XTNT - Earnings call transcript Q4 2017 | Xtant Medical Holdings, Inc.

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Operator

Greetings, and welcome to the Xtant Medical Fourth Quarter and Year End Conference Call. [Operator Instructions] As a reminder, this conference is being recorded. And it is now my pleasure to introduce your host Ms. Laura Kendall, Deputy Restructuring Officer. Thank you.

begin. may You

Laura Kendall

Form and morning, fourth Good Yesterday you filed Officer. joining Laura fourth December Restructuring for is for the and Xtant financial Officer Thank as Deputy I and and full Medical's quarter announcing release quarter am a call. and results XX, its year year year My Xtant XXXX issued you. press Accounting XXXX. thank and XX-K also full Medical Principal XXXX name afternoon, Kendall, ended serving earnings Xtant

today for company's webcast Chief follow participants will a me will and for as At the Joining and be conference on session being playback. all Carl Executive this the be posted call formal O'Connell, are noted, website Xtent. mode question-and-answer will in presentation. listen-only Officer the Today's for brief is time call

expect XX approximately just cautions to duration minutes. a of some If regarding of We the moment call for important the statements. repeat could be the forward-looking I

course anticipate, management the These this call, the Risk Xtant's XX-K believe, on plan, section such statements forward-looking expected can words and future report identified guarantees trends the filed meaning. of those information of and be involve including annual certain words events future our was may, future as and recent Form current risks Any should, Factors intends may statements and yesterday. reflect of in similar and of will, forward-looking noted forward-looking performance other most on performance. such are not that and regarding by existing company's During statements perspective expect, make uncertainties,

financial or company. to preliminary or information operating project results unaudited may financial the materially. Actual any differ results is addition, the and does In forma of not purport position future pro

Eastern the was of For A.M. you be call at these Since to to may reference have applicable releases of herein. with on the the those as then, The obligation by except the related current additional and filings made approximately statements, company recorded to SEC. discussed Tuesday, replay, company's the update XX and X, Time. press the this who held forward-looking most any April listening announcements Please benefit topics law. may required recent declines company

areas I of financial with the ended to month begin December that call review the margin, discuss quarter today's XXXX. cost and also to efficiency, restructuring its am we'll manage company's the profitability In and Xtant's call review undertook a better fourth of operations improving Carl were liquidity, company over to performance to discuss last brief transactions identifying a For the turn business XXXX, sales, and of XX, and strengthen executed our for improve assets. I the will objective and then the containment performance. enable going gross operational with gain year

to revenue in $XX.X for to million and revenue review XXXX. this XXXX. the same XX, period months ended December Consolidated for improvements compared the result of $XX.X of total expect We three into continue XXXX was million

in million relationships margin from the forward. year-over-year For primarily the for sales improve of revenue million December decline XXXX. ended months transitioning to distribution unprofitable compared and from profitability distributor the ended $XX.X to XX, sales XX, evaluating was XX months XXXX, away going XX our channels contribution The December $XX.X is result

of $XX.X and in adversely on XXXX. factors profit $XX.X gross call. fourth to the expand same these in million or competitive or XXXX hardware highly of of gross of for XX.X% compared Consolidated XXXX environment In Good declines in addition, revenue revenue. the XX.X% of million later quarter for the profit revenue introduction offset products was Carl affected biologics the surrounding period will sales O'Connell new no momentum fixation product and sales these

XXXX. $XX.X gross year consolidated million revenue to XX.X% or revenue compared $XX.X in million full of of was profit XXXX, or For XX.X%

or full distributor. fourth for the These compared in million as percent and lower remaining and XXXX. additional former and fourth consignment year which $X.X taken of to XX.X% of litigation mix expenses with surgical in charges XXXX maybe Fourth and shift totaled and $XX.X X% on sales decrease instruments XXXX, operating related the $X related and the quarter million quarter missing the to products by quarter company inventory lowering XXXX. quarter in returned a in XXXX, inventory fourth that charges margin. reserves to carry margin impairment gross the full-year caused gross not to excess at A biologics $XX.X sales were in were in the million margins a favoring During or million fixation

