Financial Data and Key Metrics Changes - Total revenue for Q2 2025 was $35.4 million, representing an 18% increase compared to $29.9 million in Q2 2024 [13] - Gross margin improved to 68.6% from 62.1% year-over-year, driven by a favorable sales mix and improved production efficiency [14] - Net income for Q2 2025 was $3.5 million, compared to a net loss of $3.9 million in Q2 2024 [16] - Adjusted EBITDA for Q2 2025 was $6.9 million, a significant improvement from an adjusted EBITDA loss of $0.6 million in the same period last year [17] Business Line Data and Key Metrics Changes - Biologics revenue grew over 20% year-over-year, contributing significantly to overall revenue growth [7] - Hardware product family experienced a 20% decline, amounting to a $2.7 million decrease compared to the previous year [13] Market Data and Key Metrics Changes - Licensing revenue for Q2 2025 included nearly $5 million from agreements related to Q codes and the SIMPLIMAX dual layer amniotic membrane [7] - The company anticipates an additional $5 million in licensing revenue for the remainder of 2025 [22] Company Strategy and Development Direction - The company plans to use proceeds from the sale of non-core assets to reduce long-term debt and enhance cash liquidity [5][6] - Focus will shift towards driving growth in the biologics platform, with an emphasis on organic revenue growth and profitability [10] - The company raised its full-year 2025 revenue guidance to a range of $131 million to $135 million, reflecting an expected growth of approximately 11% to 15% over 2024 [11] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in achieving self-sustainability and profitability through new product launches and cost-cutting initiatives [10] - The anticipated sale of non-core assets is expected to have a neutral to slightly positive effect on margins and bottom-line metrics [12] Other Important Information - The company has $7 million in cash and cash equivalents, with $27 million in net accounts receivable and $40.1 million in inventory as of June 30, 2025 [17][18] - The anticipated sale of certain assets is expected to close during 2025, with an annual revenue run rate of approximately $23.5 million from the sold businesses [12] Q&A Session Summary Question: Can you clarify the nature of licensing revenue? - Management confirmed that licensing revenue is straightforward and based on sales volume from partners [20] Question: What is the outlook for licensing revenue for the remainder of the year? - Management expects at least another strong quarter but is less confident about Q4 performance [21] Question: What portion of year-over-year growth is driven by new products? - Management indicated that new product introductions, particularly OsteoFactor Pro and Trivium, are expected to contribute positively to growth in the second half of the year [24][26] Question: How should gross margins be viewed for the remainder of the year? - Management anticipates a decline in gross margins by about four to five points due to the effects of royalty revenue and hardware growth decline [30] Question: How will the sale of non-core assets affect the hardware business? - Management believes that divesting non-core assets will allow for greater focus on the domestic hardware business, which is expected to improve performance [32]

[CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS](index=4&type=section&id=CAUTIONARY%20STATEMENT%20REGARDING%20FORWARD-LOOKING%20STATEMENTS) This section warns that the report contains forward-looking statements subject to risks and uncertainties that could cause actual results to differ materially from projections [Forward-Looking Statements and Risks](index=4&type=section&id=Forward-Looking%20Statements%20and%20Risks) This section details various factors that could impact future performance, including revenue growth, profitability, strategic execution, economic conditions, and manufacturing challenges - The report contains forward-looking statements about future expectations, hopes, beliefs, intentions, or strategies, identified by words like "anticipate," "believe," "expect," etc[9](index=9&type=chunk) - Key risks include the ability to increase revenue and profitability, execute strategic priorities, manage the supply chain, effects of global economic slowdown, dependence on sales agents, success of new products (e.g., Trivium™), international operations, manufacturing challenges (stem cell shortage), competition, regulatory approvals, and financial liquidity[10](index=10&type=chunk)[11](index=11&type=chunk)[14](index=14&type=chunk) - Forward-looking statements are based on current expectations, but actual results may differ materially due to risks and uncertainties, including those described in the "Risk Factors" section of the Annual Report on Form 10-K for 2024[12](index=12&type=chunk) [PART I. FINANCIAL INFORMATION](index=7&type=section&id=PART%20I.%20FINANCIAL%20INFORMATION) This part presents the company's unaudited condensed consolidated financial statements and management's discussion and analysis of financial condition and results of operations [ITEM 1. FINANCIAL STATEMENTS](index=7&type=section&id=ITEM%201.%20FINANCIAL%20STATEMENTS) This section provides the unaudited condensed consolidated financial statements, including balance sheets, statements of operations, comprehensive income, equity, and cash flows, along with detailed notes [Condensed Consolidated Balance Sheets](index=7&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) This statement presents the company's financial position, detailing assets, liabilities, and equity as of June 30, 2025, and December 31, 2024 | Metric | June 30, 2025 (in thousands) | December 31, 2024 (in thousands) | Change (in thousands) | | :-------------------------------- | :----------------------------- | :------------------------------- | :-------------------- | | Total Assets | $103,479 | $93,837 | +$9,642 | | Total Liabilities | $54,977 | $50,874 | +$4,103 | | Total Stockholders' Equity | $48,502 | $42,963 | +$5,539 | | Cash and cash equivalents | $6,923 | $6,199 | +$724 | | Restricted cash | $114 | $22 | +$92 | | Trade accounts receivable, net | $26,951 | $20,660 | +$6,291 | | Inventories | $40,135 | $38,634 | +$1,501 | | Prepaid and other current assets | $1,466 | $1,601 | $(135) | | Total current assets | $75,589 | $67,116 | +$8,473 | | Accounts payable | $7,223 | $7,918 | $(695) | | Accrued liabilities | $10,626 | $7,771 | +$2,855 | | Current portion of lease liability | $693 | $703 | $(10) | | Current portion of finance lease obligations | $52 | $69 | $(17) | | Line of credit | $12,006 | $12,120 | $(114) | | Total current liabilities | $30,600 | $28,581 | +$2,019 | | Right-of-use asset, net | $2,634 | $829 | +$1,805 | | Long-term debt, plus premium and less issuance costs | $22,278 | $22,038 | +$240 | [Condensed Consolidated Statements of Operations](index=8&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations) This statement reports the company's revenues, expenses, and net income or loss for the three and six months ended June 30, 2025 and 2024 | Metric (Three Months Ended June 30) | 2025 (in thousands) | 2024 (in thousands) | Change (in thousands) | YoY Change (%) | | :---------------------------------- | :------------------ | :------------------ | :-------------------- | :------------- | | Total Revenue | $35,411 | $29,943 | +$5,468 | +18.26% | | Product revenue | $30,436 | $29,943 | +$493 | +1.65% | | License revenue | $4,975 | $0 | +$4,975 | N/A | | Cost of sales | $11,127 | $11,361 | $(234) | -2.06% | | Gross Profit | $24,284 | $18,582 | +$5,702 | +30.68% | | Total Operating Expenses | $19,660 | $21,528 | $(1,868) | -8.68% | | Income (Loss) from Operations | $4,624 | $(2,946) | +$7,570 | N/A | | Total Other Expense | $(819) | $(879) | +$60 | -6.83% | | Net Income (Loss) from Operations Before Provision for Income Taxes | $3,805 | $(3,825) | +$7,630 | N/A | | Provision for Income Taxes Current and Deferred | $(255) | $(36) | $(219) | +608.33% | | Net Income (Loss) | $3,550 | $(3,861) | +$7,411 | N/A | | Basic Net Income (Loss) Per Share | $0.03 | $(0.03) | +$0.06 | N/A | | Dilutive Net Income (Loss) Per Share | $0.02 | $(0.03) | +$0.05 | N/A | | Metric (Six Months Ended June 30) | 2025 (in thousands) | 2024 (in thousands) | Change (in thousands) | YoY Change (%) | | :-------------------------------- | :------------------ | :------------------ | :-------------------- | :------------- | | Total Revenue | $68,315 | $57,816 | +$10,499 | +18.16% | | Product revenue | $59,720 | $57,816 | +$1,904 | +3.29% | | License revenue | $8,595 | $0 | +$8,595 | N/A | | Cost of sales | $23,788 | $21,932 | +$1,856 | +8.46% | | Gross Profit | $44,527 | $35,884 | +$8,643 | +24.09% | | Total Operating Expenses | $38,840 | $42,300 | $(3,460) | -8.18% | | Income (Loss) from Operations | $5,687 | $(6,416) | +$12,103 | N/A | | Total Other Expense | $(1,849) | $(1,741) | $(108) | +6.20% | | Net Income (Loss) from Operations Before Provision for Income Taxes | $3,838 | $(8,157) | +$11,995 | N/A | | Provision for Income Taxes Current and Deferred | $(230) | $(104) | $(126) | +121.15% | | Net Income (Loss) | $3,608 | $(8,261) | +$11,869 | N/A | | Basic Net Income (Loss) Per Share | $0.03 | $(0.06) | +$0.09 | N/A | | Dilutive Net Income (Loss) Per Share | $0.02 | $(0.06) | +$0.08 | N/A | [Condensed Consolidated Statements of Comprehensive Income (Loss)](index=9&type=section&id=Condensed%20Consolidated%20Statements%20of%20Comprehensive%20Income%20(Loss)) This statement presents the net income or loss and other comprehensive income or loss components for the three and six months ended June 30, 2025 and 2024 | Metric (Three Months Ended June 30) | 2025 (in thousands) | 2024 (in thousands) | Change (in thousands) | | :---------------------------------- | :------------------ | :------------------ | :-------------------- | | Net Income (Loss) | $3,550 | $(3,861) | +$7,411 | | Foreign currency translation adjustments | $361 | $(42) | +$403 | | Comprehensive Income (Loss) | $3,911 | $(3,903) | +$7,814 | | Metric (Six Months Ended June 30) | 2025 (in thousands) | 2024 (in thousands) | Change (in thousands) | | :-------------------------------- | :------------------ | :------------------ | :-------------------- | | Net Income (Loss) | $3,608 | $(8,261) | +$11,869 | | Foreign currency translation adjustments | $468 | $(204) | +$672 | | Comprehensive Income (Loss) | $4,076 | $(8,465) | +$12,541 | [Condensed Consolidated Statements of Equity](index=10&type=section&id=Condensed%20Consolidated%20Statements%20of%20Equity) This statement details changes in stockholders' equity, including additional paid-in capital and accumulated deficit, for the six months ended June 30, 2025 | Metric | December 31, 2024 (in thousands) | June 30, 2025 (in thousands) | Change (in thousands) | | :-------------------------------- | :------------------------------- | :----------------------------- | :-------------------- | | Total Stockholders' Equity | $42,963 | $48,502 | +$5,539 | | Additional Paid-In Capital | $302,738 | $304,201 | +$1,463 | | Accumulated Other Comprehensive Income (Loss) | $(316) | $152 | +$468 | | Accumulated Deficit | $(259,459) | $(255,851) | +$3,608 | - The increase in Additional Paid-In Capital is mainly due to stock-based compensation (**$758k** for