Q1 2021 Xtant Medical Holdings Inc Earnings Call

Greetings and welcome to the extent and medical first quarter 2020 One financial results Conference call. All participants are in a listen only mode for today's presentation.

And should require operator assistance during the conference. Please press star zero on your telephone keypad.

As a reminder, this conference call is being recorded I would now like to turn the conference over to Matt Steinberg simple as RF and partners. Please go ahead.

Thank you operator, and welcome to accident Medical's first quarter 2021 financial results call.

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.

And of course of this call and absolutely management.

Management may make certain forward looking statements regarding future events and the company's expected future performance. These forward looking statements reflect accents current perspective on existing trends and information and can be identified by such words as expect plan 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 and the risk factors section of the company's annual report on form 10-K filed with the FCC on February 24th 2021 actual results may differ materially.

The 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 are 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 Tuesday may 11th.

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The company 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 at this time last year and so the global pandemic took over our world. We outlined four goals that would put ex Tac medical and a much stronger financial and operational position. Those goals consisted of the following one keep our people and their families safe to conserve as much cash.

As possible three catch up on production shortfalls, and four transform our bio production and hardware operations a year later as we begin to emerge from the worst of this pandemic. We can now look back and say that not only did we meet those goals, but X 10, as the business is stronger than ever our business underwent a significant.

And transformation with the implementation of several strategic and operational initiatives designed to position accident for future growth and strengthen our financial position case and point, it's the $20 million private placement we closed in February that brought in much needed growth capital to support our initiatives focused on innovative new products and expansion.

And of our distribution network. In addition last week, we closed on debt financing of $20 million at more favorable terms and interest rates.

Now turning to our results and first court just the first quarter started off slow and as our sales were impacted by the reduction of elective spinal procedures and cause the increase of COVID-19 hospitalizations across the top markets. We served however in March and April we saw solid sales rebound, indicating a recovery of procedures from the first two months of the year.

This is indicative of the nature of spinal procedures, which typically have a quicker rebound compared to other elective procedures and fac and Mark we did business with the highest number of customers than any other bonds over the past year.

We continue to take the necessary steps and managing through the impacts from COVID-19, we have several upcoming initiatives as part of our shift from an operational focus to a commercial focus that we believe will drive future growth first we are advancing the release of several new product introductions that will expand and improve our biologics portfolio offering last year.

We launched two new product lines, the MAGE format Si and he asked you about plus we have plans to at least four new biologic product products in 2020, one, including some exciting products that we believe will contribute to meaningful revenue growth and the year as Ed.

Second we are in the process and expanding our marketing programs and distribution network, we remain committed to helping our existing distributors drive greater penetration and their markets. We believe that our incentive programs new product releases and revamped high touch service model will help enable our distributors to grow more profitably and insurance.

Next day, it grow as well we plan to Reengage with our customers as markets continue to open up and showcase our leading products and trade shows and other national and regional meetings and.

In addition to these marketing plans and supported by our stronger financial position. We're in the process of rebuilding our sales force. After the aggressive actions. We took at the start of the pandemic to reduce costs. We are excited to reinvest and our commercial team by bringing in new talent and expanding into adjacent markets and regions across the country, where we see promising opportunity.

These.

Looking ahead, we were pleased to be in a position, where we can focus on growth and commercial execution, our strategic initiatives give us the confidence that we can substantially grow our business over the long term over the coming months, we will continue to prudently manage our costs and work to mitigate the impact of COVID-19 pandemic, while taking advantage of gross gross opportunities within <unk>.

Our target and adjacent markets now I would like to turn the call over to our CFO, Greg Johnson and for a discussion of our first quarter 2021 financial results.

Okay.

Thank you, Sean and good morning, everyone.

Total revenue for the first quarter of 2021 was $12 5 million compared to $14 8 million and the same quarter of the prior year.

The decline in revenue was largely attributed to the impact of COVID-19 on the occurrence of electric procedures and our largest markets. However, electric procedures did recover in March after a challenging January and February.

Gross margin for the first quarter of 2021 was 64, 5% compared to 65% for the same period in 2020.

And a slight reduction in gross margin was primarily attributed to diminished economies of scale do total ore sales, partially offset by reduced depreciation expense.

First quarter 2021 operating expenses were $8 1 million compared to 11 million and the same period a year ago.

As a percentage of total revenue operating expenses were 64, 6% and the first quarter of 2021 compared to 74, 3% and the first quarter of 2020.

General and administrative expenses decreased by 1.3 million to $3 million for the first quarter of 2021 compared to the same period and 2020.

The decrease was primarily due to lower severance related expenses and costs associated with ERP system upgrades and first quarter last year.

Sales and marketing expenses were $4 9 million and the first quarter of 2021 compared to $6 4 million and first quarter of 2020 a decrease of 23%.

The decrease was primarily due to lower sales commissions because of lower sales and reduced compensation related expenses.

Net loss and the first quarter of 2021 was $29000 or zero cents per share compared to a net loss of $2 5 million or <unk> 19 per share and the comparable 2020 period.

Adjusted EBITDA for the first quarter of 2021 was <unk> 8 million compared to <unk> 3 million for the same period in 2020.

As of March 31, 2021 we had $18.6 million of cash and cash equivalents $7 million of net accounts receivable.

And 1.6 million of inventory and $5 million available under our then existing credit facility.

As we previously announced we closed a private placement that resulted in total net cash proceeds of approximately $18.4 million, which we expect will be used for working capital and other general corporate purposes. In addition on May six we entered into a new credit agreement with Midcap financial.

And trust, replacing and paying off our then existing credit facility with over med royalty opportunities fund too.

These new credit agreements provide a $12 million secured term loan and and $8 million secured revolving credit facility.

We believe this debt financing right sizes, our total debt and enhances our balance sheet and allows us to continue focusing on our strategic growth initiatives.

Also as announced earlier today, we filed a universal shelf registration statement with the FCC that once declared effective will allow us to offer and sell from time to time over a three year period, various securities and or Mount up to $150 million.

Filling of this type of registration statement and as a matter of good governance and will give us flexibility to finance future growth initiatives and business opportunities by accessing the capital markets on a timely and cost effective basis.

The registration statement upon effectiveness.

Also allows certain stockholders affiliated with orbit med advisors LLC to offer and sell from time to time up to approximately $18 2 million shares of our common stock, which if this occurs we will increase the number of shares and our public float and hopefully bring more liquidity to our stock.

Please note that the mere filing of this shelf registration statement does not mean that either we or the orbit med funds or contemplating any specific offering at this time.

And the specifics of any future operating will be determined at such time and will be described and our prospectus supplement filed in connection with such offering.

Now I'll turn the call back to Sean for closing remarks.

Okay.

Thank you Greg for 'twenty, and 'twenty, one and our strategy will focus on establishing a regular cadence of new product introductions, broadening and engaging our distribution network investing and our sales force and furthering our operational efficiencies by doing this it will provide us with a solid pathway to execute on.

On our long term growth initiatives.

Well the first two months of 2020, one we're very challenging we see the good news of lower COVID-19 case counts lower hospitalizations and positive vaccine trends. We are optimistic that electric procedure volumes will normalize over the course of the year as a spinal elective procedures are usually the first to return given patient needs.

We believe there is pent up demand and our largest markets and.

And so doing we remain dedicated 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 for your continued support.

This concludes today's call all parties and he now disconnect.