Xtant Medical (XTNT) - 2023 Q4 - Annual Results

Executive Summary & 2024 Guidance Xtant Medical achieved record 2023 revenue of $91.3 million, driven by organic growth and acquisitions, and provided 2024 revenue guidance of $112 million to $116 million Record Full Year 2023 Revenue and 2024 Guidance Xtant Medical announced record full-year 2023 revenue of $91.3 million, a 58% increase year-over-year, driven by 15% organic growth and strategic acquisitions, and established 2024 revenue guidance of $112 million to $116 million - 2023 was a transformative year, achieving record annual revenues of $91.3 million, up 58% year-over-year, with 15% organic growth[2] - Successfully integrated three separate businesses integral to the growth platform[2] | Metric | Full Year 2023 | Full Year 2022 | YoY Change | | :----- | :------------- | :------------- | :--------- | | Revenue | $91.3 million | $58.0 million | +58% | | Organic Growth | 15% | N/A | N/A | | Gross Margin | 60.8% | 55.4% | +540 bps | | Adjusted EBITDA | $1.0 million | $(3.0) million | N/A | - Established full year 2024 revenue guidance of $112 million - $116 million, representing approximately 23% to 27% annual growth compared to full year 2023, including contributions from the Surgalign acquisition[1][8] Fourth Quarter and Full Year 2023 Financial Results Overview Xtant Medical reported strong Q4 and full-year 2023 revenue growth, improved gross margins, increased operating expenses, a full-year net income, and positive adjusted EBITDA Revenue Performance Xtant Medical reported significant revenue growth for both Q4 and the full year 2023, primarily driven by increased independent agent and private label sales, as well as contributions from the acquired Coflex, CoFix, and Surgalign product lines | Period | 2023 Revenue | 2022 Revenue | YoY Growth | | :----- | :----------- | :----------- | :--------- | | Q4 | $28.1 million | $15.3 million | +84.1% | | Full Year | $91.3 million | $58.0 million | +58% | - Revenue increases attributed primarily to greater independent agent and private label sales, and sales from the acquired Coflex and CoFix product lines, and sales from the acquisition of Surgalign[3] Gross Margin Gross margin improved in both the fourth quarter and full year 2023, mainly due to a favorable product mix, greater scale, and production efficiencies, despite some offset from higher product costs | Period | 2023 Gross Margin | 2022 Gross Margin | Change (bps) | | :----- | :---------------- | :---------------- | :----------- | | Q4 | 61.0% | 54.4% | +660 bps | | Full Year | 60.8% | 55.4% | +540 bps | - These increases were primarily attributable to product mix and greater scale and production efficiencies, partially offset by higher product costs[4] Operating Expenses Operating expenses significantly increased in Q4 and full year 2023, primarily due to higher independent agent sales commissions, increased employee compensation, legal expenses, and amortization of intangible assets related to recent acquisitions | Period | 2023 Operating Expenses | 2022 Operating Expenses | YoY Change | | :----- | :---------------------- | :---------------------- | :--------- | | Q4 | $20.9 million | $10.0 million | +$10.9 million | | Full Year | $65.6 million | $38.9 million | +$26.7 million | - These increases were primarily due to additional independent agent sales commissions and higher employee compensation expenses, legal expenses, and amortization of intangible assets associated with the Coflex and CoFix product lines[5] Net Income (Loss) Xtant Medical reported a net loss for Q4 2023, but achieved net income for the full year 2023, a significant improvement from the prior year's net loss | Period | 2023 Net Income (Loss) | 2022 Net Income (Loss) | 2023 EPS | 2022 EPS | | :----- | :--------------------- | :--------------------- | :------- | :------- | | Q4 | $(4.3) million | $(2.2) million | $(0.03) | $(0.02) | | Full Year | $0.7 million | $(8.5) million | $0.01 | $(0.09) | Non-GAAP Adjusted EBITDA The company achieved positive Non-GAAP adjusted EBITDA for both Q4 and the full year 2023, a notable turnaround from losses in the