Q1 2025, **$766k** for Q2 2025)[23](index=23&type=chunk) - Net income contributed **$3.550 million** for the three months ended June 30, 2025, and **$58k** for the three months ended March 31, 2025, reducing the accumulated deficit[23](index=23&type=chunk) [Condensed Consolidated Statements of Cash Flows](index=11&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) This statement summarizes cash inflows and outflows from operating, investing, and financing activities for the six months ended June 30, 2025 and 2024 | Metric (Six Months Ended June 30) | 2025 (in thousands) | 2024 (in thousands) | Change (in thousands) | | :-------------------------------- | :------------------ | :------------------ | :-------------------- | | Net income (loss) | $3,608 | $(8,261) | +$11,869 | | Depreciation and amortization | $2,243 | $2,003 | +$240 | | Stock-based compensation | $1,524 | $2,138 | $(614) | | Net cash provided by (used in) operating activities | $2,554 | $(10,843) | +$13,397 | | Net cash used in investing activities | $(1,460) | $(1,154) | $(306) | | Net cash (used in) provided by financing activities | $(257) | $11,613 | $(11,870) | | Net change in cash and cash equivalents and restricted cash | $816 | $(445) | +$1,261 | | Cash and cash equivalents and restricted cash at end of period | $7,037 | $5,478 | +$1,559 | - The positive change in operating cash flow is primarily attributed to the company achieving net income in the first six months of 2025, contrasting with a net loss in the comparable prior year period[111](index=111&type=chunk) - Financing activities shifted to a net cash outflow in 2025 due to **$7.4 million** of reduced net revolver borrowings compared to the prior year[113](index=113&type=chunk) [Notes to Unaudited Condensed Consolidated Financial Statements](index=12&type=section&id=Notes%20to%20Unaudited%20Condensed%20Consolidated%20Financial%20Statements) This section provides detailed explanations and disclosures supporting the unaudited condensed consolidated financial statements [(1) Business Description, Basis of Presentation and Summary of Significant Accounting Policies](index=12&type=section&id=(1)%20Business%20Description,%20Basis%20of%20Presentation%20and%20Summary%20of%20Significant%20Accounting%20Policies) This note describes Xtant Medical's business, the basis of financial statement presentation, and key accounting policies, including estimates and new accounting pronouncements - Xtant is a global medical technology company focused on designing, developing, and commercializing orthobiologics and spinal implant fixation systems for spinal fusion[29](index=29&type=chunk) - The financial statements are prepared in accordance with GAAP, and management's estimates are crucial for items like property and equipment, goodwill, intangible assets, and valuation allowances[30](index=30&type=chunk)[33](index=33&type=chunk) - The company is evaluating the impact of new ASUs: ASU No. 2023-09 (Income Tax Disclosures, effective after Dec 15, 2024) and ASU 2024-03 (Expense Disaggregation Disclosures, effective after Dec 15, 2026)[41](index=41&type=chunk)[42](index=42&type=chunk) [(2) Revenue](index=14&type=section&id=(2)%20Revenue) This note details the company's revenue recognition policies for product sales and licensing, including the impact of a recent SimpliMax™ license agreement and CMS policy uncertainties - Product revenue is primarily generated in the U.S. through independent sales agents, with revenue recognized upon product utilization by hospitals[45](index=45&type=chunk)[46](index=46&type=chunk) - Licensing revenue is recognized when control of intellectual property (IP) rights is transferred, with variable consideration (sales-based royalties) recognized when the underlying sale occurs or performance obligation is satisfied[49](index=49&type=chunk)[50](index=50&type=chunk) - A license agreement for SimpliMax™ includes an upfront **$1.5 million** fee and guaranteed quarterly minimum royalties (**$3.75 million** in 2025), but future minimums beyond Q2 2025 are constrained due to uncertainty from CMS policy changes regarding reimbursement codes, with the effective date deferred to January 2026[51](index=51&type=chunk) | Revenue Source (Three Months Ended June 30) | 2025 (in thousands) | % of Total Revenue | 2024 (in thousands) | % of Total Revenue | | :------------------------------------------ | :------------------ | :----------------- | :------------------ | :----------------- | | Orthobiologics | $19,370 | 55% | $16,128 | 54% | | Spinal implant | $11,066 | 31% | $13,815 | 46% | | License revenue | $4,975 | 14% | $0 | 0% | | **Total revenue** | **$35,411** | **100%** | **$29,943** | **100%** | | Revenue Source (Six Months Ended June 30) | 2025 (in thousands) | % of Total Revenue | 2024 (in thousands) | % of Total Revenue | | :---------------------------------------- | :------------------ | :----------------- | :------------------ | :----------------- | | Orthobiologics | $37,444 | 55% | $31,544 | 55% | | Spinal implant | $22,276 | 33% | $26,272 | 45% | | License revenue | $8,595 | 12% | $0 | 0% | | **Total revenue** | **$68,315** | **100%** | **$57,816** | **100%** | [(3) Receivables](index=16&type=section&id=(3)%20Receivables) This note outlines the company's policy for estimating and recognizing the provision for current expected credit losses on trade accounts receivable - The provision for current expected credit loss is determined by historical collection experience and current economic conditions[53](index=53&type=chunk) - Account balances are charged to the allowance when collection is remote, and provisions are expensed[53](index=53&type=chunk) [(4) Inventories](index=16&type=section&id=(4)%20Inventories) This note provides a breakdown of inventory components, including raw materials, work in process, and finished goods, as of June 30, 2025, and December 31, 2024 | Inventory Component (in thousands) | June 30, 2025 | December 31, 2024 | | :------------------------------- | :------------ | :---------------- | | Raw materials | $5,443 | $6,622 | | Work in process | $3,445 | $2,812 | | Finished goods | $31,247 | $29,200 | | **Total Inventories** | **$40,135** | **$38,634** | [(5) Property and Equipment, Net](index=16&type=section&id=(5)%20Property%20and%20Equipment,%20Net) This note details the composition of property and equipment, net, and associated depreciation expense for the reported periods | Asset Category (in thousands) | June 30, 2025 | December 31, 2024 | | :-------------------------- | :------------ | :---------------- | | Equipment | $7,436 | $7,239 | | Computer equipment | $1,311 | $1,254 | | Computer software | $361 | $361 | | Leasehold improvements | $4,413 | $4,356 | | Surgical instruments | $17,326 | $15,798 | | Assets not yet in service | $774 | $960 | | Total cost | $31,621 | $29,968 | | Less: accumulated depreciation | $(21,174) | $(19,837) | | **Property and equipment, net** | **$10,447** | **$10,131** | - Depreciation expense for property and equipment increased to **$0.8 million** for the three months ended June 30, 2025 (from **$0.5 million** in 2024) and to **$1.4 million** for the six months ended June 30, 2025 (from **$1.1 million** in 2024)[55](index=55&type=chunk) [(6) Intangible Assets](index=17&type=section&id=(6)%20Intangible%20Assets) This note provides a breakdown of intangible assets, including patents, customer lists, and tradenames, along with their amortization expense | Intangible Asset (in thousands) | Weighted Average Life | Cost | Accumulated Amortization | Net (June 30, 2025) | Net (December 31, 2024) | | :------------------------------ | :-------------------- | :--- | :----------------------- | :------------------ | :---------------------- | | Patents | 11 years | $2,777 | $(1,086) | $1,691 | $1,829 | | Customer List | 6 years | $8,000 | $(3,111) | $4,889 | $5,555 | | Tradenames | 10 years | $1,190 | $(278) | $912 | $972 | | **Total** | | **$11,967** | **$(4,475)** | **$7,492** | **$8,356** | - Amortization expense was **$0.5 million** for both three-month periods ended June 30, 2025 and 2024, and **$0.9 million** for both six-month periods ended June 30, 2025 and 2024[56](index=56&type=chunk) [(7) Accrued Liabilities](index=17&type=section&id=(7)%20Accrued%20Liabilities) This note details the components of accrued liabilities, highlighting increases in cash compensation/commissions payable and other accrued liabilities | Accrued Liability (in thousands) | June 30, 2025 | December 31, 2024 | | :------------------------------- | :------------ | :---------------- | | Cash compensation/commissions payable | $6,833 | $5,565 | | Other accrued liabilities | $3,793 | $2,206 | | **Total Accrued Liabilities** | **$10,626** | **$7,771** | [(8) Debt](index=17&type=section&id=(8)%20Debt) This note describes the company's term loan and revolving line of credit, including effective interest rates, available credit, and compliance with debt covenants | Debt Component (in thousands) | June 30, 2025 | December 31, 2024 | | :---------------------------- | :------------ | :---------------- | | Amounts due under the term loan | $22,000 | $22,000 | | Accrued end-of-term payments | $649 | $465 | | Less: unamortized debt issuance costs | $(371) | $(427) | | **Long-term debt, less issuance costs** | **$22,278** | **$22,038** | - The effective rate of the term loan was **13.23%**, and the revolving line of credit was **8.94%** as of June 30, 2025[58](index=58&type=chunk) - As of June 30, 2025, the company had **$5.0 million** available under its revolving line of credit and was in compliance with all covenants under its credit agreements[58](index=58&type=chunk)[118](index=118&type=chunk) - On April 9, 2025, credit agreements were amended to increase the common stock ownership threshold for a change in control from **40% to 49.9%** to accommodate the sale of common stock from OrbiMed[59](index=59&type=chunk) [(9) Stock-Based Compensation](index=18&type=section&id=(9)%20Stock-Based%20Compensation) This note details stock-based compensation expense for various equity awards and the unrecognized compensation expense for unvested awards - Total stock-based compensation expense recognized for employees and directors was **$0.8 million** for the three months ended June 30, 2025 (down from **$1.2 million** in 2024) and **$1.5 million** for the six months ended June 30, 2025 (down from **$2.1 million** in 2024)[62](index=62&type=chunk) - As of June 30, 2025, unrecognized compensation expense for unvested stock options was approximately **$0.6 million** (expected over 2.0 years), for RSUs/DSUs was **$3.2 million** (expected over 2.6 years), and for PSUs was **$1.4 million** (expected over 1.7 years)[63](index=63&type=chunk)[64](index=64&type=chunk)[66](index=66&type=chunk) | Metric | 2025 Shares | 2025 Avg. Exercise Price | 2024 Shares | 2024 Avg. Exercise Price | | :---------------------- | :---------- | :----------------------- | :---------- | :----------------------- | | Outstanding at January 1 | 3,925,403 | $1.29 | 4,875,828 | $1.31 | | Granted | — | — | — | — | | Cancelled or expired | (164,931) | $1.19 | (156,243) | $1.03 | | Outstanding at June 30 | 3,760,472 | $1.30 | 4,719,585 | $1.32 | | Exercisable at June 30 | 3,006,140 | $1.35 | 2,313,011 | $1.46 | | Metric | 2025 Shares | 2025 Avg. Fair Value at Grant | 