Xtant Medical Holdings, Inc. - FORM 8-K - EX-99.1

Attached files

file	filename
8-K - Xtant Medical Holdings, Inc.	e12123_xtnt-8k.htm

Xtant™ Medical Reports Record Fourth Quarter Revenue of $24.5 million, 10% Growth Compared to Prior Year Period See footnote about the use of pro forma financial information

Fourth Quarter 2016 Highlights:

	•	Consolidated total revenue increased 9.9% to a record $24.5 million compared to fourth quarter 2015 revenue of

	•	$22.3 million Consolidated gross profit increased 17.4% to $17.5 million compared to fourth quarter 2015 gross

	•	profit of $14.9 million Consolidated gross margins improved to 71.6%, compared to 67.0% reported in the fourth quarter of 2015

Full-Year 2016 Highlights:

	•	Consolidated gross profit increased 10.1% to $62.3 million compared to pro forma 2015 gross profit of

	•	$56.6 million Consolidated gross margins for the year were 69.2%, compared to pro forma 2015 gross margin of 65.4%

BELGRADE, Mont., March 9, 2017 (GLOBE NEWSWIRE) -- Xtant™ Medical Holdings, Inc. (NYSE MKT: XTNT, a leader in the development of regenerative medicine products and medical devices, today reported its financial results for the period ended December 31st, 2016. The Company reported annual revenues of approximately $90.0 million and a net loss for the year of approximately $19.5 million.

Revenue

Consolidated fourth quarter 2016 revenue was approximately $24.5 million, an increase of 9.9% compared to revenue of approximately $22.3 million for the same period during 2015.

Consolidated revenue for the full year 2016 was approximately $90.0 million, compared to pro forma 2015 revenue of approximately $86.5 million, representing an increase of 4.0% over the prior year.

Gross Profit

Consolidated gross profit for the fourth quarter of 2016 was $17.5 million or 71.6% of revenues, compared to gross profit of $14.9 million or 67.0% of revenues for the fourth quarter of 2015.

For the year, gross profit was approximately $62.3 million, compared with pro forma 2015 gross profit of $56.6 million. Gross margin for the year was 69.2%, compared to 2015 pro forma gross margin of 65.4%

Sales and Marketing Expenses

Consolidated fourth quarter 2016 sales and marketing expenses increased to $11.9 million, as compared to sales and marketing expenses of $10.6 million during the same period in 2015. For the quarter, sales and marketing as a percentage of revenues increased slightly to 48.8%, compared to 47.6% in the fourth quarter of 2015.

For the year, sales and marketing expenses increased to $44.1 million for 2016, as compared to pro forma 2015 sales and marketing expenses of $39.3 million. As a percentage of revenues, sales and marketing expenses increased to 48.9% compared to 45.5% reported for the pro forma full year 2015.

General and Administrative Expenses

In the fourth quarter, consolidated general and administrative expenses remained flat at $4.5 million as compared to general and administrative expenses of $4.2 million reported for the same period last year. As a percentage of revenues, general and administrative expenses were 18.3% during the period as compared to 18.9% for the same period during 2015.

2016 general and administrative expenses decreased to $15.8 million as compared with $16.6 million reported for the pro forma period last year. As a percentage of revenues, general and administrative expenses were 17.5% as compared to 19.2% for 2015.

Net Income / Loss

The fourth quarter 2016 consolidated net loss was $4.5 million, compared to the same period a year-ago net income of $11.6 million. The decrease was primarily due to a one-time recording of a deferred tax benefit of $17.5 million that occurred during the fourth quarter 2015.

The fourth quarter 2016 consolidated loss per share of $0.31 compared to earnings per share of $0.97 in the fourth quarter of 2015.

For the full-year 2016, the Company had a net loss of $19.5 million compared to a pro forma net loss of $5.8 million for 2015. Net loss per share for the full-year 2016 was $1.54 a share compared to pro forma net loss per share of $0.65 for 2015.

