Xtant Medical Holdings Inc. Q1 2023 Earnings Call
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Greetings and welcome to X temp Medicals Q1, 'twenty two 'twenty three financial results call.
At this time all participants are in a listen only mode.
A question and answer session will follow the formal presentation.
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During the course of this call management may make certain forward looking statements regarding future events, the company's expected future performance.
These forward looking statements reflect <unk> 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 in the risk factors section of the company's annual report on Form 10-K filed with the SEC on March seven 2023, and in subsequent SEC reports and press releases.
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.
Thank you, Matt and good morning, everyone. We are very proud of the significant progress made by ex Tac medical in the first quarter during the quarter. We achieved several milestones highlighted by solid revenue growth of 38%, which included strong organic growth of 29% as well as 9% growth from the first sales.
Generated by our recently acquired co flexing Caltex product lines importantly, all market channels of independent agents OEM Dth and the ASC market saw a significant growth, which demonstrates that the continued execution against our strategic growth pillars, as it's well positioned for long term sustainable growth.
As a reminder, our four key growth pillars are focused on one new product introductions to distribution network expansion three adjacent market penetration and four targeted strategic acquisitions now I will share an overview of our first quarter business performance, starting with an update on the complex acquisition and integration.
<unk> the code Flash Interlaminate stabilization device and the co fixed supplemental fixation device.
Notably these new product lines bring transformative treatment options to our large and growing patient population.
This deal was an immediate contributor to our top line as evidenced by the 55% year over year revenue growth to our spinal fixation business. Furthermore, it improved our margin profile and better positions us to achieve profitability in the near future integration of <unk> has been progressed release progressing smoothly.
And looking ahead, we plan to remain diligent in our approach to both tuck in and transformational acquisitions as the year progresses.
<unk> market. We are excited about the traction generated to date and look forward to the continued growth of these product lines turning to our distribution network as part of the <unk> transaction, we accelerated our footprint expansion. The addition of roughly 150 current new distributors and a significant number of new physicians and surgeons to our network.
Unrelated to the acquisition, we secured 17, new distributors in the first quarter.
Glad to have the capacity to handle these new orders. This is an important part of our growth strategy as it allows us to quickly expand the total addressable market for our products.
From an operational standpoint, our focus has been on ensuring we can manage costs and scale for profitability supported by our proactive efforts, we are realizing improvements and expand their capacity, while better managing our supply chain. We continue to manage our cost prudently as we regularly target areas to improve our operational efficiency.
Likewise, as we are making strides towards the modernization of our production optimization of our processes and diversification and development of new product lines now.
Long term sustainable growth now.
So yes so.
Also want to caution on a couple of things first of all <unk>. Overall. We're this is a business that we're in the process of digesting you think about people invitation implementation has gone great.
When we see that we're gonna have substantially more capacity to work with as we look at the third quarter.
Yes. So there is nothing well, we always have a full funnel of new opportunities right and a lot of it comes down to timing evaluation all the other pieces to that.
But I think you're hitting on both sides I think that as an organization, we absolutely want to find where possible similar deals like we have with teleflex.
Product lines that quite frankly were forgotten or I forgot just couldn't be given the focus at a bigger organization will take that and those are things that from an integration perspective and from the implementation and from quite frankly.
What it means to your revenue and earnings can be accretive fairly quickly. So love Love Love Love those deals will seek those wherever possible.
When you talk about some capacity expanding opportunities that also bring us potentially into some other biologics I see those because again the size of our business those are a little more transformational and so absolutely. Those are things that are also on the docket. It's just a matter of again, finding the right fit and finding what is the right value and you know all the pieces that go along with that.
No.
So without being too Cagy right I got it I got it you know, it's it's a it's really a matter of.
Prioritization and the deal that comes forward.
Got it all makes sense and then last one for you here Scott you know gross margins were up nicely you know just one month of called Flex benefit.
It should be up nicely again, with a full quarter, where does the entire business kind of steady out here over the next let's say couple of quarters through the end of the year from a gross margin perspective.
Okay.
I think we saw that's coming in about mid 57, I think as we progressed through the year I think we strive to make our way into the sixties.