2024 Shares | 2024 Avg. Fair Value at Grant | | :---------------------- | :---------- | :---------------------------- | :---------- | :---------------------------- | | Outstanding at January 1 | 5,455,472 | $0.90 | 3,524,675 | $1.07 | | Granted | — | $0.98 | 2,641,549 | $0.98 | | Vested | (386,624) | $0.91 | (142,327) | $0.67 | | Cancelled | (34,197) | $0.98 | (155,668) | $1.03 | | Outstanding at June 30 | 5,034,651 | $0.90 | 5,868,229 | $1.04 | [(10) Warrants](index=19&type=section&id=(10)%20Warrants) This note provides information on outstanding and exercisable warrants to purchase common stock, including their exercise price and remaining contractual term - As of June 30, 2025, **12,237,470** warrants were outstanding and exercisable, with a weighted average exercise price of **$1.53** per share and a weighted average remaining contractual term of **1.3 years**[67](index=67&type=chunk) [(11) Related Party Transactions](index=20&type=section&id=(11)%20Related%20Party%20Transactions) This note describes the sale of OrbiMed's shares, the termination of the Investor Rights Agreement, and the new significant ownership by Nantahala Capital Management, LLC - OrbiMed, which previously owned **52.6%** of the company's common stock, sold all its shares in April 2025[68](index=68&type=chunk) - Nantahala Capital Management, LLC became the lead purchaser in the private secondary resale transaction, now holding **49.1%** of the company's issued and outstanding common stock[68](index=68&type=chunk) - The sale of OrbiMed's shares resulted in the termination of the Investor Rights Agreement, and the company entered into a registration rights agreement with the purchasers to register the resale of shares[68](index=68&type=chunk) [(12) Commitments and Contingencies](index=20&type=section&id=(12)%20Commitments%20and%20Contingencies) This note outlines the company's operating lease commitments and potential liabilities from government regulations, claims, and legal actions - The company has non-cancelable operating lease agreements for facilities and equipment, with a weighted-average remaining lease term of **2.8 years** as of June 30, 2025[69](index=69&type=chunk)[71](index=71&type=chunk) | Period | Amount (in thousands) | | :-------------------------- | :-------------------- | | Remainder of 2025 | $624 | | 2026 | $730 | | 2027 | $611 | | 2028 | $594 | | 2029 | $592 | | Thereafter | $335 | | **Total future minimum lease payments** | **$3,486** | | Less: amount representing interest | $(778) | | **Present value of obligations under operating leases** | **$2,708** | - The company is subject to potential liabilities from various claims and legal actions, assessing contingencies to accrue estimated losses when probable and reasonably estimable, though litigation outcomes are inherently unpredictable[73](index=73&type=chunk) [(13) Income Taxes](index=21&type=section&id=(13)%20Income%20Taxes) This note details income tax expense, effective tax rates, and the impact of a valuation allowance against deferred tax assets, including the evaluation of new tax legislation | Metric | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :------------------------------------------ | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Income tax expense from continuing operations | $255 | $36 | $230 | $104 | | Income (loss) from continuing operations before income taxes | $3,805 | $(3,825) | $3,838 | $(8,157) | | Effective income tax rate | 6.7% | -1.0% | 6.0% | -1.3% | - The effective tax rate differs from the statutory rate primarily due to a valuation allowance against deferred tax assets, offset by cash state and foreign taxes[74](index=74&type=chunk)[75](index=75&type=chunk) - The company is evaluating the impact of the One Big Beautiful Bill Act (OBBBA) signed on July 4, 2025, but does not anticipate a material change to its effective income tax rate or net deferred federal income tax assets due to maintaining a full valuation allowance[77](index=77&type=chunk) [(14) Net Income (Loss) Per Share](index=22&type=section&id=(14)%20Net%20Income%20(Loss)%20Per%20Share) This note presents basic and diluted net income (loss) per share calculations, including the impact of dilutive securities | Metric | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :-------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Net income (loss) | $3,550 | $(3,861) | $3,608 | $(8,261) | | Basic – weighted average shares outstanding | 139,310,589 | 130,269,710 | 139,190,378 | 130,291,796 | | Effect of dilutive securities: Employee restricted stock units and deferred stock units | 4,011,541 | — | 3,896,933 | — | | Effect of dilutive securities: Warrants | 5,252,112 | — | 5,252,112 | — | | Diluted – weighted average shares outstanding | 148,574,242 | 130,269,710 | 148,339,423 | 130,291,796 | | Basic earnings (loss) per share | $0.03 | $(0.03) | $0.03 | $(0.06) | | Diluted earnings (loss) per share | $0.02 | $(0.03) | $0.02 | $(0.06) | - For the three and six months ended June 30, 2024, shares underlying stock options, restricted stock units, deferred stock units, and warrants were excluded from diluted EPS calculation as they were anti-dilutive due to net losses[78](index=78&type=chunk)[79](index=79&type=chunk) [(15) Supplemental Disclosure of Cash Flow Information](index=22&type=section&id=(15)%20Supplemental%20Disclosure%20of%20Cash%20Flow%20Information) This note provides additional cash flow details, including cash interest paid and non-cash activities related to right-of-use assets and lease liabilities | Item | Six Months Ended June 30, 2025 (in thousands) | Six Months Ended June 30, 2024 (in thousands) | | :------------------------------------------ | :------------------------------------------ | :------------------------------------------ | | Cash paid during the period for: Interest | $1,760 | $774 | | Non-cash activities: Increase in right of use assets and lease liability | $2,107 | $0 | [(16) Segment and Geographic Information](index=22&type=section&id=(16)%20Segment%20and%20Geographic%20Information) This note clarifies that the company operates as a single reportable segment and provides a breakdown of revenue by geographic area - The company operates as one reportable and operating segment, with the CEO using consolidated net income (loss) as the primary performance measure[81](index=81&type=chunk) | Geographic Area (Three Months Ended June 30) | 2025 (in thousands) | 2024 (in thousands) | | :------------------------------------------- | :------------------ | :------------------ | | United States | $32,133 | $26,276 | | Rest of world | $3,278 | $3,667 | | **Total revenue** | **$35,411** | **$29,943** | | Geographic Area (Six Months Ended June 30) | 2025 (in thousands) | 2024 (in thousands) | | :------------------------------------------- | :------------------ | :------------------ | | United States | $62,250 | $51,409 | | Rest of world | $6,065 | $6,407 | | **Total revenue** | **$68,315** | **$57,816** | - Approximately **91%** of total revenue for both the three and six months ended June 30, 2025, was generated in the United States[82](index=82&type=chunk) [(17) Subsequent Event](index=23&type=section&id=(17)%20Subsequent%20Event) This note details the company's agreements to sell its Coflex/CoFix Business and international hardware business to Companion Spine, LLC, including terms and contingencies - On July 7, 2025, the company agreed to sell its Coflex/CoFix Business in the U.S. to Companion Spine, LLC for **$17.5 million**, including a **$2.5 million** non-refundable cash deposit and an **$8.2 million** unsecured promissory note due December 31, 2025[83](index=83&type=chunk)[96](index=96&type=chunk) - Concurrently, the company agreed to sell its international hardware business, Paradigm Spine GmbH, to Companion for **$1.7 million**[84](index=84&type=chunk)[97](index=97&type=chunk) - Both transactions are contingent on each other and the buyer obtaining financing, with an expected closing in the third quarter of 2025, subject to potential delays or termination[85](index=85&type=chunk)[98](index=98&type=chunk) - MidCap, the company's lender, consented to the transactions, requiring a **$9.6 million** prepayment from the proceeds[87](index=87&type=chunk)[101](index=101&type=chunk) [ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS](index=25&type=section&id=ITEM%202.%20MANAGEMENT'S%20DISCUSSION%20AND%20ANALYSIS%20OF%20FINANCIAL%20CONDITION%20AND%20RESULTS%20OF%20OPERATIONS) This section discusses the company's financial performance, strategic developments, and liquidity for the three and six months ended June 30, 2025 [Business Overview](index=25&type=section&id=Business%20Overview) This overview describes the company's focus on regenerative medicine and medical devices, its market strategy, growth initiatives, and potential impacts of CMS policy changes - The company develops, manufactures, and markets regenerative medicine products and medical devices, including orthobiologics for bone healing and spinal implant fixation systems[90](index=90&type=chunk) - Products are promoted in the U.S. through independent distributors and stocking agents, with access to IDNs and GPOs, and internationally through direct sales and distribution partners in Europe, Canada, Mexico, South America, Australia, and Pacific regions[91](index=91&type=chunk) - Four key growth initiatives include introducing new products (Trivium™, Cortera, OsteoVive Plus, SimpliGraft™, SimpliMax™), expanding distribution, penetrating adjacent markets, and leveraging growth with technology and strategic acquisitions[92](index=92&type=chunk) - The company entered into license agreements for SimpliGraft® and SimpliMax™ products, but potential CMS policy changes for 2026 could significantly impact reimbursement for cellular and tissue-based products[94](index=94&type=chunk) [Recent Developments](index=26&type=section&id=Recent%20Developments) This section highlights the company's recent agreements to sell its Coflex/CoFix Business and international hardware business, including transaction terms and lender requirements - On July 7, 2025, Xtant agreed to sell its Coflex/CoFix Business in the U.S. to Companion Spine, LLC for **$17.5 million**, including a **$2.5 million** non-refundable deposit and an **$8.2 million** unsecured promissory note[96](index=96&type=chunk) - Simultaneously, Xtant agreed to sell its international hardware business, Paradigm Spine GmbH, to Companion for **$1.7 million**[97](index=97&type=chunk) - Both transactions are contingent on each other and the buyer obtaining financing, with an expected closing in Q3 2025, but no assurance of timely completion[98](index=98&type=chunk) - MidCap, the company's lenders, provided consent to the transactions, requiring a **$9.6 million** prepayment from the proceeds[101](index=101&type=chunk) [Results of Operations](index=27&type=section&id=Results%20of%20Operations) This section analyzes the company's revenue, cost of sales, gross profit, and operating expenses for the three and six months ended June 30, 2025 and 2024 [Revenue](index=27&type=section&id=Revenue) This analysis details the increase in total revenue, primarily driven by higher orthobiologics sales and significant license revenue | Period | June 30, 2025 (in millions) | June 30, 2024 (in millions) | Increase (millions) | % Increase | | :-------------------------- | :-------------------------- | :-------------------------- | :------------------ | :--------- | | Three Months Ended | $35.4 | $30.0 | $5.4 | 18% | | Six Months Ended | $68.3 | $57.8 | $10.5 | 18% | - Revenue increases were primarily attributed to higher orthobiologics sales and **$5.0 million** (three months) and **$8.6 million** (six months) in licensing revenue[102](index=102&type=chunk) [Cost of Sales](index=27&type=section&id=Cost%20of%20Sales) This analysis explains the changes in cost of sales, attributing them to reduced product costs from internal production and higher revenue | Period | June 30, 2025 (in millions) | June 30, 2024 (in millions) | Change (millions) | | :-------------------------- | :-------------------------- | :-------------------------- | :---------------- | | Three Months Ended | $11.2 | $11.4 | $(0.2) | | Six Months Ended | $23.8 | $21.9 | $1.9 | - The decrease in cost of sales for the three-month period was due to reduced product costs from transitioning to internal production, partially offset by higher revenue[103](index=103&type=chunk) - The increase for the six-month period was primarily due to greater revenue in the current year[103](index=103&type=chunk) [Gross Profit](index=27&type=section&id=Gross%20Profit) This analysis highlights the significant increase in gross profit percentage due to favorable sales mix, greater scale, improved production efficiency, and reduced product costs | Period | June 30, 2025 | June 30, 2024 | Increase (basis points) | | :-------------------------- | :------------ | :------------ | :---------------------- | | Three Months Ended | 68.6% | 62.1% | 650 bps | | Six Months Ended | 65.2% | 62.1% | 310 bps | - For the three-month comparison, **460 basis points** of the increase were due to sales mix, greater scale, and improved production efficiency, and **110 basis points** were due to reductions in product cost[104](index=104&type=chunk) - For the six-month comparison, **280 basis points** were due to sales mix and greater scale, and **100 basis points** were due to reductions in product cost[104](index=104&type=chunk) [General and Administrative](index=27&type=section&id=General%20and%20Administrative) This analysis details the decrease in general and administrative expenses, primarily due to reduced stock-based compensation and audit fees, partially offset by increased legal fees | Period | June 30, 2025 (in millions) | June 30, 2024 (in millions) | Change (millions) | % Change | | :-------------------------- | :-------------------------- | :-------------------------- | :---------------- | :--------- | | Three Months Ended | $7.5 | $7.7 | $(0.2) | -3% | | Six Months Ended | $15.0 | $15.5 | $(0.5) | -3% | - The three-month decrease was mainly due to **$0.5 million** reduced stock-based compensation, partially offset by **$0.3 million** additional legal fees related to the Companion transactions[105](index=105&type=chunk) - The six-month decrease was primarily due to **$0.6 million** reduced stock-based compensation and **$0.3 million** reduced audit fees, partially offset by **$0.4 million** additional legal fees for the Companion transactions[105](index=105&type=chunk) [Sales and Marketing](index=28&type=section&id=Sales%20and%20Marketing) This analysis explains the decrease in sales and marketing expenses, mainly due to reduced commission expense from revenue mix and lower compensation expense | Period | June 30, 2025 (in millions) | June 30, 2024 (in millions) | Change (millions) | % Change | | :-------------------------- | :-------------------------- | :-------------------------- | :---------------- | :--------- | | Three Months Ended | $11.6 | $13.2 | $(1.6) | -12% | | Six Months Ended | $22.9 | $25.6 | $(2.8) | -11% | - The three-month decrease was primarily due to **$1.5 million** reduced commission expense (revenue mix) and **$0.7 million** reduced compensation expense (headcount), partially offset by **$0.9 million** additional consulting fees[106](index=106&type=chunk) - The six-month decrease was primarily due to **$2.3 million** reduced commission expense (revenue mix) and **$1.3 million** reduced compensation expense (headcount), partially offset by **$1.4 million** additional consulting fees[106](index=106&type=chunk) [Research and Development](index=28&type=section&id=Research%20and%20Development) This analysis shows the consistency in research and development expenses for the three-month period and a slight decrease for the six-month period | Period | June 30, 2025 (in millions) | June 30, 2024 (in millions) | Change (millions) | | :-------------------------- | :-------------------------- | :-------------------------- | :---------------- | | Three Months Ended | $0.6 | $0.6 | $0.0 | | Six Months Ended | $1.0 | $1.2 | $(0.2) | [Interest Expense](index=28&type=section&id=Interest%20Expense) This analysis details the stability of interest expense for the three-month period and an increase for the six-month period due to additional borrowings | Period | June 30, 2025 (in millions) | June 30, 2024 (in millions) | Change (millions) | | :-------------------------- | :-------------------------- | :-------------------------- | :---------------- | | Three Months Ended | $1.0 | $1.0 | $0.0 | | Six Months Ended | $2.0 | $1.8 | $0.2 | - The increase for the six-month comparison resulted primarily from additional borrowings on the revolving line of credit and a **$5.0 million** borrowing under the term credit agreement in May 2024[108](index=108&type=chunk) - Annualized interest expense is expected to increase by approximately **$0.1 million** for every **25 basis points** increase in the reference rate associated with credit agreements[108](index=108&type=chunk) [Provision for Income Taxes Current and Deferred](index=28&type=section&id=Provision%20for%20Income%20Taxes%20Current%20and%20Deferred) This analysis attributes the increase in income tax expense to higher cash state taxes for both the three and six months ended June 30, 2025 - The increase in income tax expense for both the three and six months ended June 30, 2025, compared to the prior year periods, was primarily due to an increase in cash state taxes in 2025[109](index=109&type=chunk) [Liquidity and Capital Resources](index=28&type=section&id=Liquidity%20and%20Capital%20Resources) This section assesses the company's working capital, cash flows, debt facilities, and future cash requirements [Working Capital](index=28&type=section&id=Working%20Capital) This analysis details the increase in net working capital, driven by a rise in current assets exceeding current liabilities | Metric | June 30, 2025 (in thousands) | December 31, 2024 (in thousands) | Change (in thousands) | | :---------------------- | :--------------------------- | :------------------------------- | :-------------------- | | Total current assets | $75,589 | $67,116 | +$8,473 | | Total current liabilities | $30,600 | $28,581 | +$2,019 | | **Net working capital** | **$44,989** | **$38,535** | **+$6,454** | [Cash Flows](index=29&type=section&id=Cash%20Flows) This analysis highlights the significant improvement in operating cash flow, changes in investing activities, and a shift in financing activities - Net cash provided by operating activities for the first six months of 2025 was **$2.6 million**, a significant improvement from net cash used of **$10.8 million** in the comparable prior year period, primarily due to net income[111](index=111&type=chunk) - Net cash used in investing activities increased to **$1.5 million** for the first six months of 2025, up from **$1.2 million** in 2024, mainly due to increased purchases of property and equipment[112](index=112&type=chunk) - Net cash used in financing activities was **$0.3 million** for the first six months of 2025, a shift from **$11.6 million** provided in 2024, primarily due to **$7.4 million** of reduced net revolver borrowings[113](index=113&type=chunk) [Term Loan and Revolving Credit Facilities](index=29&type=section&id=Term%20Loan%20and%20Revolving%20Credit%20Facilities) The company maintains a $22.0 million Term Facility and a Revolving Facility allowing up to $17.0 million, with $12.0 million outstanding and $5.0 million available as of June 30, 2025. Both facilities mature on March 1, 2029, are secured by company assets, and the company was in compliance with all covenants as of the reporting date - The company has a Term Facility of **$22.0 million** and a Revolving Facility allowing borrowings up to **$17.0 million**, with **$12.0 million** outstanding and **$5.0 million** available as of June 30, 2025[114](index=114&type=chunk)[115](index=115&type=chunk)[116](index=116&type=chunk) - The facilities mature on March 1, 2029, and are secured by first-priority liens on substantially all company assets[116](index=116&type=chunk) - Interest rates are SOFR plus an applicable margin (**6.50%** for Term, **4.50%** for Revolving), with a **2.50%** floor. Effective rates as of June 30, 2025, were **13.23%** for the Term Facility and **8.94%** for the Revolving Facility[117](index=117&type=chunk) - The company was in compliance with all covenants, including minimum net product revenue and liquidity levels, as of June 30, 2025[118](index=118&type=chunk) [Cash Requirements](index=30&type=section&id=Cash%20Requirements) This section outlines the company's assessment of its ability to meet future cash requirements and potential needs for additional financing - The company believes its **$7.0 million** cash and cash equivalents, anticipated operating cash flows, and available credit facilities will be sufficient to meet cash requirements through at least August 2026[120](index=120&type=chunk) - The company may seek additional financing before August 2026 if market conditions are favorable, through equity, debt, or strategic transactions, but there's no assurance of securing funds on acceptable terms[121](index=121&type=chunk) - Raising additional capital could dilute current stockholders, introduce discounted equity purchase prices, warrants, or liquidation preferences, or impose new debt covenants[122](index=122&type=chunk) [Critical Accounting Estimates](index=30&type=section&id=Critical%20Accounting%20Estimates) This section confirms that there have been no changes in the company's critical accounting estimates for the reported period - There have been no changes in the company's critical accounting estimates for the six months ended June 30, 2025, compared to those described in the Annual Report on Form 10-K for the fiscal year ended December 31, 2024[123](index=123&type=chunk) [ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK](index=30&type=section&id=ITEM%203.%20QUANTITATIVE%20AND%20QUALITATIVE%20DISCLOSURES%20ABOUT%20MARKET%20RISK) As a smaller reporting company, Xtant Medical Holdings, Inc. is exempt from providing detailed quantitative and qualitative disclosures about market risk - As a smaller reporting company, Xtant Medical Holdings, Inc. is exempt from providing quantitative and qualitative disclosures about market risk[124](index=124&type=chunk) [ITEM 4. CONTROLS AND PROCEDURES](index=30&type=section&id=ITEM%204.