Q3 2023 Xtant Medical Holdings Inc Earnings Call
Speaker 1: Greetings and welcome to the Exped medical third quarter 2023 financial results conference call. At this time, all participants are in a listen only mode. A brief question answer session will follow the formal presentation. 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 FIN partners, please go ahead.
Greetings and welcome to the expert medical third quarter 2023 financial results Conference call.
At this time all participants are in a listen only mode.
Brief question and answer session will follow the formal presentation. 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'd now like to turn the conference over to Matt Steinberg Offend partners. Please go ahead.
Speaker 2: Thank you, operator, and welcome to Exit Medical's third quarter 2023 financial results call. Joining me today is Sean Brown, President and Chief Executive Officer and Scott Niels, Chief Financial Officer. Today's call is being webcast and will be posted on the company's website for playbath.
Thank you operator, and welcome to extra Medicals third quarter 2023 financial results call.
Joining me today is Sean Brown, President and Chief Executive Officer, and Scott <unk>, Chief Financial Officer.
Today's call is being webcast and will be posted on the company's website for playback.
Speaker 2: During the course of this call, management may make certain forward-looking statements regarding future events in the company's expected future performance.
During the course of this call management may make certain forward looking statements regarding future events and the company's expected future performance.
Speaker 2: These forward-looking statements reflect an extensive current perspective on existing trends, and information, and can be identified by such words as expect, plan, will, may, anticipate, believe, should, in tens, and other words, with similar meanings.
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.
Speaker 2: 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 10K filed with the SEC on March 7, 2023, and in subsequent SEC reports and press releases. Actual results need to be...
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 SEC on March seven 2023, and subsequent SEC reports and press releases.
Actual results may differ materially.
Speaker 2: The company's financial results press release and today's discussion includes certain non-GAAP financial measures.
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 our press release.
Speaker 2: Please refer to the non-GAP to GAP reconciliations, which appear in our press release, and are otherwise available on our website.
Otherwise available on our website.
Speaker 2: Note that our Form 8K, followed with our Financial Results Press Release, provides a detailed narrative that describes our use of such measures.
Note that our form 8-K filed with our financial results press release provides a detailed narrative that describes our use of such measures.
Speaker 2: For the benefit of those of you who may be listening to the replay, this call is held and recorded on Thursday, November 9th, at approximately 9 a.m. Eastern time. 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 Brown.
For the benefit of those of you who may be listening to the replay. This call was held and recorded on Thursday November nine at approximately nine a M eastern time.
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.
Speaker 3: Thank you, Matt, and good morning, everyone. In recent years, Axat Medical's evolution has featured important value-creating acquisition.
Thank you, Matt and good morning, everyone. In recent years accident Medical's evolution has featured important value, creating acquisitions, we have refinanced debt, we have lowered our operating cost basis, and we have done key financings and we have added new leadership. These critical initiatives have the company poised to.
Speaker 3: We have refinanced debt. We have lowered our operating cost basis, and we've done key finance.
Speaker 3: And we have added new leadership. These critical initiatives have the company poised to achieve sustainable long-term growth and take additional share of the large and growing US orthobiologics in Spine Mark.
Achieve sustainable long term growth and take additional share of the large and growing U S. Ortho biologics and spine markets. Our actions are starting to take effect as demonstrated in our third quarter financial results, notably we delivered record quarterly revenue of $25 million, an increase of 73% year over year.
The strong growth was driven by our core <unk> business, which includes organic growth of 18% and further bolstered by contributions from our recent acquisitions I want to reemphasize, our strong organic growth in the quarter. When we were in the process of digesting two very complicated acquisitions trying, particularly thrilled with excellent teams.
Speaker 3: I want to re-emphasize our strong organic growth in the quarter when we were the process of digesting two very complicated acquisitions. So I'm particularly thrilled with Extant Team's continued focus on our core business.
Continued focus on our core business.
Speaker 3: Our revenue growth and efficiently run operations are driving our bottom line as we recorded our second consecutive quarter of adjusted EBITDA. Altogether, our business is clicking on all cylinders, giving us more confidence regarding our future prospects.
Our revenue growth and efficiently run operations are driving our bottom line as we recorded our second consecutive quarter of adjusted EBITDA altogether, our business is clicking on all cylinders, giving us more confidence regarding our future prospects during.
Speaker 3: During the third quarter, as part of our expanding business, we completed the acquisition of Surgeon Lines Biologics and Spinal Fixation Business for $5 million in an all cash transaction. We believe Surgeon Lines business is a perfect complement with extant offerings, primarily with their spinal fusion and motion preservation portfolio.
During the third quarter as part of our expanding business. We completed the acquisition of search Alliance biologics and spinal fixation business for $5 million in an all cash transaction. We believe search lines business is a perfect complement with accents offerings, primarily primarily with their spinal fusion and motion preservation portfolio. So far.
Speaker 3: So far, we've completed the commercial integration of the acquisition ahead of schedule. It has been a great fit that is helping us rapidly expand our commercial footprint with new contracts and distributors. We believe there is significant room for continued upside as we remain focused on streamlining operations and capitalizing on synergistic opportunities.
