Q4 2024 Xtant Medical Holdings Inc Earnings Call

Operator: Good day, everyone, and welcome to the Xtant Medical fourth quarter and year in 2024. At this time, all participants have been placed on a listen-only mode.

Good day, everyone and welcome to the extent medical fourth quarter and year end 2024 earnings.

At this time all participants have been placed on a listen only mode. If you have any questions or comments. During the presentation. You May press star one on your phone to enter the question queue at any time and we will open the floor for your questions and comments after the presentation.

Operator: If you have any questions or comments during the presentation, you may press star 1 on your phone to enter the question queue at any time, and we will open the floor for your questions and comments after the presentation.

Brett Maas: It is now my pleasure to turn the floor over to your host, Brett Maas, with Hayden IR. Sir, the floor is yours.

Speaker Change: It is now my pleasure to turn the floor over to your host Brett Maas with Hayden IR, Sir the floor is yours.

Brett Maas: Joining me today is Sean Browne, President, Chief Executive Officer and Scott Neils, Chief Financial Officer. Today's call is being webcast and will be posted on the company's website for playback.

Speaker Change: Thank you operator, joining me today is Sean Brown, President and Chief Executive Officer, and Scott <unk>, Chief Financial Officer, today's call is being webcast 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's expected future performance. These forward looking statements reflect <unk> current perspective on existing.

Brett Maas: During the course of this call, management may make certain forward-looking statements regarding future events and the company's expected future performance. These forward-looking statements reflect Xtant's current perspective on existing trends and information and can be identified as such words by expect, plan, will, may, anticipate, believe, should, intends, and other words with similar meaning. Such forward-looking statements are not guaranteed 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 this afternoon with the SEC and in subsequent SEC reports and press releases.

Speaker Change: And information and can be identified as such words as expect plan will may anticipate believe should intend and other words of similar meaning.

Speaker Change: 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 this afternoon with the SEC and in subsequent SEC reports and press releases actual results may differ materially the company's financial results press release and today's discussion includes certain non-GAAP financial measures. Please refer to the non-GAAP and GAAP.

Brett Maas: Actual results may differ materially. The company's financial results press release in today's discussion includes certain non-GAAP financial measures. Please refer to the non-GAAP and GAAP reconciliations which appear in our press release and are otherwise available on our website. Note that our Form 10, I'm sorry, our Form 8K, followed the financial results press release, provides a detailed narrative that describes our use of such measures.

Speaker Change: Reconciliations, which appear in our press release or otherwise available on our website.

Speaker Change: Note that our form 10, or I'm, sorry, a form 8-K filed with our financial results press release provides a detailed narrative that describes our use of such measures.

Brett Maas: For the benefit of those who may be listening to the replay of this call, it was held on record on March 6th at approximately 4.30 p.m. Eastern time.

Speaker Change: Benefit of those who may be listening to replay. This call was held and recorded on March 6th at approximately 430 P. 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 Richard Brian John the floor is yours.

Brett Maas: The company declines any obligation to update its forwarding statements except as required by applicable law.

Brett Maas: Now I'd like to turn the call over to Sean Browne. Sean, the floor is yours.

Sean Browne: Thank you, Brett, and good afternoon, everyone. I am pleased to announce record fourth quarter revenue of $31.5 million, and for the full year, $117.3 million. This is our first full quarter, but consistent year-over-year comparison with the SurgeAlign business incorporated into our revenue, which amounts to a 12% growth quarter-over-quarter and a 28% year-over-year growth.

Speaker Change: Thank you Brett and good afternoon, everyone I am pleased to announce record fourth quarter revenue of $31 5 million and for the full year of $117 3 million. This is our first full quarter of consistent year over year comparison with the surge of line business incorporated into our revenue, which amounts to about 12%.

Speaker Change: Growth quarter over quarter, and a 28% year over year growth and from a profitability perspective, we again delivered positive adjusted EBITDA of $438000 in the fourth quarter. This accomplishment was achieved despite an inventory write off of $1 5 million related to the <unk> acquisition as Scott will explain.

Sean Browne: And from a profitability perspective, we again delivered positive adjusted EBITDA of $438,000.

Sean Browne: This accomplishment was achieved despite an inventory write-off of $1.5 million related to the SurgeAlign acquisition, as Scott will explain later.

Sean Browne: In summary, 2024 was a challenging year on many fronts with the integration of the various SurgeAlign businesses and the ambitious challenge of vertically integrating Xtant's Biologics offering. I'm thrilled to say that as a team, we have come out leaner and better prepared to create a self-sustaining, growing, and profitable company.

Speaker Change: Later in summary, 'twenty 'twenty four was a challenging year on many fronts with the integration of the various search online businesses and the ambitious challenge or vertically integrating X stance biologics offering I'm thrilled to say that as a team we have come out leaner and better prepared to create a self sustaining growing and profitable company.