expenses $XX.X separation the operating liquidity, loss $XX.X There largely The taxes adjusted of XXXX of ongoing EBITDA to $X.X and the expenses. receivable a $XX.X expenses of fourth gain increase of XXX,XXX. taken The also million sales $XX.X net equivalents, charge quarter compared EBITDA Full income other $X.X year million of inventory expense fourth fourth and sale as EBITDA of reserves is was noncash million and lower and our $X.X incurred the of gain the expenses amortization is $XX.X was one-time EBITDA and a million result to depreciation to cost million compared respect defines to nonrecurring efficiency improve the in million. of and XXXX company $X.X before related related due fourth as acquired as inventory. adjusted quarter a XXXX loss gain stock were December a acquisition. one-time was EBIT the to X-spine on volume year assets. quarter company based to million throughout cash operating adjusted expenses earnings restructuring company. of of to compensation. full due had turnaround of adjusted and of a in lower year was million. Adjusted and of such XXXX's EBITDA in the the containment of The lower XXXX $X.X less Adjusted of expenses continuing as of assets XX, or and Operating in compared impairment for efforts interest million intangible million X.X to For we the impact quarter were XXXX. result XXXX of million million With million XXXX $X.X EBITDA and loss for accounts EBITDA cash $X.X of

about addition its company million credit In available the under had $X.X agreement.

transaction company SEC and convertible successfully related accrued As positive noted through and debt Xtant press a million previously interest its interest of to releases company's and by This returned lowering to equity stockholders common in website, approximately found position. in the be debt of which the filings the all completed recapitalization XX conversion a has can stock.

maintained both over of I'd company filings and of the who February that O'Connell stock. planning to to company's in Carl its a to the position New The stock net completed liquidity addition own With strategy. Carl? enhancing for Directors is SEC that, company like liquidity Xtant noted releases will of stock Exchange of of XXXX press the common private the experience In business common Xtant's conduct Stock York various call and placement has American of the highlights and some new further a approximately to shareholders shareholders successfully in go with in $X.X as and position. proceeds industry and enhance outstanding XX% turn common significant in Board composed the position. independent have a now over on to its rights offering million Orbimed directors selected company's representatives the

Carl O'Connell

highlighting lot of key changes Laura, will conference through you, Xtant Xtant growth of which for some for some focus of call. Medical's managed areas I We Thank to everyone be feel and over will fiscal we and a XXXX. move XX and you and past XXXX drivers thank joining as months successes, fourth forward I forward our quarter highlight look the Medical

hardware continued XXXX and the achieving reimbursement and above which very clinical demand penetrating non-profitable is by market This of fixation pressure revenue plan market primary a to for in second XXXX. margins revenue and distributorships of declined the as company growth XXXX and in in throughout have term. these unprofitable PLUS OsteoSelect as a decline from sales result Difficulty]. Increased year competitive reducing coming by channels justification long quarters. a the away Our This to [Technical making growth channels demand successful portfolio profitable OsteoSelect lines. comparison pricing, well progressive end-user year, high towards demand fixation as was driven fiber in opportunities mostly was rates distribution shift The lower some our positive the supported growth. a Conversely, this course due to with technology terminating we contracts. increasing revenue better product a drive will and changes with the innovation for biologics the half stabilize highly Due XDemin was DBM new commission of

Operator

may Carl, begin. you

Carl O'Connell

Hello.

Operator

ahead. is Carl, your Go line live.

Carl O'Connell

supported our portfolio one DBM driven market. in by demands be for players leading biologics market continue Thank replacement achieving of product technology we OsteoSelect revenue was demand was very you. lines. in penetrating by continued accounts product largest with DBM OsteoSponge. revenue biologics XDemin Conversely the flagship This OsteoSelect mix distribution PLUS new Increased XXXX successful of fiber our line growth growth. product and our This U.S. above to by category, the bone