We've completed the commercial integration of the acquisition ahead of schedule and its been a great fit that is helping us rapidly expand our commercial footprint with new contracts and distributors. We believe there is significant room for continued upside as we remain focused on streamlining operations and capitalizing on synergistic opportunities.
Speaker 3: Turning to a more detailed discussion of the quarters performance, I first want to remind the listeners that our four key growth pillars are focused on one new product introductions, two distribution network expansion, three adjacent market penetration and four strategic acquisition.
Turning to a more detailed discussion of the quarter's performance I want I first want to remind the listeners that our four key growth pillars are focused on one new product introductions to distribution network expansion three adjacent market penetration and for strategic acquisitions.
Speaker 3: The sustained robust demand for our osteo factor and osteovi plus products since their initial launch has been a driving force in our success with a 2.4 billion US orthobiologic market. Our newly expanded comprehensive product portfolio increasingly addresses this market. We're selecting our commitment to patients in need. Looking ahead, we remain opportunistic on future product launches and acquisitions that position us to take greater market share.
The sustained robust demand for our Osteo factor, an osteo bypass products since they are in this initial launch it's been a driving force of our success with the $2 4 billion U S. Ortho biologics market, our newly expanded comprehensive product portfolio increasingly addresses this market.
Our commitment to patients in need looking ahead, we remain opportunistic on future product launches and acquisitions have positioned us to take greater market share now.
Speaker 3: Now, turning to our distribution network expansion pillar, with the successful integration of Surgeon Line's contract portfolio and distributor network, we've added roughly 50 new agreements for a total of over 450 IDN and GPO agreements.
Now turning to our distribution network expansion pillar with the successful integration of search alliance contract portfolio and district distributor network. We've added roughly 50, new agreements for a total of over 450 I D. N G. P O agreements.
Speaker 3: Additionally, we picked up 150 new distributors, so now we have a network of more than 650 independent agents in creating a national network. In the quarters ahead, we will work on getting greater penetration with our current distribution network, and we'll be opportunistic in adding new distributors where it makes sense.
Additionally, we picked up a 150 new distributors. So now we have a network of more than 650 independent agents and creating a national network in the quarters ahead, we will work on getting greater penetration with our current distributor distribution network and we will be opportunistic in adding new distributors, where it makes sense.
Speaker 3: For our third pillar of leveraging adjacent markets, we continue to make inroads in penetrating these markets, particularly in the foot and ankle and trauma and orthopedic implant markets. Notably, our expanded capacity has translated into increased OEM sales.
For our third pillar leveraging adjacent markets, we continue to make inroads in penetrating these markets, particularly in the foot and ankle and trauma in orthopedic implant markets, notably our expanded capacity has translated into increased OEM sales.
Speaker 3: Finally, our fourth pillar focuses on achieving growth through M&A. Our approach to both tuck-in and transformational acquisitions remains a priority going forward. We continue to focus on acquisition targets based on R3Cs, capabilities, capacity, and cash flows. In terms of capabilities, we target businesses with our meeting needs of stem cells, amnion, motion preservation hardware, and a long-term focus on the higher end regenerative biological.
Finally, our fourth pillar focuses on achieving growth through M&A, our approach to both tuck in and transformational acquisitions remains a priority going forward. We continue to focus on acquisition targets based on our three CS capabilities capacity and cash flows in terms of capabilities, we target businesses with our <unk>.
He didn't needs of stem cells, ambien motion preservation hardware and a long term focus on the higher end regenerative biologics in terms of capacity, increasing our biologics production capacity that meets the demand we envision in the years ahead in terms of cash flows we seek businesses that are profitable.
Speaker 3: In terms of capacity, increasing our biologics production capacity that meets the demand we envision in the years ahead. In terms of cash flows, we seek businesses that are profitable or can become profitable by producing extant products.
Or can become profitable by producing <unk> products.
Speaker 3: The recent co-flex, surge line and now nano deals have met our acquisition criteria, marking significant milestones that are key for us and achieving our long-term goal.
The recent co flax surge align and now nanos deals have met our acquisition criteria, marking significant milestones that are key for us in achieving our long term goals well. We believe the surge line acquisition will be a long term growth driver in mid July their largest product line by ball was pulled off the.
Speaker 3: While we believe the Surge Line Acquisition will be a long-term growth driver in mid-July, their largest product line by bone was pulled off the market due to a tuberculosis infection caused by a zero, a contract manufacturer of Surge Line stem cell products. This not only impacts Surge Line, but it's had a significant impact on the entire stem cell market. Since then, the American Association of Tissue Banks or AATB released updated guidelines for donor screening requirements.
Market due to a tuberculosis infection caused by Z O a contract manufacturer of certain lines of stem cell products. This not only impacts surge like that has had a significant impact on the entire step submarket. Since then the American association of tissue banks or a a T be released updated guy the guidelines for donor screening requirements.
Speaker 3: We appreciate the AAPB's efforts in proactively addressing these important concerns to ensure patient safety. However, since this recall, donor availability has been limited and is adversely affected our stem cell path.