Sean Browne: For more information, visit www.FEMA.gov Operationally, we continue to look at opportunities to leverage the Xtant and SurgeAlign platforms to improve efficiency. Through this work, we were able to penetrate or able to generate cash flows from operations in Q4 of over a half a million dollars for the first time since 2022. Since August and through the current first quarter of 2025, we have reduced our operating expenses by approximately $5 million. A portion of this cost savings was achieved through headcount reductions of more than 13%, most of which was tied to the closing of the Greenville facility and other acquisition-related integration activities.

Speaker Change: Operationally, we continue to look at opportunities to leverage the <unk> and <unk> platforms to improve efficiency through this work, we were able to penetrate or were able to generate.

Speaker Change: Cash flows from operations in Q4 of over half a million dollars for the first time since 2022 since.

Speaker Change: Since the August and through the current first quarter of 2025, we have reduced our operating expenses by approximately $5 million a portion of this cost savings was achieved through head count reductions of more than 13% most of which was tied to the closing of the Greenville facility and other acquisition related integration activities recall, we acquired our.

Sean Browne: Recall, we acquired our Greenville facility when we acquired the Nanos production operations from RTI Surgical in October of 2023. We recently moved the production of our Nanos products to our Belgrade facility. As we continue to vertically integrate our biologics business, we believe we will realize additional operating efficiencies tied to greater throughput and improved processing. From a hardware perspective, we continue to rationalize old and redundant lines. This is a good example of where we have chosen to give up some top line revenue due to the capital required to maintain a hardware line. Furthermore, as we bring more lines into our main distribution facility in Belgrade, we believe there will be additional savings compared to using a third-party logistics company in 2024 that is not as efficient as our own operation.

Speaker Change: Greenville facility, when we acquired the nano production operations from RTI surgical in October of 2023, we recently moved the production of our nanos products to our Belgrade facility.

Speaker Change: We continue to vertically.

Speaker Change: Vertically integrate our biologics business, we believe we will realize additional operating efficiencies tied to greater throughput and improve processes.

Speaker Change: From a hardware perspective, we continue to rationalize old and redundant lives. This is a good example of where we've chosen to give up some top line revenue due to the capital required to maintain our hardware line. Furthermore, as we bring more lives into our main distribution facility in Belgrade, We believe there will be additional savings compared to using a third party logistics.

Speaker Change: Company in 2024 that is not as efficient as our own operations.

Sean Browne: From a commercial perspective, our biologics business grew 21% for the quarter, while our hardware took a 10% hit. Two main drivers for the growth of biologics were, first and foremost, our new stem cell offering, branded as OsteoVive Plus, which has done very well for us out of the gate. The second driver was our new Amnion product line. Conversely, our hardware drop-off was tied to two significant issues. First, to a very strong previous year comparison that included several rationalized surge line fixation lines. These were lines that surge lines had discontinued prior to our acquisition. And secondly, our international business continued to fight through EU supply chain issues that impacted their sales again in this quarter.

Speaker Change: From a commercial perspective, our biologics business grew 21% for the quarter, while our hardware took a 10% debt.

Speaker Change: Main driver for the growth in biologics, where first and foremost our new stem cell offering branded as Osteophyte, plus which has done very well for us out of the gate. The second driver was our new amniotic product line. Conversely, our hardware drop off was tied to two significant issues first to a very strong previous year comparison that included <unk>.

Speaker Change: Several rationalized searchlight fixation lives. These realized that surge line of discontinued prior to our acquisition and secondly, our international business continued to fight through EU supply chain issues that impacted their sales again in this quarter.

Sean Browne: From a new product development perspective, we anticipate four new Biologics products scheduled to launch this year. The primary release will be our own Growth Factor product, which we are excited about because it will complete the targeted vertical integration of our current offering. Two of our new products will be upgraded DBM-based products that should drive higher revenue and gross profit. The last of these new product lines will expand our surgical wound care offering. Our surgeons currently use all of these products, and our independent agent partners have requested them for quite some time.

Speaker Change: From a new product development perspective, we anticipate four new biologics products scheduled to launch this year. The primary release will be our own growth factor product, which we're excited about because it will complete the targeted vertical integration of our current offering two of our new products will be upgraded DBM based products that should drive higher revenue for <unk>.

Speaker Change: Profit the last of these new product lines will expand our surgical wound care offering our surgeons currently use all of these products and our independent agent partners have requested them for quite some time.

Sean Browne: This year, we expect to pick up a solid growth in our OEM business. These OEM opportunities serve two purposes. First is a great channel for us to leverage manufacturing capacity to grow profitably. Second, it serves as a means for Xtant to learn more about adjacent markets such as foot and ankle, trauma, surgical, wound care, and other relevant markets that we can serve now with our current expanded offerings of products, which many of these serve these adjacent markets.

Speaker Change: This year, we expect to pick up a solid growth in our OEM business. These OEM opportunities serves two purposes first is a great channel for us to leverage manufacturing capacity to grow profitably.

