matt Steinberg of Lazard Finn partners. Please go ahead.

Thank you operator, and welcome to accident Medical's fourth quarter and full year 'twenty 'twenty financial results call joined.

Joining me today is Sean Brown, President and Chief Executive Officer, and Greg Jensen, Vice President Finance and Chief Financial Officer.

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

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

These forward looking statements reflect <unk> current perspective on existing trends and information can be identified by search such words as expect.

<unk> will may anticipate believe should intend and other words with similar meaning.

Such forward looking statements are not guarantees of future performance and involve risks and uncertainties, including those noted in the risk factors section of the company's annual report on form 10-K that will be filed with U S. D C. Today.

Actual results may differ materially.

Company's financial results press release, and today's discussion include certain non-GAAP financial measures.

Please refer to the non-GAAP to GAAP, reconciliations, which appear in the tables of our press release and other 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 may be listening to the replay. This call was held and recorded on Wednesday February 24th at approximately nine a M. Eastern standard time.

<unk> declines 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 Browne.

Thank you, Matt and good morning to everyone listening during the past year, we undertook numerous strategic and operational initiatives to mitigate the effects from the pandemic, while positioning <unk> to focus on delivering growth in the years to come.

Actions enabled us to preserve cash while right sizing our operations as we enter 2021, we are a leaner more efficient company that is poised for growth. Despite a fairly significant uptick in COVID-19 hospitalizations across our largest markets for the fourth quarter of 2020, we are pleased with the progress made across our business highlighted consecutive quarter.

Income from operations in the second half of 2020 other aggressive actions earlier in the year and it paid off as we work through the second wave of Covid hospitalizations strategically we chose to focus on our strengths and to align our business with the changing market environment, which when combined with our successful debt restructuring revamped operating.

<unk> initiatives provide us with positive momentum entering in 2021.

Our confidence is further underscored by the $20 million private placement investment that we are in the process of closing and expect to close today. This investment recognizes the success that we've had in turning around X sight medical as well as the growth potential of our business moving forward.

Our revenues for the fourth quarter of 2020 for 14 million about flat from the third quarter as the rebound in domestic spinal electric procedures slowed dramatically towards the second half for the quarter due to the rise in Covid cases are largest markets were hit, particularly hard with delayed or canceled electric procedures in spite of these.

Challenges, which we expect will persist for the near term, we anticipate that our shift from an operational focus to a commercial focus will drive our future growth.

For I highlight our 2021 strategy, let me first recap last year's accomplishments, what we completely rebuilt our cost structure and refocus the company on areas, where we can be successful this including stripping out underperforming investments and activities that will either strategically distracting or financially unsustainable too we.

Converted most of our sizable outstanding debt. This cleaned up our balance sheet and has now given us the freedom to focus our working capital growth type initiatives.

Three we rolled out two new product lines, the major form S. I in the Osteo of IV plus from the second half of 2020 that are now starting to get traction more importantly, we have at least three new products that will be rolled out in 2021 that will continue this forward momentum.

And for we close one of the largest regional G. P. OS in the country that would give us the kind of contract coverage debt our perspective distributors have been looking for in the Midwestern and southern states. Thanks.

Thanks for these actions we generated for consecutive quarters of operating profit during the second half from 2020, which was a major accomplishment for the <unk> more importantly, we have set the standard for our business to expect this type of performance. Additionally, our debt restructuring dramatically reduced our debt load and lowered our cost to service. This debt moving forward. These actions.

Make it easier for us to facilitate future access to the capital markets to fund our growth initiatives.

Now that we've made tremendous progress under difficult circumstances, we are focused on strategic initiatives, which will drive our overall commercial performance for.

First we plan to continue to develop and release new products on a regular cadence. We believe there's a significant opportunity to expand and improve our biologics offering we have initiatives underway to bring three new products to market throughout the year and several more in the years to come.

Second we are expanding our marketing programs and distribution network as I mentioned earlier, our latest G. P. O agreement was critical in creating broad coverage to further expand our distribution network, particularly in the locations that have higher density populations. Additionally, we remain committed to helping our existing distributors drive greater penetration in their markets through new.

New incentive programs, new product releases and a revamped high touch service model, we anticipate that these events will help enable our distributors to grow more profitably and in turn help accident grow as well.

Finally, as we've done other paths, we will continue to pursue operational improvements. While we were pleased to have generated an operating profit in the last two quarters. There is still more margin upside to our business. Additionally, we see significant opportunity in reducing our inventory on hand, and that's improving our working capital with.