We appreciate the a T v's efforts and proactively addressing these important concerns to ensure patient safety. However, since this recall donor availability has been limited and has adversely affected our stem cell business. We anticipate that this current stem cell shortage will adversely impact fourth quarter revenues.
Speaker 3: We anticipate that this current stem cell shortage will adversely impact fourth quarter traveling through overdra
Speaker 3: We are working tirelessly to mitigate these external constraints and are optimistic that this is a temporary supply issue and we anticipate that this will normalize by the second quarter of 2024.
Working tirelessly to mitigate these external constraints and are optimistic that this is a temporary supply issue and we anticipate that this will normalize by the second quarter of 2024.
Speaker 3: As part of our strategy to meet demand and achieve adjusted positive EBITDA, our operational efforts have been dedicated to the implementation of crucial process improvement initiatives and capacity expansion. These actions have successfully boosted both production and overall efficiency, and as a result, we can sell and deliver products on a greater scale.
Part of our strategy to meet demand and achieve adjusted positive EBITDA. Our operational efforts had been dedicated to the implementation of crucial process improvement initiatives and capacity expansion. These actions have successfully boosted both production and overall efficiency and it was a result, we can sell and deliver products on a greater scale with.
Speaker 3: With the recently announced acquisition of the Nanos production operation from RTI Surgical, we are even better equipped to produce more of our own orthobiologics products versus having to source these products from outside vendors. Having full control over Nanos enables us to begin the process of reviving and growing this important product line.
Released recently announced acquisition of the nano production operation from RTI surgical we're even better equipped to produce more of our own ortho biologics products versus having to source. These products from outside vendors, having full control over and analysts enables us to begin the process of revising and growing this important product line.
Speaker 3: Finally, we raised our 2023 full year annual revenue range to approximately $88 million to $91 million, up from the previous range of $75 million to $77 million.
Finally, we raised our 2023 full year annual revenue range to approximately 88 million to 91 million up from the previous range of 75 million to $77 million.
Speaker 3: This newly revised guidance range reflects annual revenue growth of 52 to 57% from the year ago period. The updated guidance now includes contributions from the SurgeLine acquisitions, in addition to the strength of our organic business.
This newly revised guidance range reflects annual revenue growth of 52% to 57% from the year ago period.
The updated guidance now includes contributions from the search online acquisitions. In addition to the strength of our organic business overall.
Speaker 3: Overall, we have come a long way in a short period of time. Our business is performing exceptionally well, and we are excited about our growth potential, which continues to rise with our continued execution. Extent is strategically moving forward, and we have solid products, operations, and talent to back it up.
Overall, we have come a long way in a short period of time, our business is performing exceptionally well and we are excited about our growth potential which continues to rise with our continued execution extended strategically moving forward and we have solid products operations and talent to back it up.
Speaker 3: Now I'd like to turn the call over to Scott, who will discuss our third quarter 2023 financial results.
Now I'd like to turn the call over to Scott, who will discuss our third quarter 2023 financial results.
Speaker 4: Thank you, Sean, and good morning, everyone. Total revenue for the third quarter of 2023 was a record $25 million, compared to $14.5 million for the same period in 2022. This robust 73% annual increase is attributed primarily to greater independent agent sales, contributions from the COFLEX and COFIX product lines, opportunistic private label sales, and product sales from the recently acquired SurgeLine hardware and biologic.
Thank you Sean and good morning, everyone total revenue for the third quarter of 2023 was a record $25 million compared to $14 $5 million for the same period in 2022.
Robust, 73% annual increase is attributed primarily to greater independent agent sales contribution from the KOL flex and co a fixed product lines opportunistic private label sales and product sales from the recently acquired certain line hardware and biologics business gross margin for the third quarter of 2023 was 61.3 per.
Speaker 4: Gross margin for the third quarter of 2023 was 61.3% compared to 54.6% for the same period in 2022. The increase was primarily attributable to greater production and production efficiencies, favorable product mix, and a decrease in charges for excess and obsolete inventory, partially offset by higher product.
Compared to 54, 6% for the same period in 2022, the increase was primarily attributable to greater production production efficiencies favorable product mix and a decrease in charges for excess and obsolete inventory, partially offset by higher product costs.
Speaker 4: Third quarter 2023 operating expenses were $18.7 million, compared to $9.8 million in the same period a year ago. As a percentage of total revenue, operating expenses were 75%, compared to 68% in the same period.
Third quarter 2023, operating expenses were $18 $7 million compared to $9 $8 million in the same period, a year ago as a percentage of total revenue operating expenses were 75% compared to 68% in the same period a year ago.
Speaker 4: General and administrative expenses were $7.1 million for the three months ended September 30th, 2023, compared to $3.7 million for the same period in 2022. This increase is primarily attributable to additional compensation expense, acquisition-related legal expenses, amortization of intangible assets associated with the COFLEX and COFIX product lines, and higher consulting fees associated with acquisition-related activities.