EBITDA

The Company defines earnings before interest, taxes, depreciation and amortization (“EBITDA”) as net income/loss from operations before depreciation, amortization, impairment charges, non-recurring expenses and non-cash stock-based compensation. Consolidated EBITDA for the fourth quarter of 2016 was a gain of $1.2 million compared to a loss of $350,000 for the same period during 2015.

Full year 2016 EBITDA was a gain of $2.0 million compared to a zero pro forma loss in the prior year.

Financial Liquidity

Cash on hand as of December 31, 2016, was $2.6 million, as compared to $6.4 million as of December 31, 2015. Net working capital as of December 31, 2016 decreased $5.7 million to $17.9 million, as compared to $23.6 million as of December 31, 2015.

Outlook for Full Year 2017

The Company plans to have an immediate focus on operational and cash flow efficiencies throughout 2017. As a result, we have reduced revenue guidance while expanding projected EBITDA margins as we get to the latter part of 2017. The Company’s revised full year 2017 revenue and EBITDA guidance is based on the following:

Stated in 000’s	FY ’15*			FY ’16			2017 Guidance
Revenue	$	86,518		$	90,003			$96,000 - $98,000
Growth					4	%		6.7% - 8.9%
EBITDA	($	33	)	$	2,050			$6,900 - $7,700
*Pro forma results

Conference Call to be Held March 10, 2017

An accompanying listen-only conference call will be hosted by Carl O’Connell, Chief Executive Officer, and John Gandolfo, Chief Financial Officer, to discuss the results. The call will be held at 10:00 AM ET, on March 10, 2017. Please refer to the information below for conference call dial-in information and webcast registration.

Conference date: March 10, 2017, 10:00 AM ET
Conference dial-in: 877-269-7756
International dial-in: 201-689-7817
Conference Call Name: Xtant Medical’s Fourth Quarter 2016 Results Call
Webcast Registration: Click Here

Following the live call, a replay will be available on the Company’s website, www.xtantmedical.com, under “Investor Info.”

Use of Pro Forma Financial Information

On July 31,2015, Bacterin International Holdings, Inc. acquired all of the issued and outstanding stock of X-Spine Systems, Inc. and the combined company was renamed Xtant Medical Holdings, Inc. Except for the financial results for the three months ended December 31,2015, the results presented for the full 2015 year are on a pro forma basis as if the two companies were combined for the periods shown. Certain pro forma adjustments have been made to reflect the impact of the purchase transaction, primarily consisting of amortization of intangible assets with determinable lives and interest expense on long-term debt. In addition, certain historical expenses, such as warrant expense and interest expense associated with debt that was immediately repaid, were eliminated from these pro-forma results. The pro forma information does not necessarily reflect the actual results of operations had the acquisition been consummated at the beginning of the fiscal reporting period indicated nor is it indicative of future operating results. The pro forma information does not include any adjustment for potential revenue enhancements, cost synergies or other operating efficiencies that could result from the acquisition.

Additional information regarding the business combination and its impact on the Company’s financial position will be set forth in the Company’s Form 10-K for the fiscal year ended December 31, 2016, which will be filed with the Securities and Exchange Commission on or about March 30, 2017 and will include the Company’s audited consolidated financial statements as of and for the years ended December 31, 2016 and December 31, 2015

About Xtant™ Medical Holdings, Inc.

Xtant Medical Holdings, Inc. (NYSE MKT: XTNT) develops, manufactures and markets class-leading regenerative medicine products and medical devices for domestic and international markets. Xtant products serve the specialized needs of orthopedic and neurological surgeons, including orthobiologics for the promotion of bone healing, implants and instrumentation for the treatment of spinal disease, tissue grafts for the treatment of orthopedic disorders, and biologics to promote healing following cranial, and foot and ankle surgeries. With core competencies in both biologic and non-biologic surgical technologies, Xtant can leverage its resources to successfully compete in global neurological and orthopedic surgery markets. For further information, please visit www.xtantmedical.com.