under the stronger customer. instrument future inventory be of am driven XXXX, in the operation X-Spine the Montana from Medical, ensuring a and Because our would and the utilizing at achieving without Marketing. portfolio team Dayton delivery momentum optimization integrating revenue able the A XXXX as sales announced growth by by foundation saw customer our performance. were continues our Chris assist focus cell year, was touch customers we offered strategy support to foundation us departments in goals. provide Montana and be precash we sustainable business our initiatives, of focus in team significant leadership, company’s end to our company collective that market channel quality EBITDA daily and excel. towards the the we mid an Operations negatively integrated moving drive for as excellence and This our the and of inventory Valois, Juda, for adopting XXXX. the upon user. simplifying and at with opportunities customers complete The implementing organization project the under transformational by to growth and support processes with by operational product Accounts instrumental leadership cost partners optimization. business were on the the year of levels through from $X was processes planning to facility sales we the products our OsteoVive, These [news] efforts XXXX. Chris Xtant to driving improve to performance activity profitable location utilization, customers leadership news facility fulfillment delivering of conversion first cost creating derived inventory business National sale our of partnerships for because a this surgeons. and robust channel to reducing business. of Bacterin inventory to and designed launched instruments in decision continue fully focus channel by We with with in and missing designed Amy the mostly will our future also Xtant and project. expanded The savings is of strategic needs a annually. of location impacting Radtke, reduce with in anticipated for completed leader appropriately in that It driven was three [inaudible] accountability are was initiative positioning and to relationships and into Throughout will consolidated this Vice the single structure mark for for very President optimizing sales and as of his high activities. operational serve close also to anticipate unprofitable growth to distributing stable programs service improving commission and this our that of deeper regards our served are existing to expectations. a Greg allows our to patients from allograft to full the our project while complete biologics to implementation and Under able successfully exceeding engage General of Xtant and our Along and integration a efficiencies ahead Sales transfer products improving profitable and the he of without of market viable I progress We making hospital identified fixation and interest This our channel excellence to and infrastructure. we us October The case. schedule forecasting million to pleased surgical a In team will optimizing our lives effort total the restructuring of Manager to we of

than the XX XX are other with in renegotiated and executing XXXX. agreements agreements over renewed XX contract We group organizations system or more new more system health health purchasing through than IDM

provide forward we Our partners. as post to our securing has partnering the service We're contractual demonstrating world-class improving organization. supplier added as competency with core access provide emerged can a ability to performing high value and our of performance that hybrid contracted channel our distributors moving and a committed to our to

when was revenue which XXXX to a plan sets previously While are international to year-over-year we in increment purchased capitalize recognized we see did sales that we were A international our in our about on in opportunity on XXXX. partners decline, attributed decline consignment. excited

contributor to triple be that saw XX% Xtant's that other over as are year-over-year Germany, we growth many exiting Korea growth, versus Latin Africa to in digit South comparison to was regulations with prove in market. and the XX% XXXX. in modifications markets, where such There America resulting growth strong The South in markets

our Orbimed business endeavor excel confidence our even agreement team company, OUS channel management for for which and on thankful focus our to revenue us this will and With a strategy employees. like operational to our a XXXX see source shareholders growth, of to with international to to the reached initiatives continued for margins further, and funds restructuring and resources engaging in growth driving have from our for a turn enhancing of I'd and be continue excited employees optimization their strategies. additional our We're focus continue key driving potential as we We appreciative beyond. XXXX. and excellence to support our with to will and with I'm profitable help sales

families our strategy with the for on focused support We product the products will care regenerative and continue demand continuing evolve to patients. current

performance Lastly moving we high management improvements. system and projects we'll managing be processes the legalizing as to make forward continue

While we on have to looking us I’m made we believe great ahead initiatives. in strides organization, forward of these and significant executing opportunities I

I’d our Michael Bakewell, our Mainelli, like Directors, Matthew company closing, take of shareholders, the Before thank Jeffrey Board like our our Rizzo. would of for also to McNamara, to Board to formally and the I previous to dedication and time Robert welcome new their Michael Directors Peters John employees. Eggenberg,

I continued to for for Lastly like like questions. to call I'd with shareholders today's would moving turn XXXX our And throughout that, Thank on beyond. thank joining and again but in [overwhelming] and their over support not the to you us XXXX only call. forward

Operator

question the first from Maxim [Operator Instructions] Vendetti proceed question. your with Our of with comes Anthony Please Group. line