General and administrative expenses were $7 1 million for the three months ended September 32023, compared to $3 $7 million for the same period. In 2022. This increase was primarily attributable to additional compensation expense.
Position related legal expenses amortization of intangible assets associated with the co flex in college credit lines and higher consulting fees associated with acquisition related activities.
Speaker 4: Sales and marketing expenses were $11.1 million for the three months ended September 30, 2023, compared to $5.8 million for the same period of 2022. This increase is primarily due to additional commission and compensation expense and higher professional service fees.
Sales and marketing expenses were $11 $1 million for the three months ended September 32023, compared to $5 $8 million for the same period of 2022. This increase was primarily due to additional commission and compensation expense and higher professional service fees.
Speaker 4: Net income in the third quarter of 2023 was $9.2 million, or $0.07 per share, compared to a net loss of $2.4 million, or $0.03 per share in the comparable 2022 period.
Net income in the third quarter of 2023 was $9 $2 million or seven cents per share compared to a net loss of $2 $4 million or three cents per share in the comparable 2022 period adjust.
Speaker 4: Adjusted EBITDA for the third quarter of 2023 was $0.5 million compared to an adjusted EBITDA loss of $0.9 million for the same period in 2022.
Adjusted EBITDA for the third quarter of 2000 $23.5 million compared to an adjusted EBIT loss of point.
$9 million for the same period in 2022.
Speaker 4: As of September 30th, 2023, we had $8.7 million of cash, cash equivalents, and restricted cash, $19.2 million in net accounts receivable, $34.3 million of inventory, and $3.3 million available under a revolving credit facility.
As of September 30th 2023, we had $8 $7 million of cash cash equivalents restricted cash and $19 $2 million and net accounts receivable $34 $3 million of inventory and $3.3 million available under our revolving credit facility.
Speaker 4: During the third quarter, Extant closed private placement with accredited investors for gross proceeds of $15 million. The company expects to use the net proceeds from the private placement for working capital and other general corporate purposes. Operator, you may now disconnect.
During the third quarter exit and closed a private placement with a credit investors for gross proceeds of $15 million. The company expects to use the net proceeds from the private placement for working capital other general corporate purposes.
Operator, you May now open the line for questions.
Speaker 1: Thank you. We will now conduct a question and answer session. If you would like to ask a question, please press star 1 on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star 2 if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. Once again, that's star 1 to ask a question at this time. One moment while we poll for our first question.
Thank you we will now conduct a question and answer session. If you would like to ask a question. Please press star one on your telephone keypad.
A confirmation tone will indicate your line is there any question queue. You May press star two if you would like to remove your question from the queue for participants using speaker equipment. It may be necessary to pick up your handset before pressing just darkies once again Thats star one to ask a question at this time one moment, while we poll for my first question.
Speaker 1: Our first question comes from Chase Nicaragua with Craig Hallam. Please proceed.
Our first question comes from Chase Knickerbocker with Craig Hallum. Please proceed.
Speaker 5: Morning guys, thanks for taking the questions and congrats on the nice quarter and the progress.
Good morning, guys. Thanks for taking the questions and congrats on the nice quarter and the progress here.
Speaker 6: Great. Thanks, Chase. Just a quick housekeeping one to start. Can we get a breakdown of orthobiologics and harbor revenue in the quarter and then, you know, kind of separate organic growth rates would be helpful if you have them? Scott, I'll throw that over to you.
Thanks, Jason I'm, just yeah, just quick a housekeeping one the starch can we get a breakdown of ortho biologics and hardware revenue in the quarter and then you know kind of a separate organic growth rates. It would be helpful. If you have them.
Scott I'll throw that over to you.
Sure give me one second chase.
I think for the quarter, we had.
Overall.
Speaker 4: Orthobiologics revenue of $15.7 million, compared to employment revenue of about $9.3, $9.4 revenue, or $9.3 million revenue.
Ortho biologics revenue of $15 7 million compared to implant revenue of about 9.39 point for revenue.
Point 3 million rather.
Great. Thanks.
Speaker 5: And if we kind of think about drivers within there, I mean, what products kind of, you know, really drove growth within hardware from, you know, an organic perspective, and then also, you know, orthobiologics, because, again, that organic growth was well ahead of our expectation.
And if we kind of think about drivers within there I mean, what products kind of you know really trough where else within within hardware from an organic perspective, and then also you know ortho biologics because again that that organic growth was well ahead of our expectations.
Yeah.
Scott I'll turn it back to you as well unless you want me to dive into that.
Speaker 4: Yeah, I think, you know, on the orthobiologic side, it was the same products we've seen as in past quarters, our new product offerings, those being the Garote Factor, the OsteoVive Plus, in spite of some of the challenges we saw from the supply chain standpoint, and then also on the private label and OEM front.
Yeah, I think you know on the biologic side. It was the same products, we're seeing a as in past quarters, our new product offerings are there.
It has been the growth factor the Asti lives plus in spite of some of the challenges we saw from a supply chain standpoint, and then also on the private label and OEM front.
Speaker 4: And then on the implant side, really those ASC related products that have driven growth in past quarters as well. So it's really the same story as past quarters with growth perspective as it relates to both product families.