Important Cautions Regarding Forward-looking Statements

This press release contains certain disclosures that may be deemed forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 that are subject to significant risks and uncertainties. Forward-looking statements include statements that are predictive in nature, that depend upon or refer to future events or conditions, or that include words such as “continue,” “efforts,” “expects,” “anticipates,” “intends,” “plans,” “believes,” “estimates,” “projects,” “forecasts,” “strategy,” “will,” “goal,” “target,” “prospects,” “potential,” “optimistic,” “confident,” “likely,” “probable” or similar expressions or the negative thereof. Statements of historical fact also may be deemed to be forward-looking statements. We caution that these statements by their nature involve risks and uncertainties, and actual results may differ materially depending on a variety of important factors, including, among others: the Company’s ability to successfully integrate the acquisition of X-spine; the ability of the Company’s sales force to achieve expected results; the Company’s ability to meet its existing and anticipated contractual obligations, including financial covenant and other obligations contained in the Company’s secured lending facility; the Company’s ability to manage cash flow; the Company’s ability to develop, market, sell and distribute desirable applications, products and services and to protect its intellectual property; the ability of the Company’s customers to pay and the timeliness of such payments; the Company’s ability to obtain financing as and when needed; changes in consumer demands and preferences; the Company’s ability to attract and retain management and employees with appropriate skills and expertise; the impact of changes in market, legal and regulatory conditions and in the applicable business environment, including actions of competitors; and other factors. Additional risk factors are listed in the Company’s Annual Report on Form 10-K and Quarterly Reports on Form 10-Q under the heading “Risk Factors.” The Company undertakes no obligation to release publicly any revisions to any forward-looking statements to reflect events or circumstances after the date hereof or to reflect the occurrence of unanticipated events, except as required by law.

Contact:
COCKRELL GROUP
877.889.1972
investorrelations@thecockrellgroup.com
cockrellgroup.com

XTANT MEDICAL HOLDINGS, INC.

Condensed Consolidated Statements of Operations

Unaudited Actual and Proforma Results

	For the Three Months Ended December 31,												For the Year Ended December 31,
	2016 Unaudited						2015 Unaudited						2016 Unaudited						2015 Pro Forma
				% of						% of						% of						% of
	Amount			Revenue			Amount			Revenue			Amount			Revenue			Amount			Revenue
Orthopedic Product Sales	$	24,362,237			99.6	%	$	21,771,750			97.8	%	$	89,388,145			99.3	%	$	85,235,170			98.5	%
Other		108,621			0.4	%		494,072			2.2	%		614,591			0.7	%		1,282,429			1.5	%
Total Revenue		24,470,858			100.0	%		22,265,822			100.0	%		90,002,736			100.0	%		86,517,599			100.0	%

Cost of sales		6,960,634			28.4	%		7,353,446			33.0	%		27,710,014			30.8	%		29,913,686			34.6	%

Gross Profit		17,510,223			71.6	%		14,912,376			67.0	%		62,292,722			69.2	%		56,603,913			65.4	%

Operating Expenses
General and administrative		4,484,419			18.3	%		4,201,394			18.9	%		15,762,531			17.5	%		16,612,883			19.2	%
Sales and marketing		11,940,049			48.8	%		10,607,475			47.6	%		44,055,813			48.9	%		39,334,250			45.5	%
Research and development		798,198			3.3	%		1,027,166			4.6	%		3,410,600			3.8	%		3,840,958			4.4	%
Depreciation and amortization		1,250,436			5.1	%		2,019,258			9.1	%		4,940,955			5.5	%		6,220,316			7.2	%
Acquisition and Integration related expenses		131,755			0.5	%		1,079,236			4.8	%		1,401,367			1.6	%		4,935,755			5.7	%
Gain from the Extinguishment of Debt		0			0.0	%		0			0.0	%		0			0.0	%		(2,345,019	)		-2.7	%
Impairment of Assets		0			0.0	%		0			0.0	%		0			0.0	%		233,748			0.3	%
Non-cash consulting		0			0.0	%		55,296			0.2	%		266,721			0.3	%		246,165			0.3	%
Total Operating Expenses		18,604,856			76.0	%		18,989,824			85.3	%		69,837,986			77.6	%		69,079,056			79.8	%

Net Gain (Loss) from Operations		(1,094,633	)		-4.5	%		(4,077,448	)		-18.3	%		(7,545,264	)		-8.4	%		(12,475,142	)		-14.4	%