%20CONTROLS%20AND%20PROCEDURES) This section addresses the effectiveness of the company's disclosure controls and procedures, concluding they were effective as of June 30, 2025 [Limitations on Effectiveness of Controls and Procedures](index=30&type=section&id=Limitations%20on%20Effectiveness%20of%20Controls%20and%20Procedures) This section acknowledges that controls and procedures can only provide reasonable assurance due to inherent limitations and the need for judgment - Management recognizes that any controls and procedures, regardless of design, can only provide reasonable assurance of achieving desired control objectives due to resource constraints and the need for judgment in evaluating benefits versus costs[125](index=125&type=chunk) [Evaluation of Disclosure Controls and Procedures](index=31&type=section&id=Evaluation%20of%20Disclosure%20Controls%20and%20Procedures) This section confirms that management, including the CEO and CFO, concluded the company's disclosure controls and procedures were effective as of June 30, 2025 - As of June 30, 2025, the principal executive officer and principal financial officer concluded that the company's disclosure controls and procedures were effective in providing reasonable assurance that required information is recorded, processed, summarized, and reported timely[126](index=126&type=chunk) [Changes in Internal Control over Financial Reporting](index=31&type=section&id=Changes%20in%20Internal%20Control%20over%20Financial%20Reporting) This section states that no material changes in internal control over financial reporting occurred during the three months ended June 30, 2025 - There were no changes in internal control over financial reporting during the three months ended June 30, 2025, that materially affected, or are reasonably likely to materially affect, the company's internal control over financial reporting[127](index=127&type=chunk) [PART II. OTHER INFORMATION](index=31&type=section&id=PART%20II.%20OTHER%20INFORMATION) This part includes disclosures on legal proceedings, risk factors, equity sales, defaults, mine safety, other information, and exhibits [ITEM 1. LEGAL PROCEEDINGS](index=31&type=section&id=ITEM%201.%20LEGAL%20PROCEEDINGS) Information regarding the company's legal proceedings is incorporated by reference from Note 12, "Commitments and Contingencies" - Legal proceedings are discussed in Note 12, "Commitments and Contingencies," of the condensed consolidated financial statements[128](index=128&type=chunk) [ITEM 1A. RISK FACTORS](index=31&type=section&id=ITEM%201A.%20RISK%20FACTORS) This section discloses new risk factors related to the pending asset sales and the significant ownership by Nantahala Capital Management, LLC - New risk factors are disclosed despite the company being a smaller reporting company, supplementing those in the 2024 Form 10-K[129](index=129&type=chunk) - Risks associated with the pending sale of Coflex/CoFix Business and international hardware business include delays/termination (e.g., buyer financing), diversion of management, potential loss of key employees/partners, adverse impact if transactions fail or don't meet expectations, higher transaction costs, and the buyer's potential default on the **$8.2 million** promissory note[129](index=129&type=chunk)[132](index=132&type=chunk) - Nantahala Capital Management's **49.1%** ownership allows it to exert significant control over stockholder-approved matters, potentially preventing other stockholders from influencing corporate decisions and affecting the common stock's market price[130](index=130&type=chunk) - The sale or availability of substantial amounts of common stock, or the perception thereof, could adversely affect the market price and the company's ability to raise future capital, potentially leading to delisting if the price drops too low[131](index=131&type=chunk) [ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS](index=33&type=section&id=ITEM%202.%20UNREGISTERED%20SALES%20OF%20EQUITY%20SECURITIES%20AND%20USE%20OF%20PROCEEDS) This item is not applicable to the company for the reporting period - This item is not applicable[133](index=133&type=chunk) [ITEM 3. DEFAULTS UPON SENIOR SECURITIES](index=33&type=section&id=ITEM%203.%20DEFAULTS%20UPON%20SENIOR%20SECURITIES) This item is not applicable to the company for the reporting period - This item is not applicable[134](index=134&type=chunk) [ITEM 4. MINE SAFETY DISCLOSURES](index=33&type=section&id=ITEM%204.%20MINE%20SAFETY%20DISCLOSURES) This item is not applicable to the company for the reporting period - This item is not applicable[135](index=135&type=chunk) [ITEM 5. OTHER INFORMATION](index=33&type=section&id=ITEM%205.%20OTHER%20INFORMATION) This section confirms that no directors or officers adopted or terminated Rule 10b5-1 or non-Rule 10b5-1 trading arrangements during the quarter - No directors or officers adopted or terminated Rule 10b5-1 or non-Rule 10b5-1 trading arrangements during the three months ended June 30, 2025[136](index=136&type=chunk) [ITEM 6. EXHIBITS](index=33&type=section&id=ITEM%206.%20EXHIBITS) This section lists all exhibits filed or furnished with the Quarterly Report on Form 10-Q, including asset purchase agreements, equity purchase agreements, registration rights agreements, credit agreement amendments, and certifications - The report includes various exhibits such as Asset Purchase Agreement (Coflex/CoFix), Equity Purchase Agreement (Paradigm), Registration Rights Agreement, and amendments to Credit, Security and Guaranty Agreements[137](index=137&type=chunk)[138](index=138&type=chunk) - Certifications from the CEO and CFO pursuant to the Sarbanes-Oxley Act are also filed[138](index=138&type=chunk) [SIGNATURES](index=35&type=section&id=SIGNATURES) This section contains the official signatures of the company's President and Chief Executive Officer and Chief Financial Officer [Report Signatures](index=35&type=section&id=Report%20Signatures) This section contains the official signatures of the company's President and Chief Executive Officer, Sean E. Browne, and Chief Financial Officer, Scott C. Neils - The report is signed by Sean E. Browne, President and CEO, and Scott C. Neils, CFO, on August 12, 2025[141](index=141&type=chunk)

[Executive Summary & Highlights](index=1&type=section&id=Executive%20Summary%20%26%20Highlights) This section provides an overview of Xtant Medical's strong Q2 2025 financial performance and key strategic business developments [Second Quarter 2025 Financial Highlights](index=1&type=section&id=Second%20Quarter%202025%20Financial%20Highlights) Xtant Medical reported strong Q2 2025 financial results, achieving significant year-over-year growth in revenue, gross margin, and a turnaround to positive net income and Adjusted EBITDA, reversing prior year losses. The company also raised its full-year 2025 revenue guidance | Metric | Q2 2025 | Q2 2024 | Change | | :--- | :--- | :--- | :--- | | Revenue | $35.4 million | Up 18% | | Gross Margin | 68.6% | 62.1% | Up 6.5 percentage points | | Net Income | $3.6 million | Net loss of $3.9 million | Turnaround | | Adjusted EBITDA | $6.9 million | Adjusted EBITDA loss of $0.6 million | Turnaround | | Cash from Operations | $1.2 million generated | Cash used of $5.1 million | Turnaround | - Raised FY25 revenue guidance to **$131-$135 million**, representing growth of **11%-15%** over FY24[4](index=4&type=chunk) [Recent Business Highlights](index=1&type=section&id=Recent%20Business%20Highlights) The company is strategically focusing on its core biologics business, evidenced by the launch of next-generation products and the planned divestiture of non-core spinal implant and OUS businesses to strengthen the balance sheet and support biologics development - Enhanced focus on core biologics business while prudently managing expenses and driving operating leverage, consistent profitability, and cash flow[3](index=3&type=chunk) - Announced definitive agreements to sell its non-core Coflex® and CoFix® spinal implants and all OUS businesses to Companion Spine for total proceeds of approximately **$19.2 million**[4](index=4&type=chunk)[5](index=5&type=chunk) - Launched OsteoFactor Pro™, a next-generation growth factor designed to improve bone healing and support surgical success[4](index=4&type=chunk) - Launched Trivium™, a premium, next-generation demineralized bone matrix (DBM) allograft[4](index=4&type=chunk) - Now the **only vertically integrated company** to develop and manufacture solutions across all major orthobiologic categories[3](index=3&type=chunk) [Second Quarter 2025 Detailed Financial Results](index=2&type=section&id=Second%20Quarter%202025%20Detailed%20Financial%20Results) This section presents a comprehensive breakdown of Xtant Medical's financial performance for Q2 2025, including revenue, expenses, and profitability metrics [Revenue and Gross Margin](index=2&type=section&id=Revenue%20and%20Gross%20Margin) Total revenue increased by 18% year-over-year, primarily driven by increased orthobiologics sales and new licensing revenue. Gross margin also saw a significant improvement, attributable to royalty revenue, lower product costs, and greater scale | Metric | Q2 2025 (in thousands) | Q2 2024 (in thousands) | Change (%) | | :----- | :--------------------- | :--------------------- | :--------- | | Total Revenue | $35,411 | $29,943 | 18.3% | | Product Revenue | $30,436 | $29,943 | 1.6% | | License Revenue | $4,975 | $- | N/A | - Gross margin for Q2 2025 was **68.6%**, compared to **62.1%** for Q2 2024, primarily due to royalty revenue, lower product costs, and greater scale[6](index=6&type=chunk)[23](index=23&type=chunk) [Operating Expenses and Net Income](index=2&type=section&id=Operating%20Expenses%20and%20Net%20Income) Operating expenses decreased year-over-year, mainly due to reduced compensation and commission expenses, which contributed to a significant turnaround from a net loss to positive net income | Metric | Q2 2025 (in thousands) | Q2 2024 (in thousands) | Change | | :----- | :--------------------- | :--------------------- | :----- | | Total Operating Expenses | $19,660 | $21,528 | Down $1,868 | | Net Income (Loss) | $3,550 | $(3,861) | Turnaround | | Diluted EPS | $0.02 | $(0.03) | Turnaround | - Reduction in operating expenses primarily attributable to reduced compensation and commission expenses, partially offset by an increase in professional fees related to sales and marketing[7](index=7&type=chunk) [Adjusted EBITDA](index=2&type=section&id=Adjusted%20EBITDA) The company achieved positive Adjusted EBITDA in Q2 2025, a substantial improvement from a loss in the prior year, reflecting operational leverage and strategic adjustments in non-GAAP calculations | Metric | Q2 2025 (in thousands) | Q2 2024 (in thousands) | Change | | :----- | :--------------------- | :--------------------- | :----- | | Adjusted EBITDA | $6,904 | $(569) | Turnaround | - Beginning in Q4 2024, the phasing of the bargain purchase gain on sell-through of inventory from the Surgalign acquisition is no longer included in acquisition-related fair value adjustments for non-GAAP adjusted EBITDA calculation, with prior periods recast to conform[8](index=8&type=chunk)[27](index=27&type=chunk) [Cash and Cash Equivalents](index=2&type=section&id=Cash%20and%20Cash%20Equivalents) Xtant Medical increased its cash and cash equivalents balance as of June 30, 2025, compared to the end of the previous fiscal year | Metric | As of June 30, 2025 (in thousands) | As