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| 8-K - Xtant Medical Holdings, Inc. | e17391_xtnt-8k.htm |
Xtant Medical Reports Second Quarter 2017 Financial Results
Company Continues to Take Steps During Restructuring to Build for Future Growth
BELGRADE, Mont., August 9, 2017 (GLOBE NEWSWIRE) -- Xtant™ Medical Holdings, Inc. (NYSE American: XTNT), a leader in the development of regenerative medicine products and medical devices, today reported its financial results for the quarter ended June 30th, 2017. The Company reported Second Quarter 2017 revenue of approximately $21.4 million and an EBITDA loss of approximately ($2.1) million for the period.
Revenue
Consolidated second quarter 2017 revenue was approximately $21.4 million, a slight decrease compared to revenue of approximately $21.5 million for the same period of 2016. The slight decrease was due to an 20.5% increase in biologic revenue offset by a 18.4% decrease in fixation revenue compared to second quarter 2016 revenue.
Gross Profit
Consolidated gross profit for the second quarter of 2017 was $13.5 million or 63.2% of revenues, compared to gross profit of $14.7 million or 68.5% of revenues for the first quarter of 2016. The decrease in gross margin was primarily due to lower fixation revenue and lower fixation product margin compared to prior periods. In addition, the Company recorded a charge of approximately $304,000 for excessive wear and tear on fixation instruments and $159,000 for discarded biologics inventory about to expire.
Sales and Marketing Expenses
Consolidated second quarter 2017 sales and marketing expenses increased to $11.1 million, compared to sales and marketing expenses of $10.4 million during the same period in 2016. For the quarter, sales and marketing as a percentage of revenues increased to 52.0% compared to 48.6% in the second quarter of 2016. The increase was primarily driven by increased commissions from revenue derived from distributors who have higher contracted commissions rates.
General and Administrative Expenses
In the second quarter of 2017, consolidated general and administrative expenses increased to $4.5 million, compared to general and administrative expenses of $3.9 million for the same period during the prior year. As a percentage of revenues, general and administrative expenses were 21.1% during the period, compared to 18.2% for the same period of 2016. The increase was primarily due to increased professional fees and a $214,000 charge for contributions to employee benefit plans. In addition, the Company incurred additional insurance expense of $142,000 compared to the second quarter of 2016.
Net Income / Loss
Second quarter 2017 consolidated net loss increased to ($9.7) million, compared to a net loss of ($4.5) million reported during the year-ago period. Second quarter 2017 consolidated loss per share was ($0.54), compared to a loss per share of ($0.37) in the second quarter of 2016. The second quarter 2017 net loss includes approximately $1.5 million included in Other Expense for professional fees incurred in connection with the Company's potential restructuring and approximately $3.3 million of Interest Expense on the Company's debt instruments.
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 second quarter of 2017 was a loss of approximately ($2.1) million compared to a gain of $253,000 for the same period during 2016 due largely to the decrease in gross profit and increase in sales and marketing expenses noted above.
Financial Liquidity
Cash on hand as of June 30, 2017, was $1.7 million, as compared to $2.6 million as of December 31, 2016. Net working capital as of June 30, 2017, decreased to $17.9 million, as compared to $21.6 million as of December 31, 2016.
Conference Call to be Held August 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 August 10, 2017. Please refer to the information below for conference call dial-in information and webcast registration.
Conference
date: August 10, 2017, 10:00 AM ET
Conference dial-in: 877-269-7756
International dial-in: 201-689-7817
Conference Call Name: Xtant Medical's Second Quarter 2017 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."
