Xtant Medical (XTNT)2024-08-10 12:35Financial Data and Key Metrics Changes - Total revenue for Q2 2024 was 20.2 million in Q2 2023, primarily driven by product sales from the recently acquired Surgalign Hardware and Biologics business [14] - Adjusted EBITDA for Q2 2024 was 0.1 million in the same period in 2023, marking the fifth consecutive quarter of positive adjusted EBITDA [5][16] - Net loss for Q2 2024 was 0.03 per share, compared to a net loss of 0.02 per share in Q2 2023 [16] Business Line Data and Key Metrics Changes - Organic growth for Q2 was flat compared to the prior year, mainly due to planned cannibalization of X-spine hardware and significant OEM sales in Q2 2023 [4] - The top 20 distributors grew 16.5% in revenue since the acquisition of Surgalign in Q3 2023 [6] - The company expanded its Biologics product offering from two categories to five, with the introduction of a sixth category, amniotic membrane allografts [7] Market Data and Key Metrics Changes - The distribution network now includes over 650 distributors, covering approximately 90% of all beds in the U.S. [9] - The company is focusing on increasing penetration into existing distributors rather than just adding new ones [9] Company Strategy and Development Direction - The company aims to achieve self-sustainability by controlling its supply chain and reducing reliance on external production [12] - Key growth pillars include new product introductions, distribution network expansion, adjacent market penetration, and strategic acquisitions [11] - The company is targeting undercapitalized or subscale companies for acquisitions to enhance capabilities and expand production capacity [11] Management's Comments on Operating Environment and Future Outlook - Management expects organic growth to accelerate in the second half of 2024 as supply chain challenges abate and new products are introduced [4] - The company anticipates positive operating cash flow by Q4 2024, driven by increased production of its own biologics [13][41] - Management is optimistic about the growth potential of the amniotic tissue products and the stem cell business [28][33] Other Important Information - The company entered into an agreement for a $5 million PIPE with an existing institutional investor to provide additional working capital [17] - Gross margin for Q2 2024 was 62.1%, an increase from 61.6% in Q2 2023, attributed to greater scale and improved production efficiency [14] Q&A Session Summary Question: Can you provide color on the revenue mix between orthobiologics and spinal implants? - Management noted that Surgalign hardware significantly contributed to revenue, helping to replace older X-spine hardware, and expects an increase in self-produced products in the second half of the year [18][19] Question: How does the guidance look for the balance of the year? - Management indicated an expected uptick in Q3 and a strong performance in Q4, particularly with the ramp-up of the Stem Cell business [21][22] Question: What are the expectations for gross margins moving forward? - Management expects gross margins to remain steady in Q3 and Q4, with a significant uptick anticipated in Q1 2025 as internal production increases [24] Question: Can you discuss the opportunities in the amniotic product line? - Management highlighted the OEM opportunities and the potential for high margins, noting that sourcing amniotic tissue is currently a limiting factor [28][30] Question: How quickly can the company ramp up production for stem cells? - Management indicated that production ramp-up would occur over the next three to four months, with a focus on fulfilling OEM opportunities first [34][36] Question: What is the outlook for sustainable cash flow? - Management does not expect cash flow breakeven in Q1 2025 but anticipates that it will be sustainable thereafter [39]