And then on the implant side.
It really does ASC related products that have driven growth in past quarters as well. So it's really the same story as past quarters from a culture perspective.
As it relates to both product families.
Speaker 3: And that's the interspinous product device of Axil and then the SI fusion product of Silex, which are the two big drivers there.
And that's the inner sinus product device of axle and then the Si fusion product of Silex, which are the two big drivers there.
Speaker 5: Got it. Helpful color, guys. Then maybe just for investors, as we think about incremental EBITDA margin, as you have this inorganic revenue flowing into the model, is there a target that you guys have as far as what you're looking to drive from the incremental inorganic revenue, as far as what you think you can drive from an EBITDA margin on that revenue specifically?
Yep got it helpful color guys and then maybe just for investors as we think about.
I'm kind of incremental EBITDA margin is as you've had this inorganic revenue kind of flowing into the model is there a target that you guys have as far as what you're looking to drive from kind of the incremental inorganic revenue as far as what you think you can drive from an EBITDA margin on that you know revenue specifically.
Okay.
Speaker 4: I think that will take some time to get there, you know, we had envisioned a number of synergies as part of the transaction, however, those will take time to get there. You know, we've talked about ultimately working towards an even margin of 15%. I don't think that'll be the case in the near future. So there will be a ramp associated with that climb.
I think that I don't give it some time to get there you know we had envisioned the number of synergies as part of the transaction.
However, those will take time to get there you know we've talked about ultimately working towards an EBITDA margin of 15% I don't think that'll be the case in the near future.
So there will be a ramp associated with that client.
Speaker 5: Got it. Maybe along those lines, what's kind of the learnings that we've had through these last two integrations here? I know you're still very much in the middle of one. How do you feel about how you've trained your muscles as an organization to make these integrations successful and successful consistently as we look for more accretive deals?
Got it.
Maybe along those lines you know, what's kind of the learnings that we've had.
Through these last two integrations here I know you're still very much in the middle of one you know how do you how do you feel about how you train your muscles as an organization to make you know these integrations successful and you know successful consistently as we look for more you know accretive deals in the future.
Speaker 3: Yeah, Scott, I'll jump on this, you know, you know, I think about each of these businesses.
Yeah, Scott I'll jump on that.
About each of these businesses.
Speaker 3: you know, all of them were businesses that were in tough shape, quite frankly, from neglect. You know, when you think about Surgeline overall, it was really betting on Holo. And so these businesses were ones that, you know, they were not being fed, if you will.
You know all of them were businesses that we're in tough shape quite frankly from neglect you know when you think about certain line overall it was really betting on hold off and so these businesses for ones that they they were you know they were not being fat if you will and so for US we saw great value because we saw a product lines like co flex product.
Speaker 3: And so for us, we saw great value because we saw product lines like Coflex, product lines like just the hardware and the biologics businesses. And never mind the nanos business, which is something we've always liked. We saw those as businesses that if they were given the right kind of focus.
Clients like.
Just a hardware and biologics businesses I never mind, the nanos business, which is something we've always liked we saw though is this business is that if they were given the right kind of focus and and in some cases, a little bit of investment.
Speaker 3: And, and in some cases, a little bit of investment, good things can happen. And we still, we still believe that that's the case. And, and, and we're, you know, just even right away on a core service line business that we brought over.
Good things can happen and we still we still believe that that's the case and we're just even right away on our core search business that we brought over.
Speaker 3: I've been very, very pleased with what our funnels look like, what are just the commercial integration that's taking place, so which is quite frankly, that's the bigger one, right? That's the big one. That's the one that has the biggest impact to what we do. So I would say that I think, you know, focusing on those small things of what I think we do really well, which is on execution.
I'm I've been very very pleased with what our funnels look like what are just the commercial integration that's taking place. So so which is quite frankly, that's the bigger one right. That's the big one that's that's the one that has the biggest impact of what we do.
So I would say that I think you know focusing on those small things of what I think we do really well which is on execution.
Speaker 3: and making sure that we do the first things first when it comes to not only reviving a product, of making sure that we get the right people in place to do the things that they need to do. So I would tell you that that's, those are the things that we're working on to make sure that these become successful.
And and making sure that we do.
First things first when it comes to Natalie reviving a product of making sure that we've got the right people in place to do the things they need to do so so I would tell you that that's those are the things that we're working on to make sure that these become successful.
Got it and maybe nanos.
Speaker 5: Synthetic is a nice growth area for you guys. It's really greenfield at this point. It's a fairly large market, both in the U.S. and outside. In the deal, you kind of mentioned next-gen potential products. Could you kind of discuss what those might look like? And then also, kind of second part to that, I assume many of your distributors sell a synthetic today, right? Do you see this pretty long fruit to going to them with Nanos and trying to get them to start to market it, potentially switch some of their services?
Synthetics, a nice growth area for you guys. That's really greenfield at this point, it's you know a fairly large market both in the U S and outside in a deal you kind of mentioned next gen potential products could you kind of discuss what those might look like and then also kind of second parts of that I assume many of your distributors sell synthetic today right you see it it's pretty low hanging fruit.