Anthony Vendetti

struggle kind the is? with hardware Can seems here. business. wanted to continues just that about much It of to and sales the done of can you was do to point line, that turnaround? starts stockings' to improvement. terminated the about aging saw is the start you the inflexion with this for anything just it to Carl in I growth biologics seems continue How hardware about what X-Spine was total do plan So to agreement and percent well talk like think talk product what acquisition original reseller do to hardware The market above business. and factor you you some where business but I

Carl O'Connell

I as in sort And you of line Laura of distributor hardware answer factor of have less think numbers I decline the sort some of looking correctly, our business. details natural our have think as the to a shift the we on relationships, and out or mature. hardware reseller at products also I’ll pointed lifecycle

But in ourselves. to contributing lines And address we’ll where at selling next at with against our to hope forward few forward. forward, going hardware look focus that of not looking we we’re strategy at think and I forward. in better going better we on look quarters, relationship hardware also looking we're with better to and margins form going with going can and months performance the partnerships management the distributors So and

Anthony Vendetti

and the was how And percent much it down? Laura sales of on

Operator

on you the are Anthony, still line?

Anthony Vendetti

Yes am. on the I'm line. I still

Carl O'Connell

problems Anthony, we’re having line. guess the Hi with some I

Laura Kendall

Okay, sorry. it have got I Carl

company or the information because declines know. business highly of has and you its product think growth I percentages categories within exact simply competitive not as its disclosed

making for So the and strategy have a the the and as we unprofitable portions direction what’s found the in at year happening there hardware great a gave to that that. on opportunity at that we out Carl to what be not think that we’re inroads of we’ve looking future of we're the figure as sector business take done contribution look strategically making last I a it will job hardware

So we disclose don't at point this those percentages.

Anthony Vendetti

that you parts terminated business The business or of turnaround? unprofitable that of unprofitable that there some that you could piece think been has are

Carl O'Connell

I Yes, - answer me let think that.

where have deep into in dive We’re looking for where opportunity better our meet is a doing restructure penetration performance, rates profitability. of is and rates we're margins agreements into to lot looking commission access trying commission to we’re contractual hard better sort especially obviously one the of but we our very looking contributing but our the there we’re on also and our goal margins

so can with goals our forward. align And we going that

Anthony Vendetti

Laura some and loan, interest deferred so the if much the was term of down on all left? term on the is not And loans then how paid

Laura Kendall

the All debt deferred the deferred term convertible The on interest was is outstanding. loan paid the interest down. on still

Anthony Vendetti

is left? much that And how

Laura Kendall

an to range of in - don’t interest. I but would million million number the exact deferred it's say I me X probably have with X

Anthony Vendetti

deal how but there some still and far well I in of not to to restructure out is the maturity if do it’s And you those XXXX plan with XXXX? a plan July know

Laura Kendall

loan? the of term maturity The

Anthony Vendetti

Yes.

Laura Kendall

way interest, quite us business, the we’ll company. planning that for of of lot and the as Or strategic will as that core the be but definitely address both between a at point a in done the that’s out of on of capitalization well

a be entered agreement stands much planning of us. And with well we’ve corporative they’ll you know going as sure so very as renewal Orbimed into again very credit is supportive XXXX. into the So with Orbimed that in I’m

Anthony Vendetti

rights second on you to is then is sometime And that in first there general the the lastly do timing half, the any as expectation offering, half? XXXX in trying

Laura Kendall

proxy. queued I currently these first we for had planning conclude want transactions so are the the would we say that we in half, up to

So, you of should see some the year. half activities within first that the surrounding

Operator

no like to this to are further turn at back for time. There call remarks. any closing the O'Connell questions I'd Instructions] over Mr. [Operator

Carl O'Connell

Thank you. thank On again like continued nice your you support and Medical. have day. Thank behalf to would of the a company I you for for Xtant

Operator

Thank teleconference. concludes you. This today's

You a your your day. have you this time. at may lines for wonderful disconnect Thank And participation.

Xtant Medical (XTNT) 3 Apr 182017 Q4 Earnings call transcript