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 ability to comply with covenants in the Company’s senior credit facility and to make deferred interest payments; the ability to maintain sufficient liquidity to fund operations; the ability to remain listed on the NYSE MKT; the ability to obtain financing on reasonable terms; the ability to increase revenue; the ability to continue as a going concern; the ability to maintain sufficient liquidity to fund operations; the ability to achieve expected results; the ability to remain competitive; government regulations; the ability to innovate and develop new products; the ability to obtain donor cadavers for products; the ability to engage and retain qualified technical personnel and members of the Company’s management team; the availability of Company facilities; government and third-party coverage and reimbursement for Company products; the ability to obtain regulatory approvals; the ability to successfully integrate recent and future business combinations or acquisitions; the ability to use net operating loss carry-forwards to offset future taxable income; the ability to deduct all or a portion of the interest payments on the notes for U.S. federal income tax purposes; the ability to service Company debt; product liability claims and other litigation to which we may be subjected; product recalls and defects; timing and results of clinical studies; the ability to obtain and protect Company intellectual property and proprietary rights; infringement and ownership of intellectual property; the ability to remain accredited with the American Association of Tissue Banks; influence by Company management; the ability to pay dividends; and the ability to issue preferred stock; 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:
CG CAPITAL
877.889.1972
investorrelations@cg.capital
cg.capital
XTANT MEDICAL HOLDINGS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
| Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||
| 2017 | 2016 | 2017 | 2016 | |||||||||||||
| Revenue | ||||||||||||||||
| Orthopedic product sales | $ | 21,371,030 | $ | 21,311,322 | $ | 43,367,345 | $ | 42,119,357 | ||||||||
| Other revenue | 37,130 | 150,248 | 123,484 | 319,548 | ||||||||||||
| Total Revenue | 21,408,160 | 21,461,570 | 43,490,829 | 42,438,905 | ||||||||||||
| Cost of sales | 7,880,639 | 6,758,071 | 14,438,241 | 13,635,338 | ||||||||||||
| Gross Profit | 13,527,521 | 14,703,499 | 29,052,588 | 28,803,567 | ||||||||||||
| Operating Expenses | ||||||||||||||||
| General and administrative | 4,526,543 | 3,899,280 | 8,654,811 | 7,383,992 | ||||||||||||
| Sales and marketing | 11,137,082 | 10,420,028 | 22,134,101 | 20,932,994 | ||||||||||||
| Research and development | 640,045 | 783,897 | 1,338,680 | 1,683,472 | ||||||||||||
| Depreciation and amortization | 1,469,603 | 1,216,696 | 2,750,568 | 2,425,030 | ||||||||||||
| Acquisition and integration related expenses | — | 450,755 | — | 752,528 | ||||||||||||
| Separation related expenses | 380,548 | — | 604,920 | — | ||||||||||||
| Non-cash consulting expense | 91,857 | 55,296 | 236,580 | 110,592 | ||||||||||||
| Total Operating Expenses | 18,245,678 | 16,825,952 | 35,719,660 | 33,288,608 | ||||||||||||
| Loss from Operations | (4,718,157 | ) | (2,122,453 | ) | (6,667,072 | ) | (4,485,041 | ) | ||||||||
| Other Income (Expense) | ||||||||||||||||
| Interest expense | (3,328,262 | ) | (2,984,186 | ) | (6,728,651 | ) | (5,811,361 | ) | ||||||||
| Change in warrant derivative liability | (13,798 | ) | 477,639 | 156,233 | 496,329 | |||||||||||
| Other income (expense) | (1,632,612 | ) | 166,425 | (1,620,268 | ) | (258,574 | ) | |||||||||
| Total Other Income (Expense) | (4,974,672 | ) | (2,340,122 | ) | (8,192,686 | ) | (5,573,606 | ) | ||||||||
| Net Loss from Operations | $ | (9,692,829 | ) | $ | (4,462,575 | ) | $ | (14,859,758 | ) | $ | (10,058,647 | ) | ||||
| Net loss per share: | ||||||||||||||||
| Basic | $ | (0.54 | ) | $ | (0.37 | ) | $ | (0.82 | ) | $ | (0.84 | ) | ||||
| Dilutive | $ | (0.54 | ) | $ | (0.37 | ) | $ | (0.82 | ) | $ | (0.84 | ) | ||||
| Shares used in the computation: | ||||||||||||||||
| Basic | 18,092,603 | 12,101,356 | 18,012,959 | 11,999,478 | ||||||||||||
| Dilutive | 18,092,603 | 12,101,356 | 18,012,959 | 11,999,478 | ||||||||||||
XTANT MEDICAL HOLDINGS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
| As of | ||||||||
| June 30, | As of | |||||||
| 2017 | December 31, | |||||||
| (unaudited) | 2016 | |||||||
| ASSETS | ||||||||
| Current Assets: | ||||||||
| Cash and cash equivalents | $ | 1,664,543 | $ | 2,578,267 | ||||
| Trade accounts receivable, net of allowance for doubtful accounts of $1,923,287 and $1,653,385, respectively | 15,847,142 | 18,991,872 | ||||||
| Current inventories, net | 24,932,155 | 26,266,457 | ||||||
| Prepaid and other current assets | 831,239 | 1,149,615 | ||||||
| Total current assets | 43,275,079 | 48,986,211 | ||||||
| Non-current inventories, net | 641,124 | 971,854 | ||||||
| Property and equipment, net | 14,037,043 | 15,840,730 | ||||||
| Goodwill | 41,534,626 | 41,534,626 | ||||||
| Intangible assets, net | 33,672,915 | 35,940,810 | ||||||
| Other assets | 1,133,331 | 827,374 | ||||||
| Total Assets | $ | 134,294,118 | $ | 144,101,605 | ||||
| LIABILITIES & STOCKHOLDERS’ DEFICIT | ||||||||