Speaker Change: And it served as a means for X days to learn more about adjacent markets such as foot and ankle trauma surgical wound care and other relevant markets that we can serve now with our current expanded offerings of products, which many of these serve these adjacent markets.

Sean Browne: With that as a backdrop, in January of 2025, we licensed another Q code for a single layer amnion product. This brought us an upfront licensing fee of $1.5 million and production minimums for an OEM partner. However, most of these minimums will not continue if the local coverage determination or LCD for skin substitute takes effect as planned on April 13.

Speaker Change: With that as a backdrop in January of 2025, we licensed another Q code for a single layer amnion product.

Speaker Change: Brought us an upfront licensing fee of $1 $5 million and production minimums for an OEM partner. However, most of these minimums will not continue at the local coverage determination or LCD for skin substitute takes effect as planned on April 13th.

Sean Browne: Looking ahead to 2025, we are continuing our pursuit of achieving self-sustainability. Our corporate direction moving forward has been prioritizing profitability ahead of revenue growth. We plan to leverage our cost-cutting measures to return our business to sustainable cash-flowing business. In fiscal year 2025, we expect mid-double-digit revenue growth in biologics and to stay consistent to modestly down revenue year-over-year in hardware. From a hardware perspective, we continue to look at rationalizing lines to optimize both our offering and our management of cash. From a profitability perspective, our goal is to be sustainably cash-flowing by the end of the year.

Speaker Change: Looking ahead to 2025, we were continuing our pursuit of achieving self sustainability, our corporate direction moving forward has been prioritizing profitability ahead of revenue growth, we plan to leverage leverage our cost cutting measures to return our business to sustainable cash flowing business.

Speaker Change: In fiscal year 2025, we expect mid double digit revenue growth in biologics and to stay consistent to modestly down revenue year over year in hardware from a hardware perspective, we continue to look at rationalizing lines to optimize both our offering and our management of cash from a profitability perspective, our goal is to be sustained.

Speaker Change: Thirdly cash flowing by the end of the year.

Sean Browne: From a guidance perspective for full year 2025, we expect revenue in the range of $126 million to $130 million, which is an 8% to 11% growth, which together with our anticipated cost savings, we project that we will not need to raise additional capital.

Speaker Change: From a guidance perspective for full year 2025, we expect revenue in the range of 126 million to $130 million, which is an 8% to 11% growth with which together with our anticipated cost savings. We project that we will not need to raise additional capital.

Scott Neils: With that, I will turn the call over to Scott for a more detailed review of our financial results. Thank you, Sean. And good morning, everyone. Or good afternoon, rather.

Scott: That I will turn the call over to Scott for a more detailed review of our financial results.

Scott: Thank you, Sean and good morning, everyone or good afternoon, rather total revenue for the fourth quarter of 2024 was $31 $5 million compared to $28 $1 million for the same period in 2023, the 12% increase is attributed primarily to 21% or $3 $2 million year over year.

Scott Neils: Total revenue for the fourth quarter of 2024 was $31.5 million, compared to $28.1 million for the same period in 2023. The 12% increase is attributed primarily to 21%, or $3.2 million, year-over-year growth in our biologics product family, exclusive of the impact of $1.5 million of licensing revenue during the fourth quarter of 2024. This increase was partially offset by a 10%, or $1.3 million, year-over-year reduction in spinal implants.

Scott: And our biologics product family exclusive of the impact of $1 $5 million of licensing revenue during the fourth quarter of 2020 for.

Scott: This increase was partially offset by a 10% or $1 $3 million year over year reduction in spinal implant sales.

Scott Neils: Gross margin for the fourth quarter of 2024 was 50.8% compared to 61% for the same period in 2023.

Scott: Gross margin for the fourth quarter of 2024 was 58% compared to 61% from the same period in 2023.

Scott Neils: Throughout the course of 2024, we worked to verify the existence of inventory associated with our acquisition of Surgeline Holdings Hardware and Biological. These procedures were completed during the fourth quarter, resulting in a $1.5 million inventory charge, which adversely affected gross margin by 680 basis points compared to the same period a year ago. Additionally, gross margin was adversely affected by 570 basis points during the fourth quarter of 2024, compared to the same period in 2023, for reduced yields and throughput.

Scott: Throughout the course of 2020 for work to verify the existence of inventory associated with our acquisition of <unk> Holdings hardware and biologics business. These procedures were completed during the fourth quarter, resulting in a one and a half million dollar inventory charge, which adversely affected gross margin by 680 basis points compared to the same period a year ago.

Scott: Additionally, gross margin was adversely affected by 570 basis points during the fourth quarter of 2024 compared to the same period in 2023 reduced yields and throughput.

Scott Neils: The amnio and stem cell production was Fourth quarter 2024 operating expenses were $17.9 million compared to $21 million in the same period a year ago. As a percentage of total revenue, operating expenses were 56.8% compared to 74.5% in the same period a year ago. Sequentially, operating expenses declined $2.2 million and declined as a percentage of revenue compared to Q3 2024 by 15.5 points. General and administrative expenses were $5.7 million for the three months ended December 31, 2024, compared to $8.9 million for the same period in 2023. This decrease is primarily attributable to $2.1 million reduction to various compensation plans, as well as reductions in professional fees totaling $1 million.