prior year periods | Period | 2023 Adjusted EBITDA | 2022 Adjusted EBITDA | | :----- | :------------------- | :------------------- | | Q4 | $0.7 million | $(0.8) million | | Full Year | $1.0 million | $(3.0) million | - Adjusted EBITDA is defined as net income/loss from operations before depreciation, amortization and interest expense and provision for income taxes, and as further adjusted to add back in or exclude, as applicable, non-cash compensation, acquisition-related expenses, acquisition-related fair value adjustments, gain on bargain purchase, unrealized foreign currency translation gain, and litigation settlement reserve[7] Company Information and Disclosures This section provides details on the upcoming conference call, company profile, explanations of non-GAAP measures, cautionary statements regarding forward-looking information, and investor contact details Conference Call Details Xtant Medical will host a webcast and conference call on April 1, 2024, to discuss the Q4 and full year 2023 financial results, with replay available on their investor relations website - Webcast and conference call to discuss the fourth quarter and full year 2023 financial results on Monday, April 1, 2024 at 9:00 AM ET[9] - A replay of the call will be available at www.xtantmedical.com, under 'Investor Info'[9] About Xtant Medical Holdings, Inc. Xtant Medical is a global medical technology company specializing in orthobiologics and spinal implant systems to facilitate spinal fusion in complex spine, deformity, and degenerative procedures, operating with high integrity to serve customers - Global medical technology company focused on the design, development, and commercialization of a comprehensive portfolio of orthobiologics and spinal implant systems[9] - Products facilitate spinal fusion in complex spine, deformity and degenerative procedures[9] Non-GAAP Financial Measures Explanation The company uses non-GAAP financial measures like adjusted EBITDA and organic revenue growth to supplement GAAP statements, believing they provide useful information for investors and internal performance evaluation, but advises against using them as substitutes for GAAP measures - Uses non-GAAP financial measures (adjusted EBITDA and organic revenue growth) to supplement GAAP consolidated financial statements[11] - Management believes these measures provide useful information to investors and for internal evaluation of business performance[11] - 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[11] Cautionary Statement Regarding Forward-Looking Statements This section warns that forward-looking statements, including 2024 financial guidance, involve risks and uncertainties that could cause actual results to differ materially, and encourages investors to review SEC filings for a comprehensive discussion of these factors - Forward-looking statements, including 2024 financial guidance, involve risks and uncertainties, and actual results may differ materially[12] - Important factors include future operating results, ability to increase revenue, risks associated with recent acquisitions, anticipated shortages of stem cells, and the effect of COVID-19 and inflation[12] - Investors are encouraged to read the Company's Annual Report on Form 10-K for the year ended December 31, 2023, filed with the SEC, for a discussion of these and other risks and uncertainties[12] Investor Relations Contact Provides contact information for investor relations inquiries - Investor Relations Contact: David Carey, Lazar FINN Partners, Ph: 212-867-1762, Email: david.carey@finnpartners.com[13] Consolidated Financial Statements This section presents the consolidated balance sheets, statements of operations, and cash flows, detailing asset and liability changes, revenue growth, net income, and cash movements from operating, investing, and financing activities Consolidated Balance Sheets As of December 31, 2023, Xtant Medical reported an increase in total assets, primarily driven by higher trade accounts receivable, inventories, goodwill, and intangible assets, with total liabilities also increasing mainly due to higher accounts