Other Income (Expense)
Interest expense		(3,287,855	)		-13.4	%		(2,802,807	)		-12.6	%		(12,262,750	)		-13.6	%		(10,948,845	)		-12.7	%
Change in warrant derivative liability		0			0.0	%		348,943			1.6	%		716,738			0.8	%		270,020			0.3	%
Non-cash consideration associated with stock purchase agreement		0			0.0	%		0			0.0	%		0			0.0	%		(558,185	)		-0.6	%
Other income (expense)		(103,990	)		-0.4	%		582,123			2.6	%		(351,914	)		-0.4	%		395,006			0.5	%

Total Other Income (Expense)		(3,391,845	)		-13.9	%		(1,871,740	)		-8.4	%		(11,897,926	)		-13.2	%		(10,842,004	)		-12.5	%

Net Gain (Loss) from Operations Before Benefit (Provision) for Income Taxes		(4,486,478	)		-18.3	%		(5,949,188	)		-26.7	%		(19,443,190	)		-21.6	%		(23,317,146	)		-27.0	%

Benefit (Provision) for Income Taxes
Current		(50,362	)		-0.2	%		0			0.0	%		(50,362	)		-0.1	%		(65,387	)		-0.1	%
Deferred		0			0.0	%		17,537,408			78.8	%		0			0.0	%		17,537,408			20.3	%

Net Income (Loss)	$	(4,536,840	)		-18.5	%	$	11,588,220			52.0	%	$	(19,493,552	)		-21.7	%	$	(5,845,125	)		-6.8	%

Net Income (loss) per share:
Basic	($	0.31	)				$	0.97					($	1.54	)				($	0.65	)
Dilutive	($	0.31	)				$	0.97					($	1.54	)				($	0.65	)

Shares used in the computation:
Basic		14,479,201						11,890,104						12,671,685						9,055,483
Dilutive		14,479,201						11,890,104						12,671,685						9,055,483

XTANT MEDICAL HOLDINGS, INC.

Condensed Consolidated Statements of Operations

Audited and Unaudited Actual Results

	For the Three Months Ended December 31,												For the Year Ended December 31,
	2016 Actual Unaudited						2015 Actual Unaudited						2016 Actual Unaudited						2015 Actual Audited
				% of						% of						% of						% of
	Amount			Revenue			Amount			Revenue			Amount			Revenue			Amount			Revenue
Orthopedic Product Sales	$	24,362,237			99.6	%	$	21,771,750			97.8	%	$	89,388,145			99.3	%	$	58,194,249			98.1	%
Other		108,621			0.4	%		494,072			2.2	%		614,591			0.7	%		1,151,468			1.9	%
Total Revenue		24,470,858			100.0	%		22,265,822			100.0	%		90,002,736			100.0	%		59,345,717			100.0	%

Cost of sales		6,960,634			28.4	%		7,353,446			33.0	%		27,710,014			30.8	%		20,262,728			34.1	%

Gross Profit		17,510,223			71.6	%		14,912,376			67.0	%		62,292,722			69.2	%		39,082,989			65.9	%

Operating Expenses
General and administrative		4,484,419			18.3	%		4,201,394			18.9	%		15,762,531			17.5	%		12,993,307			21.9	%
Sales and marketing		11,940,049			48.8	%		10,607,475			47.6	%		44,055,813			48.9	%		28,731,184			48.4	%
Research and development		798,198			3.3	%		1,027,166			4.6	%		3,410,600			3.8	%		2,546,362			4.3	%
Depreciation and amortization		1,250,436			5.1	%		2,019,258			9.1	%		4,940,955			5.5	%		3,819,588			6.4	%
Acquisition and Integration related expenses		131,755			21.8	%		1,079,236			4.8	%		1,401,367			1.6	%		4,935,755			8.3	%
Gain from the Extinguishment of Debt		0			0.0	%		0			0.0	%		0			0.0	%		(2,345,019	)		-4.0	%
Impairment of Assets		0			0.0	%		0			0.0	%		0			0.0	%		233,748			0.4	%
Non-cash consulting		0			0.0	%		55,296			0.2	%		266,721			0.3	%		246,165			0.4	%
Total Operating Expenses		18,604,856			76.0	%		18,989,824			85.3	%		69,837,986			77.6	%		51,161,091			86.2	%