of December 31, 2024 (in thousands) | | :----- | :--------------------------------- | :----------------------------------- | | Cash and cash equivalents | $7,037 (including restricted cash) | $6,221 (including restricted cash) | [2025 Financial Guidance](index=3&type=section&id=2025%20Financial%20Guidance) This section outlines Xtant Medical's updated revenue projections for the full fiscal year 2025, reflecting anticipated growth and strategic adjustments [Full-Year 2025 Revenue Guidance](index=3&type=section&id=Full-Year%202025%20Revenue%20Guidance) Xtant Medical raised its full-year 2025 revenue guidance, anticipating significant growth over 2024, with further updates expected after the completion of the non-core asset sale | Metric | New FY25 Guidance | Prior FY25 Guidance | | :----- | :---------------- | :------------------ | | Revenue Range | $131 million to $135 million | $127 million to $131 million | | Growth over FY24 | 11% to 15% | N/A | - Xtant intends to update its outlook following the completion of the sale of its non-core Coflex® and CoFix® spinal implants and all OUS businesses to Companion Spine[11](index=11&type=chunk) [Company Information](index=3&type=section&id=Company%20Information) This section provides essential background on Xtant Medical, its mission, non-GAAP financial measures, and cautionary statements regarding forward-looking information [About Xtant Medical Holdings, Inc.](index=3&type=section&id=About%20Xtant%20Medical%20Holdings%2C%20Inc.) Xtant Medical is a global medical technology company focused on the design, development, and commercialization of a comprehensive portfolio of orthobiologics serving the chronic and surgical wound care and sports medicine markets, as well as spinal implant systems - Mission: Honoring the gift of donation so that patients can live as full and complete a life as possible[15](index=15&type=chunk) - Focus: Global medical technology company focused on surgical solutions for the treatment of spinal, orthopedic, and woundcare disorders, with a comprehensive portfolio of orthobiologics and spinal implant systems[1](index=1&type=chunk)[15](index=15&type=chunk) [Non-GAAP Financial Measures](index=3&type=section&id=Non-GAAP%20Financial%20Measures) The company uses certain non-GAAP financial measures, such as adjusted EBITDA, to supplement its GAAP consolidated financial statements, believing they provide useful information for investors and internal performance evaluation, though they are not a substitute for GAAP measures - Non-GAAP measures (e.g., adjusted EBITDA) supplement GAAP statements, providing useful information for investors and aiding management in evaluating business performance and resource allocation[17](index=17&type=chunk) - Adjusted EBITDA is defined as net income/loss from operations before depreciation, amortization, interest expense, and provision for income tax/benefit, further adjusted for separation-related expenses, non-cash compensation, disposition/acquisition-related expense, acquisition-related fair value adjustments, and unrealized foreign currency translation gain or loss[9](index=9&type=chunk) - Investors should consider non-GAAP financial measures only as a supplement to, not as a substitute for or as superior to, measures of financial performance prepared in accordance with GAAP[17](index=17&type=chunk) [Cautionary Statement Regarding Forward-Looking Statements](index=4&type=section&id=Cautionary%20Statement%20Regarding%20Forward-Looking%20Statements) This press release contains forward-looking statements, including the company's full-year 2025 revenue guidance and the anticipated closing of the non-core asset sale, which are inherently subject to various risks and uncertainties that could cause actual results to differ materially - Forward-looking statements include the Company's full year 2025 revenue guidance and the anticipated closing of the sale of Coflex® and CoFix® spinal implants and all OUS businesses to Companion Spine[18](index=18&type=chunk) - Risks and uncertainties include the possibility that the sale may not be completed or its anticipated benefits not realized, higher-than-anticipated completion costs, diversion of management's attention, potential litigation, future operating results, ability to increase revenue, supply chain disruptions, regulatory approvals, and other factors detailed in SEC filings[18](index=18&type=chunk) [Financial Statements](index=5&type=section&id=Financial%20Statements) This section includes the detailed consolidated balance sheets, statements of operations, and cash flows, along with non-GAAP reconciliations [Consolidated Balance Sheets](index=5&type=section&id=Consolidated%20Balance%20Sheets) The consolidated balance sheet shows an increase in total assets and stockholders' equity from December 31, 2024, to June 30, 2025, driven by growth in current assets, particularly trade accounts receivable and inventories | ASSETS (in thousands) | June 30, 2025 | December 31, 2024 | | :-------------------- | :------------ | :---------------- | | Total Assets | $103,479 | $93,837 | | Current Assets | $75,589 | $67,116 | | Cash and cash equivalents | $6,923 | $6,199 | | Trade accounts receivable, net | $26,951 | $20,660 | | Inventories | $40,135 | $38,634 | | LIABILITIES & STOCKHOLDERS' EQUITY (in thousands) | June 30, 2025 | December 31, 2024 | | Total Liabilities | $54,977 | $50,874 | | Total Stockholders' Equity | $48,502 | $42,963 | [Consolidated Statements of Operations](index=6&type=section&id=Consolidated%20Statements%20of%20Operations) The consolidated statements of operations reflect strong performance for Q2 and the six months ended June 30, 2025, with significant revenue growth, improved gross profit margins, reduced operating expenses, and a shift from net loss to net income compared to the prior year | Metric (in thousands) | Q2 2025 | Q2 2024 | 6 Months 2025 | 6 Months 2024 | | :-------------------- | :------ | :------ | :------------ | :------------ | | Total Revenue | $35,411 | $29,943 | $68,315 | $57,816 | | Gross Profit | $24,284 | $18,582 | $44,527 | $35,884 | | Gross Profit % | 68.6% | 62.1% | 65.2% | 62.1% | | Total Operating Expenses | $19,660 | $21,528 | $38,840 | $42,300 | | Income (Loss) from Operations | $4,624 | $(2,946) | $5,687 | $(6,416) | | Net Income (Loss) | $3,550 | $(3,861) | $3,608 | $(8,261) | | Diluted EPS | $0.02 | $(0.03) | $0.02 | $(0.06) | [Consolidated Statements of Cash Flows](index=7&type=section&id=Consolidated%20Statements%20of%20Cash%20Flows) For the six months ended June 30, 2025, the company generated positive cash from operating activities, a significant improvement from cash used in the prior year, while investing activities remained a net outflow and financing activities resulted in a net outflow | Cash Flow Activity (in thousands) | 6 Months Ended June 30, 2025 | 6 Months Ended June 30, 2024 | | :-------------------------------- | :----------------------------- | :----------------------------- | | Net cash provided by (used in) operating activities | $2,554 | $(10,843) | | Net cash used in investing activities | $(1,460) | $(1,154) | | Net cash (used in) provided by financing activities | $(257) | $11,613 | | Net change in cash and cash equivalents and restricted cash | $816 | $(445) | | Cash and cash equivalents and restricted cash at end of year | $7,037 | $5,478 | [Non-GAAP EBITDA and Adjusted EBITDA Reconciliation](index=8&type=section&id=Non-GAAP%20EBITDA%20and%20Adjusted%20EBITDA%20Reconciliation) The reconciliation shows a strong positive Non-GAAP EBITDA and Adjusted EBITDA for both Q2 and the six months ended June 30, 2025, marking a significant improvement from negative figures in the prior year, with adjustments for non-cash and acquisition-related items | Metric (in thousands) | Q2 2025 | Q2 2024 | 6 Months 2025 | 6 Months 2024 | | :-------------------- | :------ | :------ | :------------ | :------------ | | Net Income (Loss) | $3,550 | $(3,861) | $3,608 | $(8,261) | | Non-GAAP EBITDA | $5,978 | $(1,835) | $8,130 | $(4,327) | | Non-GAAP EBITDA/Total revenue | 16.9% | -6.1% | 11.9% | -7.5% | | Non-GAAP Adjusted EBITDA | $6,904 | $(596) | $9,941 | $(1,546) | | Non-GAAP Adjusted EBITDA/Total revenue | 22.7% | -2.0% | 16.6% | -2.7% | - Adjustments to EBITDA include separation-related expenses, non-cash compensation, divestiture/acquisition-related expense, acquisition-related fair value adjustments, and unrealized foreign currency translation (gain) loss[27](index=27&type=chunk) [Additional Information](index=3&type=section&id=Additional%20Information) This section provides details regarding the Q2 2025 earnings conference call and investor relations contact information [Conference Call Details](index=3&type=section&id=Conference%20Call%20Details) Xtant Medical hosted a webcast and conference call on August 12, 2025, to discuss its Q2 2025 financial and operating results, with replay information available on the company's investor website - Webcast and conference call held on **August 12, 2025**, at **8:30 am ET** to discuss Q2 2025 financial and operating results[12](index=12&type=chunk) - A replay of the call will be available on the Investor section of the Company's website at www.xtantmedical.com[14](index=14&type=chunk) [Investor Relations Contact](index=4&type=section&id=Investor%20Relations%20Contact) Contact information for investor relations is provided through LifeSci Advisors, with specific contacts and email addresses listed - Investor Relations Contacts: Kevin Gardner (kgardner@lifesciadvisors.com) and Rob Windsor (rwindsor@lifescipartners.com) of LifeSci Advisors[19](index=19&type=chunk)

Core Viewpoint - Xtant Medical Holdings, Inc. reported strong financial results for Q2 2025, achieving positive net income, adjusted EBITDA, and operating cash flow, while raising its FY25 revenue guidance to $131-$135 million, indicating growth of 11%-15% over FY24 [1][10]. Financial Highlights - Revenue increased by 18% to $35.4 million compared to $29.9 million in Q2 2024, driven by higher orthobiologics sales and licensing revenue [4][7]. - Gross margin improved to 68.6% from 62.1% in the same quarter last year, attributed to royalty revenue, lower product costs, and greater scale [4][7]. - Operating expenses decreased to $19.7 million from $21.5 million in Q2 2024, mainly due to reduced compensation and commission expenses [5][7]. - Net income reached $3.6 million, or $0.02 per share, compared to a net loss of $3.9 million, or $(0.03) per share, in Q2 2024 [5][7]. - Non-GAAP adjusted EBITDA for Q2 2025 was $6.9 million, a significant improvement from an adjusted EBITDA loss of $569,000 in Q2 2024 [6][7]. Business Developments - The company launched OsteoFactor Pro™, a next-generation growth factor, and Trivium™, a premium demineralized bone matrix allograft, enhancing its product offerings in the orthobiologics market [3][7]. - Xtant Medical announced agreements to sell non-core spinal implant and OUS businesses to Companion Spine for approximately $19.2 million, which is expected to strengthen its balance sheet and support the development of its biologics pipeline [3][7]. Financial Guidance - The company raised its full-year 2025 revenue guidance to a range of $131 million to $135 million, reflecting an increase from the previous guidance of $127 million to $131 million [10].