payable, accrued liabilities, and long-term debt | Metric (in thousands) | Dec 31, 2023 | Dec 31, 2022 | Change | | :-------------------- | :----------- | :----------- | :----- | | Total Assets | $92,612 | $60,229 | +$32,383 | | Total Liabilities | $41,263 | $26,058 | +$15,205 | | Total Stockholders' Equity | $51,349 | $34,171 | +$17,178 | | Cash and cash-equivalents | $5,715 | $20,298 | $(14,583) | | Inventories | $36,885 | $17,285 | +$19,600 | | Long-term debt | $17,167 | $9,687 | +$7,480 | Consolidated Statements of Operations For the full year 2023, Xtant Medical achieved significant revenue growth and improved gross profit, leading to a net income of $0.7 million, a substantial turnaround from a net loss in 2022, despite increased operating expenses | Metric (in thousands) | FY 2023 | FY 2022 | YoY Change | | :-------------------- | :------ | :------ | :--------- | | Revenue | $91,303 | $57,969 | +$33,334 | | Gross profit | $55,467 | $32,137 | +$23,330 | | Gross profit % | 60.8% | 55.4% | +5.4% | | Total operating expenses | $65,625 | $38,892 | +$26,733 | | Net Income (Loss) | $660 | $(8,485) | +$9,145 | | Basic EPS | $0.01 | $(0.09) | +$0.10 | - A bargain purchase gain of $11,694 thousand significantly contributed to total other income in 2023[17] Consolidated Statements of Cash Flows In 2023, Xtant Medical experienced a net cash outflow from operating activities, a significant increase in cash used in investing activities due to acquisitions, and a substantial net cash inflow from financing activities, primarily from borrowings and common stock issuance | Cash Flow Activity (in thousands) | FY 2023 | FY 2022 | Change | | :-------------------------------- | :------ | :------ | :----- | | Net cash used in operating activities | $(9,515) | $(5,341) | $(4,174) | | Net cash used in investing activities | $(24,784) | $(1,559) | $(23,225) | | Net cash provided by financing activities | $19,691 | $9,020 | +$10,671 | | Net change in cash and restricted cash | $(14,584) | $2,120 | $(16,704) | - Investing activities included significant acquisitions: Surgalign SPV, Inc. ($17,000 thousand), Surgalign Holdings, Inc.'s hardware and biologics business ($4,503 thousand), and nanOss Production Operations from RTI Surgical Inc. ($2,000 thousand)[19] - Financing activities were boosted by borrowings on line of credit ($78,219 thousand) and proceeds from issuance of common stock ($14,011 thousand)[19] Non-GAAP Financial Reconciliations This section provides reconciliations for non-GAAP financial measures, including the calculation of adjusted EBITDA and the breakdown of organic versus acquisition-driven revenue growth Calculation of Non-GAAP Consolidated EBITDA and Adjusted EBITDA Xtant Medical reported positive Non-GAAP Adjusted EBITDA for both Q4 and the full year 2023, a significant improvement from negative figures in 2022, after adjusting for non-cash and acquisition-related items | Metric (in thousands) | Q4 2023 | Q4 2022 | FY 2023 | FY 2022 | | :-------------------- | :------ | :------ | :------ | :------ | | Net (Loss) Income | $(4,303) | $(2,209) | $660 | $(8,485) | | Non-GAAP EBITDA | $(1,875) | $(1,403) | $4,976 | $(5,463) | | Non-GAAP Adjusted EBITDA | $761 | $(764) | $1,038 | $(2,999) | | Adjusted EBITDA/Total revenue | 2.7% | -5.0% | 1.1% | -5.2% | - Key adjustments include non-cash compensation, acquisition-related expense, acquisition-related fair value adjustments, gain on bargain purchase, unrealized foreign currency translation gain, and litigation settlement reserve[21] Reconciliation of Non-GAAP Organic Revenue Growth to Total Revenue Growth For the full year 2023, Xtant Medical achieved 15% organic revenue growth, with an additional 43% growth attributed to products acquired from Coflex, CoFix, and Surgalign, totaling a 58% overall revenue growth | Revenue Growth Component | Twelve Months Ended Dec 31, 2023 | | :----------------------- | :------------------------------- | | Organic revenue growth | 15% | | Revenue growth from products added in the acquisition of the Coflex and CoFix lines and Surgalign hardware and biologics business | 43% | | Total revenue growth | 58% |