Scott: The on stem cell production was optimized.

Scott: Okay.

Scott: Fourth quarter 2024, operating expenses were $17 $9 million compared to a $21 million in the same period a year ago.

Scott: We're centered in total revenue operating expenses were 56, 8% compared to 74, 5% in the same period, a year ago sequentially operating expenses declined $2 $2 million and declined as a percentage of revenue compared to Q3, 'twenty 'twenty four but 15 five points.

Scott: General and administrative expenses were $5 $7 million for the three months ended December 31, 2024, compared to $8 $9 million from the same period. In 2023. This decrease is primarily attributable to $2 $1 billion reduction the various compensation plans as well.

Scott: As reductions in professional fees totaling $1 million.

Scott Neils: Sales and marketing expenses were $11.7 million for the three months ended December 31, 2024, compared to $11.6 million for the same quarter last year. This increase is primarily due to higher commission expenses, $0.7 million related to increased sales, partially offset by reductions in salaries and wages totaling half a million dollars. Research and development expenses were $522,000 for the three months ended December 31, 2024, an increase from $492,000 in the fourth quarter of 2023.

Scott: Sales and marketing expenses were $11 $7 million for the three months ended December 31, 2024, compared to $11 $6 million for the same quarter last year. This increase was primarily due to higher commission expenses.

Scott: $7 million related to increased sales, partially offset by reductions in salaries and wages totaling $5 million.

Scott: Research and development expenses were $522000 for the three months ended December 31, 2024, an increase from $492000 in the fourth quarter of 2023.

Scott Neils: Net loss in the fourth quarter of 2024 was $3.2 million, or two cents per share, compared to a net loss of $4.3 million, or three cents per share in the comparable 2023 period. Adjusted EBITDA for the fourth quarter of 2024 was $438,000 compared to an adjusted EBITDA loss of $695,000 for the same period in 2023.

Scott: Net loss in the fourth quarter of 2024 was $3 $2 million or <unk> <unk> per share compared to a net loss of $4 $3 million or <unk> <unk> per share in the comparable 2023 period.

Scott: Adjusted EBITDA for the fourth quarter of 2024 was $438000 compared you do compared to an adjusted EBITDA loss of $695000 for the same period in 2023.

Scott Neils: Beginning in the fourth quarter of 2024, we are no longer including the phasing of the bargain purchase gain on our sell-through of inventory acquired as part of our purchase of Surgeon Lion Holdings' hardware and biologics business in our calculation of adjusted EBITDA, and prior periods have been recast to conform to the current calculation. The related effect on adjusted EBITDA was a reduction of $1.4 million in the fourth quarter of 2023 to arrive at the recast amount.

Scott: Beginning in the fourth quarter of 2024, we are no longer including the phasing of the bargain purchase gain on our sell through of inventory acquired as part of our purchase of certain lines hold in hardware and biologics business and our calculation of adjusted EBITDA and prior periods have been recast to conform to the current calculation.

Scott: Weighted effect on adjusted EBITDA was a reduction of $1 $4 million in the fourth quarter of 2023 to arrive at the recast of Mt.

Scott Neils: Turning now to our full year financial results. Total revenue for 2024 was $117.3 million, compared to $91.3 million for 2023, an increase of 28%. This increase is primarily attributable to the additional sales from our acquisition in the Surgeon Line Holdings Hardware and Biologics Hire an independent agent sales and $1.5 million of upfront licensing revenue related to our Simply Max product and associated trademark.

Scott: Now to our full year financial results total revenue for 2024 was $117 $3 million compared to $91 $3 million for 2023, an increase of 28%. This increase is primarily attributable to the additional sales from our acquisition of the surge of Lion holdings hardware and biologics business.

Scott: Higher independent agent sales and $1.5 million upfront licensing revenue related or simply Max product and associated trademarks.

Scott Neils: Gross margin for 2024 was 58.2% compared to 60.8% for 2023. Of this decrease, 220 basis points were due to product mix and 200 basis points were due to reduced production through 2024 operating expenses were $80.3 million, or 68.5% of total revenue, compared to $65.6 million, or 71.9% of total revenue in 2023. General and administrative expenses were $28.7 million for the year ended December 31, 2024, compared to $25.9 million for 2023. This increase is primarily attributable to an increase in stock-based compensation, severance expense, additional hardware and software expense, and additional amortization . which were partially offset by reductions in various compensation.

Scott: Gross margin for 2024 was 58, 2% compared to 68% for 2023.

Scott: This decrease 220 basis points were due to product mix and 200 basis points were due to reduced production throughput.

Scott: Okay.