For 2020 in our rearview mirror, we feel a renewed energy throughout ex Tac as we shift our strategy to focus on growth supported by our improved financial position combined with new product introductions and the expansion of our distribution and sales channels. We have a well earned sense of confidence that we can substantially grow our business moving forward now.

Now I'd like to turn the call over to our CFO, Greg Johnson for a discussion of our fourth quarter and full year 2020 financial results.

Thank you, Sean and good morning, everyone.

Total revenue for the fourth quarter of 2020 was $14 million compared to $17 million in the same quarter of the prior year for.

For full year 2020, total revenue was $53 3 million compared to $64 7 million for the same period in 2019. These.

These decreases were due primarily to the impact of the Covid pandemic that began in March of this year. However, electric procedures did recover to some extent during the second half from 2020, and then decreased again during the months of November and December as Covid hospitalizations increased dramatically and our largest <unk>.

Markets.

Gross margin for the fourth quarter of 2020 was 64, 1% compared to 67, 3% for the same period in 2019.

Gross margin for full year, 2020 was 64, 5% compared to 65, 7% for the same period in 2019.

These decreases were primarily attributed to diminish the economies of scale, partially offset by reduced depreciation expense.

Fourth quarter 2020, operating expenses were $8 7 million compared to $11 7 million in the same period a year ago.

For full year 2020, operating expenses were $35 1 million compared to $44 8 million for the same period in 2019.

As a percentage of total revenue operating expenses were 62, 4% and 65, 9% for the three and 12 month periods ended December 31, 2020, respectively compared to 68, 6% and 69, 1% for the three and <unk>.

12 month periods ended December 31, 2019, respectively.

General and administrative expenses decreased by $1 3 million to $3 2 million for the fourth quarter of 2020 compared to the same period in 2019 and decreased by $3 8 million to $13 5 million for.

For the full year 2020 compared to the same period in 2019. These.

These decreases were primarily due to lower legal and consulting fees legal settlement expenses.

Salaries and wages license fees and executive recruiting fees, partially offset by additional stock based compensation expense and severance related expenses.

Sales and marketing expenses were $5 4 million and $21 million for the three and 12 month periods ended December 31, 2020, respectively, a decrease of 23% and 21% for the three and 12 month periods respectively.

These decreases were primarily due to lower sales commissions because of lower sales reduced salaries and wages and lower travel expenses.

As Sean mentioned earlier responding to the early onset of the pandemic, we took immediate action to restructure and realign our business model, enabling the company to turn an operating profit for the second straight quarter in 2020, even with Covid <unk> impact on revenues during fourth quarter.

Net loss for the fourth quarter, 2020 was $700000 or <unk> <unk> per share compared to a loss of $1 $6 million or <unk> 12 per share in the comparable 2019 period net.

Net loss for 2020 was $7 million or 25 cents per share compared to $8 $2 million or <unk> 62 per share in 2019.

Adjusted EBITDA for the fourth quarter of 2020 was $1 1 million compared to $1 2 million for the same period of 2019.

Both full year 2020, and 2019, adjusted EBITDA were $3 $9 million.

As of December 31, 2020, we had $2 3 million of cash and cash equivalents $6 9 million of net accounts receivable $21 4 million of inventory and $5 million available under our credit facility.

Following the completion of our debt restructuring transaction in October we launched a rights offering that resulted in total gross proceeds of $763000 and as announced earlier. This week. We are in the process of closing a private placement investment that is expected to result in total gross proceeds of 20 million.

The remaining principal balance of our outstanding debt totaled $15 6 million at the end of 2020 now I'll turn the call back to Sean for closing remarks.

Thank you Greg.

We are pleased to have closed a challenging year with consecutive quarters of operating profit. These results represent the success or just types of strategic actions. We took back from the beginning of March looking ahead, we are well positioned to invest in our commercial pursuits drive growth our growth strategy will be focused on establishing a regular cadence of new.

New products, and broadening and engaging our distribution network.

The same time, we will continue to monitor the elective procedure landscape in Covid cases across the country adjusting our commercial strategy is necessary that said as a vaccine rollout accelerates. We are optimistic that elective procedures will normalize over the course of the year. We believe that those same markets hit hardest by the pandemic, which in turn adversely affected.

<unk> has pent up demand and should return to normalized procedure volumes quickly above all else through these actions we remain dedicated to fulfilling our mission of honoring the gift of donation. So our patients can live as full a life as possible.

Thank you for joining us today and your continued support.

This concludes today's call all parties may now disconnect.

Okay.

Yeah.

Yeah.

[music].

Yeah.

[music].

Yeah.

Yes.

[music] zone.

Okay.

[music].

Yes.

[music].

Okay.

Yeah.

[music].

Yeah.

[music].

Yes.