Going to them with no NAS and I'm trying to get them to start to market it potentially switch some of their surgeon.
Speaker 3: Yeah, and, you know, to answer the first part of that or the last part of that question first, yes, that's the hope here, right? But one of the challenges that Nanos has had is the economics for the business hasn't been great. And so by buying the product from RTI and a product line that had been going down again, it's just a little bit of a challenge within that market because it does require high commission.
Yeah, and you know to answer the first part of that or the last part of that question first yes. That's the hope here right, but one of the challenges that nano has just had its the economics for the business hasn't been great and so by buying the product from RTI and end product line that had been going down again, it's just a little bit of a it's a bit of a challenge.
Within that market because it does require high commissions and so if you don't have high margins and there it's hard to be able to compete so by us owning the facility.
Speaker 3: And so if you don't have high margins in there, it's hard to be able to compete. So by us owning the facility, essentially buying two years of inventory, all of that, all of those economics are in our hands, right? So we think that we have, A, it's a very good product. Actually, it's one of the most studied products that's out there in the synthetic world. So A, we think we got a great product. We think we can get the economics right. So B, we think that it should lead to hopefully some growth.
Essentially buying two years of inventory all of that all of those economics are in our hands right. So we think that we have a it's a very good product. It's actually it's one of the most studied products that's out there in the synthetic world. So a we think we've got a great product. We think we can get the economics right. So be we think that it should lead to.
Hopefully some growth.
Speaker 3: But then answering your first question, which was really getting into how do we feel about the next generation? They had worked on at RTI a couple of different variations.
But then answering your first question, which was really getting at there how do we feel about the next generation. They had worked on at our T. I a couple of different variations.
Speaker 3: We are evaluating those variations as well as some of the things that we, you know, we've got just a really, really strong, over the last year, we've brought on, you know, some of the best R&D guys going when it comes to the biologics world. And so I'm going to give Mark Schallenberger and his guys a chance to take a look at it and say is there something better we can do. And so, yeah, so that's when we look at nanos, you know, the next generation, that's within the offing.
We are evaluating those variations as well as some of the things that we are we've got a just a really really strong over the last year we've brought on.
Some of the best R&D guys going when it comes to the biologics World. That's all I'm going to give mark Schallenberger and his guys a chance to take a look at it and say is there something better we can do and so so so yeah. So that's when we looked at nanos the next generation.
That's that's what's in the offing.
Speaker 5: Got it. Helpful. I'm sorry to take so much time here, guys, but a lot's going on with the business, so I want to make sure we kind of hit all the points. Maybe kind of an update on where CoPlex sits today, progress with incremental coverage, you know, how the prior authorization and approval rates kind of trended, and just overall kind of what you're driving.
Got it helpful. I'm, sorry to say so much time, you guys, but lots going on with the business I want to make sure we kind of hit all the points, maybe kind of an update on where it called flex sits today progress with incremental coverage.
All of the prior authorization approval rates kind of trended and just overall kind of what you're driving there.
Speaker 3: Good, good, good. Yeah. Thanks for asking. So as I said, these are all three businesses that have had.
Good good good thanks for asking so as I said. These are all three businesses that have had yeah, hey were neglected and this is probably a great example of all of our great asset that we saw that we thought we could get a lot of value out of it. So when we got this business and this is probably a good example.
Speaker 3: Yeah, we're neglected. And this is probably a great example of a great asset that we saw.
Speaker 3: that we thought we could get a lot of value out of it. So when we got this business, and this is probably a good example, we bought it at 10 territories, of which five were open, the at half of the country that was open, and then we then do once, we lost three more guys. And so our job now has been really reviving this thing. So we got our people in place, territories are filled, and we started putting them in territories, even moving the territories to territories where the reimbursement is stronger.
Bought it it had 10 territories of which five are open. So he had half of the country that was open and then we didn't do much we lost three more guys and so our job now it's been really reviving this thing. So we got our people in place territories are filled and we started putting them in territories, even move into territories territories, where the reimbursement.
Stronger.
Speaker 3: on a commercial side. So places like Pennsylvania and upstate New York and in New York in general, Michigan, areas that we had one guy covering all of those states, we now have, you know, essentially three people, right? So
On the commercial side, so in places like Pennsylvania, and Upstate New York and in New York in General our Michigan areas that that we had one guy covering all of those states. We now have essentially three people right. So so putting people in the right places getting our people in place and so with that I'm really excited.
Speaker 3: So putting people in the right places, getting our people in place. And so with that, I'm really excited.
Speaker 3: um that you know when you look at the new surgeon sign-ons that we're getting are higher are up certainly up even from a year ago when surge line had the business.
That you know when you look at the new surgeons sign ons that we're getting are higher are up certainly up even from a year ago and certainly the business. Our funnels look really really strong but this is a business, though that that still is taking a little more time for us to get the kind of traction we expected.