Scott: 2024, operating expenses were $83 million or 68, 5% of total revenue compared to $65 $6 million or 71.9% total revenue in 2023.

General and administrative expenses were $28 $7 million for the year ended December 31st 2024, compared to $25 $9 million for 2023. This increase is primarily attributable to an increase in stock based compensation severance expense additional hardware and software expense and additional amortization expense.

Scott: Which were partially offset by reductions in various compensation plans.

Scott Neils: Sales and marketing expenses were $49.2 million for 2024, compared to $38.4 million for 2023. This increase is primarily due to higher commission expenses related to increased sales, as well as higher professional service fees. Research and development expenses were $2.4 million for the year ended December 31, 2024, an increase from $1.3 million from the prior year. This increase primarily due to additional personnel added with her acquisition.

Scott: Sales and marketing expenses were $49 $2 million for 2024 compared to $38 $4 million for 2023.

Scott: This increase was primarily due to higher commission expenses related to increased sales as well as higher professional service fees.

Scott: Research and development expenses were $2 $4 million for the year ended December 31, 2024, an increase from $1.3 million from the prior year. This increase is primarily due to additional personnel added with her acquisitions.

Scott Neils: Net loss in 2024 was $16.4 million, or $0.12 per share, compared to net income of $660,000, or $0.01 per share in 2023. Note that 2023 net income included an $11.7 million gain on bargain purchase related to our acquisition of the SurgeonLine hardware and biologic. Adjusted EBITDA for 2024 was a loss of $2.3 million compared to a loss of $1.4 million for 2023. As previously noted, we are no longer including the phasing of the bargain purchase gain under sell-through of inventories acquired as part of our purchase of Surgeon Line Holdings hardware and biologics business in our calculation of adjusted EBITDA.

Scott: Net loss in 2024 was $16 $4 million or <unk> 12 per share compared to net income of $660000 for one cents per share in 2023.

Scott: The 20th twenty-three net income included an $11.7 million gain on bargain purchase related to our acquisition of the surge in buying hardware and biologics business.

Scott: Adjusted EBITDA for 2024 was a loss of $2 $3 million compared to a loss of $1 $4 million for 2023.

Scott: Previously noted we are no longer including the phasing in of the bargain purchase gain or sell through of inventories acquired as part of our purchase of surgery line hold into hardware and biologics business. Our calculation of adjusted EBITDA. The related effect on adjusted EBITDA was a reduction of $2 $3 million in 2023 to arrive at the recast them out.

Scott Neils: The related effect on adjusted EBITDA was a reduction of $2.3 million in 2023 to arrive at the recap.

Scott Neils: As of December 31st, 2024, we had $6.2 million of cash, cash equivalents, and restricted cash. Net accounts receivable was $20.7 million. Inventory was $38.6 million, and we had $4.2 million available under revolving credit facilities as of the end of 2024.

As of December 31, 2024, we had $6 $2 million of cash cash equivalents and restricted cash net accounts receivable was $27 million inventory was $38 $6 million and we had $4 $2 million available under our revolving credit facilities as of the end of 2024.

Operator: Operator, you may now open the line for questions. Everyone at this time will be conducting a question and answer session. If you have any questions or comments, please press star one on your phone at this time.

Speaker Change: Operator, you May now open the line for questions.

Scott: Certainly everyone.

Scott: At this time, we'll be conducting a question and answer session. If you have any questions or comments. Please press star one on your phone at this time.

Operator: do ask that while posing your question, please pick up your handset if you're listening on speakerphone to provide optimum sound quality. Again, if you have any questions or comments, please press star 1 on your phone.

Scott: We do ask that will posing your question. Please pick up your handset if you're listening on speaker phone to provide optimum sound quality.

Scott: Once again, if you have any questions or comments. Please press star one on your phone.

Chase Knickerbocker: Your first question is coming from Chase Knickerbocker from Craig Hallam. Your line is live. Good afternoon. Thanks for taking the questions. Congrats on the quarter here. I guess just to start on Biologics, if we think about kind of sequential growth there, sounds like it was largely driven by the VBM launch. And is the majority of that white label? Or was there any pull through on your, on your, you know, internally developed product in Q4 through your distribution channel? And as we enter the year Unknown Speaker Is that a pretty meaningful portion of that kind of mid-teens growth that you're kind of accounting for?

Speaker Change: Your first question is coming from Chase Knickerbocker from Craig Hallum. Your line is live.

Chase Knickerbocker: Good afternoon, thanks for taking the questions.

Chase Knickerbocker: Congrats on the quarter here I guess just to start on it.

Chase Knickerbocker: Biologics, if we think about kind of sequential growth there. It sounds like it was largely driven by the V. B M launch and is the majority of that white label or was there any pull through on your on your you know an internally developed product in Q4, three or your distribution channel.

Chase Knickerbocker: Yeah. So primarily white label are we are we were finishing off the last bits of our select literally like the middle of December we finished off the last of the distributor products. So we saw a little bit of pick up on the on the our own label product, but it was mostly at the the white label.