Net Gain (Loss) from Operations		(1,094,633	)		-4.5	%		(4,077,448	)		-18.3	%		(7,545,264	)		-8.4	%		(12,078,101	)		-20.4	%

Other Income (Expense)
Interest expense		(3,287,855	)		-13.4	%		(2,802,807	)		-12.6	%		(12,262,750	)		-13.6	%		(7,733,748	)		-13.0	%
Change in warrant derivative liability		0			0.0	%		348,943			1.6	%		716,738			0.8	%		270,020			0.5	%
Non-cash consideration associated with stock purchase agreement		0			0.0	%		0			0.0	%		0			0.0	%		(558,185	)		-0.9	%
Other income (expense)		(103,990	)		-0.4	%		582,123			2.6	%		(351,914	)		-0.4	%		388,177			0.7	%

Total Other Income (Expense)		(3,391,845	)		-13.9	%		(1,871,740	)		-8.4	%		(11,897,926	)		-13.2	%		(7,633,736	)		-12.9	%

Net Gain (Loss) from Operations Before Benefit (Provision) for Income Taxes		(4,486,478	)		-18.3	%		(5,949,188	)		-26.7	%		(19,443,190	)		-21.6	%		(19,711,838	)		-33.2	%

Benefit (Provision) for Income Taxes
Current		(50,362	)		-0.2	%		0			0.0	%		(50,362	)		-0.1	%		0			0.0	%
Deferred		0			0.0	%		17,537,408			78.8	%		0			0.0	%		17,537,408			29.6	%

Net Income (Loss)	$	(4,536,840	)		-18.5	%	$	11,588,220			52.0	%	$	(19,493,552	)		-21.7	%	$	(2,174,430	)		-3.7	%

Net Income (loss) per share:
Basic	($	0.31	)				$	0.97					($	1.54	)				($	0.24	)
Dilutive	($	0.31	)				$	0.97					($	1.54	)				($	0.24	)

Shares used in the computation:
Basic		14,479,201						11,890,104						12,671,685						9,055,483
Dilutive		14,479,201						11,890,104						12,671,685						9,055,483

XTANT MEDICAL HOLDINGS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

	For the Twelve months ended December 31,
	2016 Unaudited			2015 Audited
Operating activities:
Net loss	$	(19,493,552	)	$	(2,174,430	)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization		7,241,870			4,889,272
Purchase accounting valuation allowance		0			(17,537,408	)
Non-Cash Interest		6,784,785			4,814,506
Impairment of Assets		0			956,395
Gain (Loss) on sale of fixed assets		25,458			(596,883	)
Non-cash consulting expense/stock option expense		522,987			836,741
Provision for losses on accounts receivable and inventory		223,538			700,234
Change in derivative warrant liability		(716,738	)		(270,020	)
Non-cash consideration associated with stock purchase agreement		0			558,185
Extinguishment of debt		0			(2,345,019	)
Changes in operating assets and liabilities:
Accounts receivable		(2,680,405	)		(5,512,429	)
Inventories		(4,074,086	)		(545,713	)
Prepaid and other assets		(484,061	)		(1,044,962	)
Accounts payable		319,091			644,149
Accrued liabilities		(2,076,183	)		7,527,514
Net cash used in operating activities		(14,407,296	)		(9,099,868	)

Investing activities:
Acquisition of X-spine Systems, Inc.		0			(72,975,200	)
Purchases of property and equipment and intangible assets		(5,832,690	)		(2,263,033	)
Proceeds from sale of fixed assets		16,400			1,667,195
Net cash used in investing activities		(5,816,290	)		(73,571,038	)