Core Insights - Xtant Medical Holdings, Inc. has announced the sale of certain Coflex® and CoFix® interlaminar stabilization implant assets and all OUS entities of Paradigm Spine GmbH to Companion Spine, LLC for a total consideration of approximately $19.2 million [1][2] - The transaction is expected to close in the third quarter of 2025 and aims to enhance Xtant's focus on its core business while improving its balance sheet and liquidity [2][3] Financial Details - The proceeds from the transaction consist of $11 million in cash at closing and $8.2 million in short-term seller financing [2][4] - Xtant plans to use the proceeds to reduce long-term debt and improve cash liquidity [2] Strategic Focus - The transaction allows Xtant to concentrate on the development of higher-margin orthobiologics, thereby streamlining operations [3] - Companion Spine, backed by Viscogliosi Brothers, is expected to effectively manage the transitioned products and drive their growth [3] Operational Transition - Certain members of Xtant's U.S. and international commercial organizations will transition to Companion Spine to continue supporting the products [2] - Companion Spine aims to enhance its product solutions portfolio and strengthen its presence in the U.S. market [3][8] Closing Conditions - The transaction is subject to Companion Spine obtaining financing and other customary closing conditions [3]

Market Opportunity & Growth - The worldwide spine market is a \$10 billion market[6], while the addressable orthobiologics market is \$2.5 billion[6] - Xtant Medical's FY2024 revenue was \$117.3 million, a 28% increase over FY2023[6] - The company expects FY2025 revenue to be between \$126 million and \$130 million[6] Product Portfolio & Strategy - Xtant Medical offers a full-service product offering including cervical fusion, posterior thoracic fusion, TLIF/PLIF/ALIF lumbar fusion, sacroiliac fusion, biologics, and fixation[19] - The company is vertically integrated in all five orthobiologics categories[7, 17] - Xtant Medical's current portfolio addresses the entire \$2.5 billion orthobiologics market[25] Distribution & Expansion - Xtant Medical has an established distribution network with 450 IDN contracts and 670+ independent distributors[6] - The company aims to expand its distribution network by signing new IDN and GPO agreements and attracting additional independent rep agencies[46] Acquisition & Financials - The company focuses on profitability and self-sustainability[17], with positive Adjusted EBITDA and operating cash flow in Q4 2024[8] - Inorganic growth through acquisitions is key to achieving long-term goals[47]

Core Viewpoint - Xtant Medical Holdings, Inc. has launched OsteoFactor Pro™, a new allogeneic growth factor solution aimed at enhancing bone healing and supporting surgical success in orthopedic and spine procedures [1][4]. Product Overview - OsteoFactor Pro™ is a naturally derived formulation rich in growth factors that enhances the biological activity and regenerative potential of orthobiologic scaffolds [2]. - The product features a biphasic release profile, providing an immediate bolus followed by sustained growth factor release, which stimulates key natural bone regeneration pathways such as angiogenesis, chemotaxis, and osteogenesis [2]. - It is an off-the-shelf, ready-to-use solution that integrates with various scaffolds, offering surgeons versatility and biologic performance for diverse bone regeneration approaches [3]. Company Positioning - With the launch of OsteoFactor Pro™, Xtant Medical becomes the first vertically integrated company to provide solutions across all five major orthobiologic categories, including demineralized bone matrix, cellular allografts, synthetics, structural allografts, and growth factors [5]. - The company emphasizes its commitment to innovation, scalability, and addressing the full spectrum of needs in regenerative medicine [5]. Company Mission - Xtant Medical's mission focuses on honoring the gift of donation to enhance patients' quality of life through a comprehensive portfolio of orthobiologics and spinal implant systems [6].

Financial Data and Key Metrics Changes - The company reported total revenue of $32.9 million for Q1 2025, an 18% increase from $27.9 million in Q1 2024, primarily driven by growth in the biologics product family [5][12] - Adjusted EBITDA for Q1 2025 was $3 million, compared to an adjusted EBITDA loss of $1 million in Q1 2024 [15] - Net income for Q1 2025 was $58,000, or $0.00 per share, compared to a net loss of $4.4 million, or $0.03 per share, in the same period last year [15] Business Line Data and Key Metrics Changes - The biologics product family experienced significant growth, while spinal implant sales declined by 10% or $1.2 million year over year [12] - The company launched two new innovative products, Trivium and FiberX, aimed at rejuvenating its core demineralized bone offerings [8] - The company anticipates mid double-digit revenue growth in its biologics product family for the fiscal year 2025 [10] Market Data and Key Metrics Changes - The company received royalties from licensing its Simply Max Q code to a distributor in the chronic wound care space, which is expected to generate additional income [9] - CMS has extended the local coverage determination for skin substitutes to December 31, 2025, potentially increasing royalty income [9] Company Strategy and Development Direction - The company has achieved full vertical integration of its biologics products, marking a significant strategic milestone [7] - The focus is on self-sustainability, profitability, and cash generation, with a targeted revenue guidance for 2025 in the range of $127 million to $131 million, representing 8% to 11% growth [11] - The company is rationalizing its hardware product lines to optimize cash management [10] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the company's future, emphasizing the importance of being realistic regarding government policy impacts on revenue [22] - The company is focused on maintaining its growth in the biologics sector while managing the transition in its hardware offerings [24] - Management expects steady revenue growth throughout the remainder of the year, with cash flow from operations anticipated to improve in Q4 [27] Other Important Information - The company terminated a restrictive investor rights agreement with OrbiMed, which is seen as a positive development for shareholders [6] - The company has added processing capacity at its Belgrade facility to support growing production needs [9] Q&A Session Summary Question: What are the assumptions for incremental minimum payments and royalties from the Amneal deals? - Management has not included additional minimums under the royalty agreement and assumes full manufacturing under the manufacturing license agreement for the remainder of 2025 [19][20] Question: Can you walk through the different drivers for growth in the biologics business? - Key drivers include growth from Amneal and VBM, with a focus on transitioning customers to new product lines [23][24] Question: How should we think about EBITDA and cash flow through the rest of the year? - Cash flow from operations is expected to be tighter in Q3 but improve in Q4, with steady revenue growth anticipated [27] Question: What is the outlook for sales and marketing expenses? - Sales and marketing expenses are expected to increase in Q2 and beyond, aligning more closely with Q4 of the previous year [32] Question: Will there be margin improvements from in-house production? - Management expects margin improvements from bringing production in-house, particularly for products like Fibrex and Trivium [34][35]

Financial Data and Key Metrics Changes - Total revenue for Q1 2025 was $32.9 million, an 18% increase from $27.9 million in Q1 2024, primarily driven by growth in the biologics product family [5][13] - Net income for Q1 2025 was $58,000, compared to a net loss of $4.4 million in Q1 2024, indicating a significant turnaround [16] - Adjusted EBITDA for Q1 2025 was $3 million, compared to an adjusted EBITDA loss of $1 million in the same period last year [16] Business Line Data and Key Metrics Changes - The biologics product family experienced year-over-year growth, while spinal implant sales declined by 10% or $1.2 million [13] - The company launched two new products, Trivium and FiberX, aimed at rejuvenating its core demineralized bone offerings [8] - The gross margin for Q1 2025 was 61.5%, slightly down from 62.1% in Q1 2024, affected by inventory disposal charges [14] Market Data and Key Metrics Changes - The company received royalties from licensing its Simply Max Q code, with CMS extending local coverage determination for skin substitutes to December 31, 2025, potentially increasing royalty income [10] - The company anticipates mid double-digit revenue growth in its biologics product family for 2025, while hardware revenue is expected to remain flat to modestly down [11] Company Strategy and Development Direction - The company has completed the vertical integration of its biologics products, positioning itself as a diversified, vertically integrated biologics company [7] - The focus for 2025 is on self-sustainability, profitability, and cash generation, with targeted growth opportunities and cost-cutting initiatives [11] - The company plans to rationalize its hardware product lines to optimize cash management [11] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the company's strategic direction and the removal of a restrictive investor rights agreement, which is expected to benefit shareholders [6] - The company remains cautious about potential changes in government policies affecting revenue, particularly regarding royalties [23] - Management expects steady revenue growth throughout the year, with cash flow from operations anticipated to improve in Q4 2025 [28] Other Important Information - The company has added processing capacity at its Belgrade facility to support growing production needs [10] - The company has $5.4 million in cash and cash equivalents, with net accounts receivable at $23.5 million and inventory at $38.8 million as of March 31, 2025 [18] Q&A Session Summary Question: What are the assumptions for incremental minimum payments and royalties from the Amneal deals? - Management has not included additional minimums under the royalty agreement and assumes full manufacturing under the manufacturing license agreement for the remainder of 2025 [21][22] Question: Can you walk through the different drivers for growth in the biologics side? - Key drivers include growth from Amneal and VBM, with a focus on transitioning customers to the new Cortera line [24][25] Question: How should we think about EBITDA and cash flow through the rest of the year? - Cash flow from operations is expected to be tighter in Q3 but improve in Q4, with steady revenue growth anticipated [28] Question: How do you foresee sales and marketing expenses for the rest of the year? - Sales and marketing expenses are expected to increase in Q2 and beyond, aligning more closely with Q4 of the previous year [35] Question: Is there potential for margin improvement with in-house production? - Management indicated that bringing production in-house will lead to margin improvements, particularly for products like Trivium and Fibrex [37][40]