Chase Knickerbocker: And as we entered the year.

Chase Knickerbocker: Is that a pretty meaningful portion of that kind of mid teens growth that you're kind of accounting for and you know is there a way for us to think about it from a standpoint of kind of expanding those current relationships on the white label side or are you ramping kind of new ones, just kind of walk us through how that's going to kind of work for V. B M. On your ultimate expectations for it in 'twenty five.

Sean Browne: And, you know, is there a way for us to think about it from a standpoint of kind of expanding those current relationships on the white label side? Are you ramping kind of new ones? Just kind of walk us through how that's kind of kind of worked for VBM and your ultimate expectations for it in 25. You know, four months ago, I would have told you that a big part of the growth is going to be mostly on the white label side, not mostly, but a good chunk of it was on the white label side.

Chase Knickerbocker: You know I'm four months ago I would have told you that a big part of the growth is going to be mostly on the white label side that mostly but good shopping but was otherwise they beside our funnels right now look very very good for our our extent branded product. So what I'd tell you is that the C. V. B M product is going to be a big part of our growth this year.

Sean Browne: Our funnels right now look very, very good for our, our Xtant branded product.

Sean Browne: So what I'd tell you is that the, the VVM product is going to be a big part of our growth this year. And, and as I look at it today, it's probably gonna be about a 50 50% split. as far as White Label and the next Xtant brand.

Chase Knickerbocker: Year end and as I look at it today, it's probably going to be about a 50, 50% split.

Chase Knickerbocker: As far as White label in the next 10 brands.

Chase Knickerbocker: Sure.

Unknown Executive: And then on the growth factor side.

Chase Knickerbocker: Yeah, Yeah, and then on the growth sector side.

Sean Browne: Any expectations on when we could have that launched and is that a pretty material contributor to 20 to 25? Yeah, so two things to that. So first of all, the product is to be finished this quarter. So we're excited about the product being done. But we still have another three months or so of our current product line that we'll be working through. And, and so from there, what we, we are looking at is a couple things, you know, there's with our current product line, there's some limitations to where we can sell it. So we're hoping that we can now start being able to open up this product line a lot more.

Chase Knickerbocker: Kind of any expectations on when we could have that launched and is that a pretty material contributor to 'twenty to 'twenty five.

Chase Knickerbocker: Yeah, So two things to that so first of all the product has to be finished this quarter. So we're excited about the product being done, but we still have another.

Chase Knickerbocker: Another three months or so of our current product line that we'll be working through and and so from there. What we we are looking at it as a couple of things as you know there's without a product line. There are some limitations to where we can sell it. So we're hoping that we can now start being able to open up this product line a lot more so as to the second half of this year.

Sean Browne: So as to the second half of this year, we should certainly see a pickup from a margin perspective.

Chase Knickerbocker: <unk>, we should certainly see a pick up from a margin perspective, and then secondarily, we hope to see at least the revenue begin decline. After we've basically we got to take out the last line and make sure that we keep that business, but that also grow it from there.

Sean Browne: And then secondarily, we hope to see at least the revenue begin to climb, you know, after we've basically we got to take out the last line and make sure that we keep that business, but then also grow it from there.

Chase Knickerbocker: Scott, sorry if I missed it, but what were the exact impacts to gross margin in Q4 from those inventory write-offs? The one related to our inventory cleanup or the inventory charge related to the surge line inventory was just under 700 basis points, it's actually 680, and then the difference in throughput was about 570 basis points. Got it.

Speaker Change: And Scott sorry, if I missed it but what were the exact impacts to gross margin in Q4 from those inventory write offs.

The one related to our inventory cleanup or the inventory charge related to the surge line inventory was just under 700 basis points. Its actually 680, and then the difference in our throughput was about 500.

Speaker Change: 70 basis points.

Scott Neils: And is there, if we think about 25, I mean, any color you can give towards gross margins, we should see some improvement, I would imagine, as VBM starts to sell through the direct channel in a bigger sense as well. Any thoughts on gross margin for 25? Right, we finished the year for the full year at 58.2%. And I think as we walk through the course of 2025, you know, by the time we get to Q4 of 2025, I think we pick up four or five points at as we see the impact of EVM and some of the other new product introduction will be going on.

Speaker Change: Oh got it and is there if we think about 25 I mean any color you can get towards gross margins, we should see some improvement I would imagine as DBM starts to sell through the direct channel and in a bigger sense as well.

Speaker Change: Any thoughts on gross margin for 25.

Speaker Change: Right. We finished the year for the full year at 58, 2% and I think as we walk through the course of 2025.

Speaker Change: By the time, we get to Q4 of 2025, I think we picked up four five points to that.

Speaker Change: As we see the impact of E D M and some of the other new product introductions will be rolling out.

Chase Knickerbocker: Great, thanks guys.

Speaker Change: Great. Thanks, guys.

Sean Browne: Thank you.