Financing activities:
Proceeds from long-term and convertible debt, net of deferred and financing costs		3,238,166			83,897,361
Net proceeds from equity private placement		0			515,395
Payment on royalty obligation		0			(542,905	)
Payments on Long-term debt		0			(1,325,814	)
Payments on capital leases		(144,600	)		(101,760	)
Net proceeds from the issuance of stock		3,087,462			2,116,937
Net Proceeds from the revolving line of credit		10,252,809			0
Proceeds from exercise of options		0			11,500
Net cash provided by financing activities		16,433,837			84,570,714

Net change in cash and cash equivalents		(3,789,749	)		1,899,808
Cash and cash equivalents at beginning of period		6,368,016			4,468,208
Cash and cash equivalents at end of period	$	2,578,267		$	6,368,016

XTANT MEDICAL HOLDINGS, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

As of December 31, 2015 and 2016

	As of		As of
	Dec. 31, 2016 Unaudited		Dec. 31, 2015 Audited
ASSETS
Current Assets:
Cash and cash equivalents	$	2,578,267	$	6,368,016
Trade accounts receivable, net of allowance for doubtful accounts of $1,635,385 and $2,579,634, respectively		18,991,872		15,385,218
Inventories, net		26,266,457		22,684,716
Prepaid and other current assets		1,149,616		601,697
Total current assets		48,986,211		45,039,647

Non-current inventories		971,854		1,607,915
Property and equipment, net		15,840,730		11,816,629
Goodwill		41,534,626		41,534,626
Intangible assets, net		35,940,810		40,237,289
Other assets		827,372		791,221
Total Assets	$	144,101,605	$	141,027,327

LIABILITIES & STOCKHOLDERS’ (DEFICIT) EQUITY
Current Liabilities:
Accounts payable	$	10,471,944	$	9,386,531
Accounts payable - related party		640,441		1,406,763
Accrued liabilities		8,982,187		9,595,851
Revolving Line of Credit		10,448,283		0
Warrant derivative liability		333,613		1,050,351
Current portion of capital lease obligations		244,847		35,139
Total current liabilities		31,121,316		21,474,635
Long-term Liabilities:
Capital lease obligation, less current portion		832,152		7,800
Long term convertible debt, less current portion		68,937,247		66,436,647
Long-term debt, less current portion		50,284,187		44,231,718
Total Liabilities		151,174,902		132,150,800

Commitments and Contingencies
Stockholders’ Equity
Preferred stock		-		-
Common stock		17		11
Additional paid-in capital		85,461,210		81,917,488
Accumulated deficit		(92,534,524)		(73,040,973)
Total Stockholders’ Equity (Deficit)		(7,073,297)		8,876,527

Total Liabilities & Stockholders’ Equity	$	144,101,605	$	141,027,327

XTANT MEDICAL HOLDINGS, INC.

Calculation of Consolidated EBITDA for the Three and Twelve Months Ended December 31, 2016

and for the Three and Pro Forma Twelve Months Ended December 31, 2015

Unaudited

	For the three months ended December 31,						For the twelve months ended December 31,
	2016			2015			2016			2015
Net Loss		(4,536,840	)		11,588,220			(19,493,552	)		(5,845,125	)

(Benefit) Provision		50,362			(17,537,408	)		50,362			(17,472,021	)
Other (Income) Expense		103,990			(582,123	)		351,914			(395,006	)
Change in warrant derivative liability		0			(348,943	)		(716,738	)		(270,020	)
Non-cash consideration associated with stock purchase agreement		0			0			0			558,185
Interest expense		3,287,855			2,802,807			12,262,750			10,948,845
Acquisition and Integration related expenses		131,755			0			1,401,367			233,748
Extinguishment of Debt		0			1,079,236			0			4,935,755
Impairment of Assets		0			0			0			(2,345,019	)
Non-Cash Compensation		0			163,124			522,987			794,358
Depreciation & Amortization		1,690,020			2,485,321			7,241,870			8,822,994
One Time Inventory Reserves and Accounts Receivables Allowances		426,355			0			426,355			0
EBITDA Gain (Loss)		1,153,497			(349,767	)		2,047,315			(33,306	)

Xtant Medical Holdings, Inc. - FORM 8-K - EX-99.1 - March 9, 2017

Attached files

Xtant Medical Holdings, Inc. Reports