Low to mid <unk> on the gross margin Kroger.
Helpful. All right. Thanks, guys for taking the questions nice quarter again thanks.
Great. Thanks, Jason.
The next question is from Kyle Rose of Canaccord. Please proceed with your question Hey, Kyle how are you good morning, everyone.
Two quick questions for me one I mean, you talked about Copel ex kind of opening up the non acute sector. I'm. Just wondering how you can think about that longer term.
I saw that in an earlier question just any changes to the different type of distributors you need for that market and then I'll just ask the second question now.
Can you just remind us the new product cadence that you have lined up now for biologics. Thank you.
Sure Okay.
So how are we thinking about co flex and how that and let me just repeat the question how we're thinking about co flex.
Moving forward and how that helps us in the ambulatory surgery center market Slash outpatient market. If you will is that is that really kind of your question Kyle.
Yes.
Then just the overall strategy.
We see expanding share a different call point.
Yeah. So when you think about co flex overall, the fact that it's.
Really what we're going after those.
It's a really robust market of the experienced 60000, plus laminectomy and the 260000 plus single level fusions and so what we're what we have to offer really is a great product that.
Many if not most of those procedures are moving outside of the hospital and so we look at Colfax is this great opportunity that that not only is a superior product and the fact that it's a superior clinical outcome.
It preserves all alternatives. So if you are somebody was about to get a laminectomy why wouldn't you get a laminectomy with Arco flex device, which again in our lab and or it gives you a full range of motion gives you all the things that you need and hopefully staves off fusion for quite some time, but if fusion is in your future you've been giving yourself a fair.
A number of years to be able to go back to that if that is if that is.
Our solution the challenge with going to fusion right away and in fact that as you know you start.
Having to have.
And next level fusion stuff and so so from our side when we look at it and where this is positioned and how we can go after it I think there's a great opportunity. Additionally, the reimbursement in the ambulatory surgery Center World has actually gone up really nicely and so when you compare it to the other procedures such as land that activate this is a very very profitable procedure, if you will and.
Clinically arguably this is a great great great solution for any surgeon, who is a patient that quite frankly want to stave off.
Any type of confusion for quite some time.
And so that's kind of how we're positioned and how we're looking at it and then when you look at what we're rolling out with respect to our pipeline of new products certainly on the.
On.
The biologic side to two things one of the things that we've had a challenge with on our side is the supply of our Osteophyte plots, we cannot make enough of it if we can't get enough of it out the door. So that's still a product line that has a fair amount of Av.
Room left to grow and so we're still focused on obviously, a bypass as well as the Osteo factor, which Osteo factor again is our growth factor product, which again, if we can't sell enough of it and it's going very very well.
And if there are additions and again you got to be careful when you're rolling out products, you don't want to take any steam out of something that's working really well.
We will have some additions for instance, the osteophyte plus side.
We also will have.
There is several other products that are queued up it's a matter of when we decide to actually release them because again, we want to make sure we're getting as much out of these and giving all of our distributors and surgeons the opportunity to grow with these products as far as they can so that's what's in the pipeline right now and that's where our focus is.
But if yes, I mean, theres certainly more to come over the course of the next few years, but that's where we are today.
Thank you.
There are no additional questions at this time I'd like to turn the call back to Sean Brown for closing remarks.
Great. Thank you.
We are off to a great start in 2023 highlighted by a robust organic growth led by continued demand for our leading biologics products and initial contributions from our recently acquired co flex and co fixed product lines with our strategic growth pillars, beginning to materialize in the form of strong revenues and efficient operations. We are poised to continue building on this upward.
Trajectory as we scale the business. Moreover, the initiation of annual revenue guidance for 2023 further illustrates our confidence in our business and strategy.
And then finally, the success of our mission of honoring the gift of donation by allowing our patients to live as full and complete a life as possible is only made possible by our valuable employees I would like to thank them for their continued dedication to bringing our life changing solutions to patients in need.
Thank you for joining us today and for your continued support.
This concludes today's conference you may disconnect your lines at this time and thank you for your participation.
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