Xtant Medical Holdings, Inc.
Q4 2020 Earnings Call Transcript

Published: 24 Feb 2021

[Operator:]

Greetings, and welcome to the Xtant Medical Fourth Quarter and Full Year 2020 Financial Results Conference Call. At this time, all participants are in a listen-only mode. As a reminder, this conference is being recorded. I'd now like to turn the conference over to Matt Steinberg of Lazar FINN Partners. Please go ahead.

[Matt Steinberg:]

Thank you, operator, and welcome to Xtant Medical's fourth quarter and full year 2020 financial results call. Joining me today is Sean Browne, President and Chief Executive Officer; and Greg Jensen, Vice President, Finance and Chief Financial Officer. Today's call is being webcast and will be posted on the company's website for playback. During the course of this call, management may make forward-looking statements regarding future events and the company's expected future performance. These forward-looking statements reflect Xtant's current perspective on existing trends and information that can be identified by such words as expect, plan, will, may, anticipate, believe, should, intends and other words with similar meaning.

[Sean Browne:]

Thank you, Matt, and good morning to everyone listening. During the past year, we undertook numerous strategic and operational initiatives to mitigate the effects of the pandemic while positioning extensive focus on delivering growth in the years to come. These actions enabled us to preserve cash while rightsizing our operations. As we enter 2021, we are a leaner, more efficient company that is poised for growth. Despite a fairly significant uptick in COVID hospitalizations across our largest markets in the fourth quarter of 2020, we are pleased with the progress made across our business highlighted consecutive quarters of income from operations in the second half of 2020. Our aggressive actions earlier in the year have paid off as we work through the second wave of COVID hospitalizations. Strategically, we chose to focus on our strengths and to align our business with the changing market environment, which when combined with our successful debt restructuring and revamped operational initiatives provide us with positive momentum entering in 2021. Our confidence is further underscored by the $20 million private placement investment that we are in the process of closing and expect to close today. This investment recognizes the success that we've had in turning around Xtant Medical as well as the growth potential of our business moving forward. Our revenues for the fourth quarter of 2020 were $40 million about flat for the third quarter as the rebound in domestic spinal elective procedure slowed dramatically towards the second half of the quarter due to the rise in COVID cases. Our largest markets were hit particularly hard with later canceled elective procedures. In spite of these challenges, which we expect will persist in the near-term, we anticipate that our shift from an operational focus to a commercial focus, will drive our future growth.

[Greg Jensen:]

Thank you, Sean and good morning, everyone. Total revenue for the fourth quarter of 2020 was $14 million compared to $17 million in the same quarter of the prior-year. For the full-year 2020, total revenue was $53.3 million compared to $64.7 million for the same period in 2019. These decreases were due primarily to the impact of the COVID pandemic that began in March of this year. However, elective procedures did recovered to some extent during the second half of 2020 and then decreased again during the months of November and December as COVID hospitalizations increased dramatically in our largest markets. Gross margin for the fourth quarter of 2020 was 64.1% compared to 67.3% for the same period in 2019. Gross margin for full year 2020 was 64.5% compared to 65.7% for the same period in 2019. These decreases were primarily attributed to diminished economies of scale partially offset by reduced depreciation expense. Fourth quarter 2020 operating expenses were $8.7 million compared to $11.7 million in the same period a year ago. For full-year 2020, operating expenses were $35.1 million compared to $44.8 million for the same period in 2019. As a percentage of total revenue, operating expenses were 62.4% and 65.9% for the three and 12 month periods ended December 31, 2020 respectively, compared to 68.6% and 69.1% for the three and 12-month period ended December 31, 2019 respectively. General and administrative expenses decreased by $1.3 million to $3.2 million for the fourth quarter of 2020, compared to the same period in 2019 and decreased by $3.8 million to $13.5 million for the full-year 2020 compared to the same period in 2019. These decreases were primarily due to lower legal and consulting fees, legal settlement expenses, salaries and wages, license fees and executive recruiting fees, partially offset by additional stock-based compensation expense and severance related expenses.

[Sean Browne:]

Thank you, Greg. We are pleased to have closed the challenging year with consecutive quarters of operating profit. These results represent the success of our decisive strategic actions we took back in the beginning of March. Looking ahead, we're well-positioned to invest in our commercial pursuits to drive growth. Our growth strategy will be focused on establishing a regular cadence of new products and broadening and engaging our distribution network. At the same time, we'll continue to monitor the elective procedure landscape in COVID cases across the country. Adjusting our commercial strategy is necessary. That said, as the vaccine rollout accelerates, we're optimistic that elective procedures will normalize over the course of year. We believe that those same markets hit hardest by the pandemic, which in turn adversely affected Xtant have pent-up demand and should return to normalized procedure volumes quickly. Above all else, through these actions, we remain dedicated to fulfilling our mission of honoring the gift of donation to our patients can live as full life as possible. Thank you for joining us today and your continued support.

[Operator:]

This concludes today's call. All parties may now disconnect.

[End of Q&A:]