| Current Liabilities: | ||||||||
| Accounts payable | $ | 8,446,454 | $ | 10,471,944 | ||||
| Accounts payable - related party | 291,785 | 640,442 | ||||||
| Revolving line of credit | — | 10,448,283 | ||||||
| Accrued liabilities | 11,627,528 | 8,982,187 | ||||||
| Warrant derivative liability | 177,380 | 333,613 | ||||||
| Current portion of capital lease obligations | 302,064 | 244,847 | ||||||
| Total current liabilities | 20,845,211 | 31,121,316 | ||||||
| Long-term Liabilities: | ||||||||
| Capital lease obligation, less current portion | 747,000 | 832,152 | ||||||
| Long-term convertible debt, less issuance costs | 70,708,939 | 68,937,247 | ||||||
| Long-term debt, less issuance costs | 63,285,428 | 50,284,187 | ||||||
| Total Liabilities | 155,586,578 | 151,174,902 | ||||||
| Commitments and Contingencies | ||||||||
| Stockholders’ Deficit: | ||||||||
| Preferred stock, $0.000001 par value; 5,000,000 shares authorized; no shares issued and Outstanding | — | — | ||||||
| Common stock, $0.000001 par value; 95,000,000 shares authorized; 18,092,603 shares issued and outstanding as of June 30, 2017 and 17,249,315 shares issued and outstanding as of December 31, 2016 | 18 | 17 | ||||||
| Additional paid-in capital | 86,101,803 | 85,461,210 | ||||||
| Accumulated deficit | (107,394,281 | ) | (92,534,524 | ) | ||||
| Total Stockholders’ Deficit | (21,292,460 | ) | (7,073,297 | ) | ||||
| Total Liabilities & Stockholders’ Deficit | $ | 134,294,118 | $ | 144,101,605 | ||||
XTANT MEDICAL HOLDINGS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
| Six Months Ended June 30, | ||||||||
| 2017 | 2016 | |||||||
| Operating activities: | ||||||||
| Net loss | $ | (14,859,758 | ) | $ | (10,058,647 | ) | ||
| Adjustments to reconcile net loss to net cash used in operating activities: | ||||||||
| Depreciation and amortization | 4,029,851 | 3,649,361 | ||||||
| Non-cash interest | 6,211,365 | 2,541,890 | ||||||
| Loss on disposal of fixed assets | 878,251 | — | ||||||
| Non-cash consulting expense/stock option expense | 397,174 | 271,374 | ||||||
| Provision for losses on accounts receivable and inventory | 538,890 | 432,781 | ||||||
| Change in derivative warrant liability | (156,233 | ) | (496,329 | ) | ||||
| Changes in operating assets and liabilities: | ||||||||
| Accounts receivable | 2,544,399 | 207,934 | ||||||
| Inventories | 1,726,473 | (2,673,670 | ) | |||||
| Prepaid and other assets | 12,417 | (708,693 | ) | |||||
| Accounts payable | (2,374,147 | ) | 3,652,113 | |||||
| Accrued liabilities | 63,235 | (4,568,572 | ) | |||||
| Net cash used in operating activities | (988,083 | ) | (7,750,458 | ) | ||||
| Investing activities: | ||||||||
| Purchases of property and equipment and intangible assets | (836,517 | ) | (4,369,562 | ) | ||||
| Net cash used in investing activities | (836,517 | ) | (4,369,562 | ) | ||||
| Financing activities: | ||||||||
| Proceeds from long-term debt | 11,387,094 | — | ||||||
| Payments on capital leases | (27,935 | ) | (49,428 | ) | ||||
| Proceeds from the issuance of Convertible Debt | — | 2,238,166 | ||||||
| Proceeds from Revolving Line of Credit | — | 5,480,671 | ||||||
| Payments on Revolving Line of Credit | (10,448,283 | ) | — | |||||
| Net proceeds from issuance of stock | — | 300,000 | ||||||
| Net cash provided by financing activities | 910,876 | 7,969,409 | ||||||
| Net change in cash and cash equivalents | (913,724 | ) | (4,150,611 | ) | ||||
| Cash and cash equivalents at beginning of period | 2,578,267 | 6,368,016 | ||||||
| Cash and cash equivalents at end of period | $ | 1,664,543 | $ | 2,217,405 | ||||
XTANT MEDICAL HOLDINGS, INC.
Calculation of Consolidated EBITDA for the Periods Ended June 30, 2017 and 2016
| (Unaudited) | ||||||||||||||||
| For the three months ended June 30, | For the six months ended June 30, | |||||||||||||||
| 2017 | 2016 | 2017 | 2016 | |||||||||||||
| Net Loss | (9,692,829 | ) | (4,462,575 | ) | (14,859,758 | ) | (10,058,647 | ) | ||||||||
| Tax (Benefit) Provision | — | — | — | — | ||||||||||||
| Other (Income) Expense | 1,632,612 | (166,426 | ) | 1,620,268 | 258,574 | |||||||||||
| Change in warrant derivative liability | 13,798 | (477,639 | ) | (156,233 | ) | (496,329 | ) | |||||||||
| Interest expense | 3,328,262 | 2,984,186 | 6,728,651 | 5,811,361 | ||||||||||||
| Separation related expenses | 380,548 | — | 604,920 | — | ||||||||||||
| Acquisition and Integration related expenses | — | 450,756 | — | 752,529 | ||||||||||||
| Non-Cash Compensation | 91,857 | 55,296 | 236,580 | 110,592 | ||||||||||||
| Depreciation & Amortization | 2,168,104 | 1,869,375 | 4,239,441 | 3,649,361 | ||||||||||||
| EBITDA Gain (Loss) | (2,077,648 | ) | 252,973 | (1,586,131 | ) | 27,441 | ||||||||||