Speaker 3: Our funnels look really, really strong. But this is a business, though, that still is taking a little more time for us to get the kind of traction we expected. You know, it's relatively, when you think about our overall business, it's relatively small. It's 10 to 12% of our overall revenue, but it has a high margin. It has a high contribution element to it. So, as that climbs up more, we're gonna see more of a positive EBITDA pickup.
You know its relatively when you think about our overall business, it's relatively small it's 10% to 12% of our overall revenue, but it has a high margin. It has a high contribution element to it. So so as dax climbs up more we're gonna see more of a positive either a pick up.
Got it and then just last for me.
Speaker 5: Got it. And just last for me, you know, there's quite a few products that came over with the search line asset purchase, right? I mean, maybe just kind of hit the highlights as far as what you're most excited about. As far as the, you know, the individual SKUs that, that, that came over with that asset.
You know there's quite a few products that came over with a surge on an asset purchase right. I mean, maybe just kind of hit the highlights as far as what you're most excited about as far as the you know the individual skus that say that came over with that asset purchase.
Speaker 3: Sure, sure. You know, a couple of things. Cortera was a product line that they were in the throes of rolling out, which is a new pedicle, pedicle screw system that had a number of surgeon.
Sure sure you know a couple of things Cartera was a product line that they were in the throes of rolling out which is a new pedicle screw system that had a number of our surgeon advisers, helping with that and so when that got slowed down some of that momentum for them stopped and so what we've been doing it.
Speaker 3: advisors helping with that. And so when that got slowed down.
Speaker 3: some of that momentum for them stopped. And so what we've been doing is really reinvigorating that. And so we're starting to see that happen already.
Really reinvigorating that and so we're starting to see that happen right already.
Speaker 3: So that criteria line outstanding. There is a couple of other product lines that actually are on the European side. One of them, I mean again, I'd like to say that this was, you know, part of our great due diligence that we saw this.
So that Cartera line outstanding.
There is a couple of other product lines that actually are on the European side.
One of them I mean, again I I I'd like to say that this was part of our great. Due diligence that we saw this this terrific Dci product, which is which.
Speaker 3: terrific DCI product, which is a dynamic,
Is dynamic cervical implant and it's a fantastic product basically a co flex for the surgical area. So that's something that's in Europe today doing very well.
Speaker 3: cervical implant, and it's a fantastic product. It's basically a coflex for the cervical area, so that's something that's in Europe today doing very well. There's another product, which we were aware of, that's doing also really well in Europe . It's called the HPS system. Again, both of these are motion preservation systems that are just fantastic.
Another product, which we were aware of that's doing also really well in Europe, it's called the H P. S system.
Again, both of these are motion preservation systems that are just fantastic. So those are a couple of gems that will take us some time to bring here to America.
Speaker 3: So those are a couple of gems that will take us some time to bring here to America. Um, but there's, you know, just a slew of other product lines that, that.
But there's just a slew of other product lines that that.
Speaker 3: where the great thing about SurgeLine, what they do for us, if you think about xSpine, we didn't invest in that over the course of time. It was actually one of the dictates that I had gotten from when I first got going. I said, listen, if we do anything in hardware, we better buy something because we just weren't going to invest in that. So what that's been able to do to our xStand, or the old xSpine product line,
Where are the great thing about searches on what they do for US. If you think about X spine, we didnt invest in that over the course of time. It was actually one of the dictates that I had gotten from when I first got calling is that listen if we do anything it hardware, we better buy something because we just weren't going to invest in that so what that's been able to do to our extant or the old X spine products.
Speaker 3: that's completely reinvigorated it. And quite frankly, we now have some offerings like our inner spinous process device, the Axel, as well as our Silex product, the SI Fusion product.
It's completely reinvigorated and quite frankly, we now have some offerings like our inner spinous process device the axle as well as our silex product BSI fusion product.
Speaker 3: These are products that I did not. And so we now give them some products that they can sell. So it is actually a nice melding of what we can offer and what they can offer to us. And so we're really very excited about that and what they're bringing to us.
These are products that did not and so so we now give them some products that they themselves. So so it is actually a nice melding of what we can offer and what they can offer to us and so so we're really very excited about that and what they're bringing to us.
Great. Thanks for taking the questions guys.
Speaker 1: Thank you. Our next question comes from Ryan Zimmerman with BTIG. Please proceed.
Thank you. Our next question comes from Ryan Zimmerman with B T. I G. Please proceed.
Speaker 7: Hey Ryan. Hey Ryan. This is Izzy on For Ryan. Just for the order of guys. All right. Is he Ryan, your voice has gotten a lot higher there. Wow, okay. Just a little bit. So I want to follow up on your comments about the recent M&A activity in your product portfolio. So how are you guys thinking about the general size of that product portfolio?
Hey, Ryan.
Oh. This is is he on for Ryan just alright, okay.
This is Ryan your voice has gotten a lot lot higher there wow, okay, just a little bit so I wonder on your comments about the recent M&A activity in your product portfolio. So how are you guys thinking about the general size of that product portfolio.
Speaker 7: think it's sufficient are you going to look for additional targets over say the net near or medium?
It's the session or are you going to look for additional targets or very near or medium term.