Speaker Change: Thank you. Your next question is coming from Ryan Zimmerman from B T. I G. Your line is live.

Ryan Zimmerman: Your next question is coming from Ryan Zimmerman from BTIG. Your line is live. Hi, Sean. Hi, Scott. This is Izzy on for Ryan. Thank you for taking the question. Hello, Izzy. How are you? Good, thank you.

Speaker Change: Hi, Sharon Hi, Todd This is on for Ryan. Thank you for taking my question.

Speaker Change: Hey, how are you.

Speaker Change: Good. Thank you and just to start with 25 guidance I was hoping if you could speak to some of your assumptions around pacing and what would get you to the low and high ends of the guide.

Unknown Executive: Just to start with 25 guidance, I was hoping if you could speak to some of your assumptions around pacing, and what would get you to the low and high ends of the guide. Scott, you want me to jump in or you want to jump in on this? Yeah, maybe I'll set the stage for it. And if you want to add any color to it, feel free to jump in, Sean. But I think from a phasing perspective on top line, I think we look for seasonality that directionally is consistent with what we saw in 2024. That said, I don't expect to see as dramatic an increase in sales transitioning from Q1 to Q2, really only because of the impact of some of what we'll see on the annual licensing sag here in Q1.

Speaker Change: Scott you want me to jump in or you want to jump in on this.

Scott: Yeah, maybe I'll set the stage for it and if you want to add any color to it feel free to write on that John but I think from a phasing perspective on top line I think we look for seasonality that directionally is consistent with what we saw in 2024.

Scott: Said I don't expect to see as dramatic an increase in sales are transitioning from Q1 to Q2.

Scott: <unk> really only because of the impact of somewhat of what we'll see on the amnio licensing side here in Q1.

Scott Neils: As we move down into OPEX, you know, having covered gross margin with Chase, turning to the OPEX front, you know, I think we pick up maybe a point on the G&A side during the course of the year. I think we pick up significant leverage in sales and marketing. You know, we're probably picking up four to five points as a percentage of revenue on that side of things. And then I think R&D, we look to stay largely flat during the course of the year. And that gives you some good color, doesn't it?

Scott: As we move down into Opex, you know having covered our gross margin would chase I'm turning to the Opex front.

Scott: We pick up maybe a point on the G&A side during the course of the year I think we'd pick up significant leverage in sales and marketing and you know, we're probably picking up four to five points.

Scott: As a percentage of revenue on that side of things and then I think R&D, we look to stay largely flat during the course of the year.

Scott: I'll give you some good color is it.

Unknown Executive: Yeah, that's helpful. Thank you.

Scott: Yeah. That's helpful. Thank you.

Unknown Executive: And is there anything that would allow for any outperformance in 2025 that we should keep in mind? Sure. Well, one of the big ones is if the LCD gets pushed in any way. Additionally, to that point, if you think about the way the LCD for the wound care side is set up, it really only covers diabetic foot ulcers and venous leg ulcers. And so that's, you know, from organogenesis, as well as my medics, that makes them about 57% of that total market. So some of that OEM revenue that we have, or at least licensing revenue could certainly pick up in that realm.

Scott: And is there anything that would allow for any outperformance in 2025 that we should keep in mind.

Speaker Change: Sure well one of the big ones is if the L. C D. He get pushed in any way. Additionally to that point. If you think about the way the LCD for the wound care side is setup. It really only covers diabetic foot ulcers and venous leg ulcers and so that's you know what I listened to the gentlemen from organic Genesis as.

Speaker Change: Well as my bad acts that makes them about 57% of the total market. So some of that OEM revenue that we have for this licensing revenue could certainly pick up in that in that realm. There's other things too that problem one of the things that I want to make sure of that we can when we bring on an OEM.

Sean Browne: There's other things too that from one of the things that I want to make sure of that we can, when we bring on an OEM player for any of our products that we can reliably supply them. We've been on the wrong side of that ourselves. So as we create more capacity within our plant, which is some of the things we're working on as we speak, we think that there's quite frankly, we've got plenty of demand. It's a matter of, you know, getting the donors, having the clean rooms and all the things available so that we can produce what we need to produce to really knock this number out.

Player for any of our products that we can reliably supply that we've been on the wrong side of that ourselves. So as we create more capacity within our plants, which is some of the things. We're working on as we speak we think that there's there's there's quite frankly, we've got plenty of demand. It's a it's a matter of getting the.

Speaker Change: The owners, having the clean rooms, and all the things available. So that we can produce what we need to produce to really knock this number out so so I feel good about.

Sean Browne: So I feel good about The top line side of the thing, it's just a matter of making sure that we can we don't out kick our coverage, so to speak.

Speaker Change: The top line side of this thing, it's just a matter of making sure that we can we don't I'll kick our coverage so to speak.