Part I: Financial Information [Financial Statements](index=7&type=section&id=ITEM%201.%20FINANCIAL%20STATEMENTS) The company reported a net income of **$58 thousand** in Q1 2025, a significant turnaround from a **$4.4 million** net loss in Q1 2024, driven by an **18%** revenue increase and a post-quarter change in majority ownership [Condensed Consolidated Financial Statements](index=7&type=section&id=Condensed%20Consolidated%20Financial%20Statements) Q1 2025 financial statements reflect a shift to profitability with a net income of **$58 thousand**, positive operating cash flow of **$1.3 million**, and a slight increase in total assets to **$95.8 million** Condensed Consolidated Balance Sheet Data (in thousands) | Account | March 31, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Cash and cash equivalents | $5,032 | $6,199 | | Total current assets | $69,144 | $67,116 | | Total Assets | $95,833 | $93,837 | | Total current liabilities | $29,581 | $28,581 | | Total Liabilities | $51,956 | $50,874 | | Total Stockholders' Equity | $43,877 | $42,963 | Condensed Consolidated Statements of Operations (in thousands, except per share data) | Account | Q1 2025 | Q1 2024 | | :--- | :--- | :--- | | Total Revenue | $32,904 | $27,873 | | Gross Profit | $20,243 | $17,302 | | Income (Loss) from Operations | $1,063 | $(3,470) | | Net Income (Loss) | $58 | $(4,400) | | Basic & Diluted EPS | $0.00 | $(0.03) | Condensed Consolidated Statements of Cash Flows (in thousands) | Activity | Q1 2025 | Q1 2024 | | :--- | :--- | :--- | | Net cash provided by (used in) operating activities | $1,278 | $(5,755) | | Net cash used in investing activities | $(1,143) | $(674) | | Net cash (used in) provided by financing activities | $(919) | $5,179 | | Net change in cash | $(786) | $(1,299) | [Notes to Financial Statements](index=12&type=section&id=Notes%20to%20Financial%20Statements) Notes reveal a significant revenue shift with **$3.6 million** in new licensing revenue, continued debt covenant compliance, and a major post-quarter ownership change where Nantahala Capital Management acquired a **49.1%** stake Revenue by Product Line (in thousands) | Product Line | Q1 2025 | Q1 2024 | | :--- | :--- | :--- | | Orthobiologics | $18,074 | $15,416 | | Spinal implant | $11,210 | $12,457 | | License revenue | $3,620 | $— | | **Total revenue** | **$32,904** | **$27,873** | - A new license agreement includes a **$1.5 million** upfront fee and guaranteed quarterly minimum royalties, though future minimums beyond Q1 2025 were constrained due to uncertainty regarding a CMS policy change[52](index=52&type=chunk) - As of March 31, 2025, the company had **$5.7 million** available under its revolving line of credit and was in compliance with all debt covenants[59](index=59&type=chunk) - Subsequent to the quarter end, in April 2025, OrbiMed sold its entire **~73.1 million share stake**, with Nantahala Capital Management increasing its ownership to **49.1%** of the company's outstanding common stock as the lead purchaser[79](index=79&type=chunk)[83](index=83&type=chunk) [Management's Discussion and Analysis (MD&A)](index=23&type=section&id=ITEM%202.%20MANAGEMENT'S%20DISCUSSION%20AND%20ANALYSIS%20OF%20FINANCIAL%20CONDITION%20AND%20RESULTS%20OF%20OPERATIONS) Management attributes Q1 2025 revenue growth of **18%** to orthobiologics and new licensing, leading to an operating income of **$1.1 million** and sufficient liquidity to fund operations through at least May 2026 [Business Overview and Strategy](index=23&type=section&id=Business%20Overview%20and%20Strategy) The company focuses on developing and marketing regenerative medicine and medical devices, pursuing growth through new products, expanded distribution, adjacent market penetration, and strategic acquisitions - The company's four key growth initiatives are: - Introduce new products (e.g., Trivium™) - Expand distribution network - Penetrate adjacent markets - Leverage growth platform with technology and strategic acquisitions[88](index=88&type=chunk) - Recent license agreements for SimpliGraft® and SimpliMax™ products are subject to revenue recognition risks related to potential changes in CMS reimbursement policies, which have been delayed to January 1, 2026[91](index=91&type=chunk) [Results of Operations](index=24&type=section&id=Results%20of%20Operations) Q1 2025 total revenue grew **18%** to **$32.9 million** driven by orthobiologics and new licensing, while gross margin slightly decreased to **61.5%** and operating expenses notably declined, shifting to operating income - Total revenue increased **18%** year-over-year to **$32.9 million**, driven by orthobiologics sales and **$3.6 million** in new licensing revenue[93](index=93&type=chunk) - Gross margin decreased by **60 basis points** to **61.5%**, primarily due to inventory write-offs and sales mix changes[94](index=94&type=chunk) - Sales and marketing expenses decreased by **10%** (**$1.3 million**), mainly from a **$0.8 million** reduction in agent commissions and a **$0.7 million** decrease in compensation expense due to reduced headcount[96](index=96&type=chunk) - General and administrative expenses decreased by **3%** (**$0.3 million**) due to reduced accounting and consultant fees[95](index=95&type=chunk) [Liquidity and Capital Resources](index=25&type=section&id=Liquidity%20and%20Capital%20Resources) The company's liquidity, including **$5.4 million** cash and **$5.7 million** available credit, is deemed sufficient to meet cash requirements through at least May 2026, supported by **$1.3 million** in Q1 2025 operating cash flow - The company believes its **$5.4 million** in cash as of March 31, 2025, along with operating cash flows and available credit, will be sufficient to meet cash requirements through at least **May 2026**[109](index=109&type=chunk) - Net cash from operating activities was **$1.3 million** in Q1 2025, a significant improvement from a **$5.8 million** use of cash in Q1 2024, primarily due to achieving net income versus a net loss[101](index=101&type=chunk) - As of March 31, 2025, the company had **$11.3 million** outstanding on its revolving line of credit, with **$5.7 million** of availability[106](index=106&type=chunk) [Quantitative and Qualitative Disclosures About Market Risk](index=27&type=section&id=ITEM%203.%20QUANTITATIVE%20AND%20QUALITATIVE%20DISCLOSURES%20ABOUT%20MARKET%20RISK) As a smaller reporting company, Xtant Medical is not required to provide the information for this item - The company is not required to provide this information as it qualifies as a smaller reporting company[113](index=113&type=chunk) [Controls and Procedures](index=27&type=section&id=ITEM%204.%20CONTROLS%20AND%20PROCEDURES) Management concluded that disclosure controls and procedures were not effective as of March 31, 2025, due to a previously identified material weakness in internal control over financial reporting - Based on their evaluation, the principal executive officer and principal financial officer concluded that as of March 31, 2025, the company's disclosure controls and procedures were not effective[115](index=115&type=chunk) - The ineffectiveness is attributed to a material weakness in the company's internal control over financial reporting[115](index=115&type=chunk) Part II: Other Information [Legal Proceedings](index=28&type=section&id=ITEM%201.%20LEGAL%20PROCEEDINGS) The company is subject to various legal claims arising in the ordinary course of business and believes it has adequately accrued for probable and estimable contingent liabilities - The company is subject to potential liabilities from various claims and legal actions arising in the ordinary course of business[71](index=71&type=chunk)[117](index=117&type=chunk) - Management believes it has adequately accrued for contingent liabilities where loss is probable and reasonably estimable, and does not expect the ultimate resolution of claims to have a material adverse effect[71](index=71&type=chunk) [Other Information](index=28&type=section&id=ITEM%205.%20OTHER%20INFORMATION) Effective May 12, 2025, Mark A. Schallenberger was appointed COO with an annual base salary of **$461,760** and a **75%** target bonus, with no Rule 10b5-1 trading plan changes reported - Effective May 12, 2025, Mark A. Schallenberger was appointed as the company's Chief Operating Officer[122](index=122&type=chunk) - Mr. Schallenberger's compensation was increased to an annual base salary of **$461,760** and a target annual bonus of **75%** of base salary[124](index=124&type=chunk) [Other Items (Risk Factors, Unregistered Sales, Defaults, Mine Safety)](index=28&type=section&id=Other%20Items) As a smaller reporting company, Item 1A (Risk Factors) information is not required, and other items including unregistered sales, defaults, and mine safety disclosures were not applicable - As a smaller reporting company, information regarding Risk Factors (Item 1A) is not required[118](index=118&type=chunk) - Items concerning Unregistered Sales of Equity Securities, Defaults Upon Senior Securities, and Mine Safety Disclosures were not applicable[119](index=119&type=chunk)[120](index=120&type=chunk)[121](index=121&type=chunk)