Speaker 3: Yeah, you know, great question. So yes, we have a very robust M&A pipeline.
Yeah, Great question. So, yes, we have a very robust.
M&A pipeline.
Speaker 3: I will say we have been a little bit more focused on digesting what we have, but there's a number of really great opportunities that are sitting out there as we speak. We have some areas of specific need. If you looked at our, like for instance, our hardware line, there's areas.
I will say, we have been a little bit more focus on digesting, what we have but there's a number of really great opportunities that are sitting out there as we speak we have some areas of specific need if you've looked at our like for instance, our hardware line, there's there's areas.
Speaker 3: you know, the expandable offering needs to greatly improve. I mean, there's other things that we can be doing within our hardware side. Certainly from a biologics perspective, we are always looking for ways in which we can increase our capabilities. So what I mean by capabilities today, Extant makes.
Yeah, the expandable offering needs to it needs to greatly improve I mean, there's other things that we can be doing within our hardware side certainly from a biologics perspective, we are always looking for ways in which we can increase our capabilities. So what you mean by capabilities today extent makes.
Speaker 3: you know, DBM and alligraph products, we source things like stem cells, we source things like you know, our growth factor products. So where we can find opportunities to expand our capabilities by all means we're going to be doing that, we also see, you know, anytime we can get greater capacity within our biologic production.
M D. B M. An allograft products, we source things like stem cells, we source things like or our growth factor products, So where we can find opportunities to expand our capabilities by all means we're gonna be doing that.
We also see you know anytime we can get greater capacity within our biologics biologics production.
Speaker 3: That's also going to be really, really important to what we're going to be chasing after. So I call it the three Cs of capabilities capacity and cash flows. So those are the things that we seek as we look at deals. And happily, there's a lot of deals out there. And quite frankly, I think.
That's also going to be really really important to what we're gonna be chasing after so yeah I'd call. It the three CS of capabilities capacity and cash flows and so so those are the things that we seek as we look at deals and happily there's a lot of deals out there and and and quite frankly, I think both valuations are finally, starting to come down, but then the other part of it.
Speaker 3: Both valuations are finally starting to come down, but then the other part of it is the fact that I do think that a lot of these companies that are capital constrained are starting to waver under some of these debt obligations. So I think that there's more and more opportunities that are going to be coming our way, especially for those companies that are in a strong financial position like we are and companies that
The fact that I do think that a lot of these companies that are capital constrained or starting to waver under some of these debt obligations. So so I think that there's more and more opportunities are going to be coming our way, especially for those companies that are in a strong financial position like we are and you know companies that that.
Speaker 3: can show to potential companies not only how they can win in way of getting an exit, but then having hopefully a substantial win as they hopefully take more of our stock as it goes up as well.
Can show to potential companies not only how they can win in way of getting an exit, but then having hopefully a substantial.
When is a hopefully take more of our stock as it goes up as well.
Speaker 7: Great, that's really helpful. Thanks for taking the question and congrats on the quarter again.
Great. That's really helpful. Thanks for taking the question and congrats on the quarter again.
Thank you.
Speaker 1: Thank you. At this time, I would like to turn the floor back over to Mr. Sean Brown for closing comments.
Thank you at this time I would like to turn the floor back over to Mr. Sean Brown for closing comments.
Speaker 3: Great, thank you, operator. Overall, we are very proud of the tremendous strides that we have made as an organization in recent years. Our record quarterly revenue demonstrates that we are successfully executing on each of our four strategic growth pillars.
Great. Thank you operator, and overall, we are very proud of the tremendous strides we've made as an organization in recent years a record quarterly revenue demonstrates that we are successfully executing on each of our four strategic growth pillars and by raising our revenue guidance and delivering positive adjusted EBITDA for two consecutive quarters. These accomplishments further.
Speaker 3: And by raising a revenue guidance and delivering positive adjustment even for two consecutive quarters, these accomplishments further demonstrate the progress that we are making. We believe this is just the beginning of what we are working towards long-term sustainable growth.
Great the progress that we're making we believe this is just the beginning of what we're working towards long term sustainable growth through our diligent approach of increasing our capacity and our distribution network. We were filling the higher order demand of our biologics and fixation products and achieving scale we were realizing this demand.
Speaker 3: Through our diligent approach of increasing our capacity and our distribution network, we are filling the higher order demand of our biologics and fixation products in achieving scale. We are realizing this demand not just organically, but also for our newly acquired businesses. We look forward to building upon this momentum and delivering on our broader goal of maximizing shareholder value.
Not just organically, but also for our newly acquired businesses. We look forward to building upon this momentum and delivering on our broader goal of maximizing shareholder value in closing I'd like to reiterate that 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.
Speaker 3: In closing, I'd like to reiterate that 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. We thank them for their continued work and dedication. Thank you for joining us today and for your.
Employees, we thank them for their continued work and dedication. Thank you for joining us today and for your continued support.
Thank you that concludes our call today all parties may now disconnect and have a great day.
Speaker 8: Thank you. That concludes our call today. All parties may now disconnect and have a great day.
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