Unknown Executive: Understood. And I heard your comments around that guidance isn't going to require any additional capital. Curious if you guys are holding back spend in any other areas that would potentially allow for growth if you had it on Oh, that's a great question. Um, You know, like anything, I mean, I tell you, back in the dot com days, right, you know, if you had enough money, you could just keep buying or buying business, basically. So yeah, there's certainly a way to buy business, no question about it. But, but what we are trying to build is really something sustainable.

Speaker Change: Understood and I heard your comments around that guidance isn't going to require any additional capital curious if you guys are holding back spend in any other areas that would potentially allow for growth. If you had it on hand.

Speaker Change: Well, it's a great question.

Speaker Change: You know like anything that yeah, I would tell you.

Speaker Change: Back of the Dotcom days right.

Speaker Change: Why don't you just keep buying or buying business basically so yeah, there's certainly a way to buy business no question about it but ER, but what we are trying to build is really something sustainable and so to that end, we wouldn't be doing anything that would be that detrimental to our growth engine. It's just that you know there are certain things like for instance hardware is a great example.

Sean Browne: And so to that end, you know, we wouldn't be doing anything that would be that detrimental to our growth engine. It's just that, you know, there's certain things like, for instance, hardware is a great example, you know, we have certain product lines that are pretty old for us, where we might have, say, 10 doctors out there that are using 10 different sets of, say, a pedicle screw line, an old pedicle screw line. You know, if we wanted to upgrade those lines and bring them up to say, you know, if we had to buy brand new ones, we have to buy 20 new sets altogether, even though we only have 10 sets being used.

Speaker Change: <unk> you know we have certain product lines that are pretty old for us where we might have say.

Speaker Change: 10 doctors out there that are using 10 different sets of say a pedicle screw line I know pedicle screw like you know if we wanted to upgrade those lives and bring them up to say you know if we had to buy brand new ones. We have to buy 20, new sites all together, even though we only have 10 starts being used and so so yeah, we could be buying stuff like that on the call.

Sean Browne: And so so yeah, we could be buying stuff like that on the come, but it's, it's just, you know, and hardware is one of those things where there's a lot of, you know, you could put a lot of money into hardware. And, you know, before you know it, you have outstripped all of your profitability through CapEx. And so so that's just something we want to keep an eye on.

Speaker Change: But it's it's just you know and it hardware, it's one of those things where theres a lot of you could put a lot of money into hardware and before you know you have outstripped all of your profitability through Capex and so so that's something we want to keep an eye on.

Unknown Executive: Got it.

Unknown Executive: And then last one for me. I was just curious how quickly we should start seeing some of the cost savings move into the P&L. Thanks for taking the question.

Speaker Change: Got it and then last one for me I was just curious as how quickly we should start seeing some of that cost savings to move into the P&L. Thanks for taking the questions.

Scott Neils: Great, Scott, I'll throw that over to you. Well, I can tell you right now, we're already immediately starting to see some of it already in the fourth quarter. But you'll see a significant amount here in the first quarter. Scott, I'll let you add to that. Right, I think that's exactly right. We put the wheels motion on those, you know, to the extent we've needed to reduce headcount, we've done so. And we put the spend reductions in place where necessary. So those are locked and loaded heading into 2025. Thanks for taking the question. Great.

Scott: Great Scott I'll I'll throw that over to you.

Scott: Well I can tell you right now we're are already immediately you're starting to see some of it already in the fourth quarter, but you'll see a significant amount here in the first quarter, Scott I'll, let you add to that.

Scott: Right I think that's exactly right, we put the wheels in motion on those you know.

Scott: To the extent, we need the dirtiest head count we've done so and.

Scott: And we put the spend reductions in place where necessary. So those are locked and loaded at heading into 2025.

Thanks for taking the questions.

Unknown Executive: Thanks, Susan. Thank you.

Speaker Change: Great. Thanks, Susan.

Operator: That concludes our Q&A session.

Sean Brown: Thank you that concludes our Q&A session I'll now hand, the conference back to President and Chief Executive Officer, Sean Brown for closing remarks. Please go ahead.

Sean Browne: I'll now hand the conference back to President and Chief Executive Officer Sean Browne for closing remarks. Please go ahead. Thank you, operator. First, I'd like to thank our hardworking Xtant team members, and their dedication to our mission of honoring the gift of donations that our patients can live as full and complete a life as possible. And then thankfully, I'd like to thank all of you who have joined us today. We greatly appreciate your support.

Speaker Change: Thank you operator.

Speaker Change: First I'd like to thank our hard working X 10 team members and their dedication to our mission of honoring the gift of donation so that our patients can live as full and complete a life as possible and then secondly, I'd like to thank all of you who have joined US today. We greatly appreciate your support and we're really excited about our self sustaining here of 2025. Thank you.

Sean Browne: And we're really excited about our self sustaining year of 2025. Thank you. Thank you, everyone.

Speaker Change: <unk>.

Thank you everyone. This concludes today's event you may disconnect at this time and have a wonderful day. Thank you for your participation.

Operator: This concludes today's event. You may disconnect at this time and have a wonderful day. Thank you for your participation.