Xtant Medical Holdings, Inc.

Greetings and welcome to the EXTENT Medical Third Quarter 2023 Financial Results Conference Call. At this time, all participants are in a listen-only mode. A brief question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. As a reminder, this conference is being recorded. I would now like to turn the conference over to Matt Steinberg of Finn Partners. Please go ahead.

Thank you, operator. and welcome to Extent Medical's third quarter 2023 financial results call. Joining me today is Sean Brown, President and Chief Executive Officer, and Scott Niels, 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 certain forward-looking statements regarding future events and the company's expected future performance. These forward-looking statements reflect XSEN's current perspective on existing trends and information and can be identified by such words as expect, plan, will, may, anticipate, believe, should, intends, and other words with similar meaning. Such forward-looking statements are not guarantees of future performance and involve risks and uncertainties, including those noted in the risk factors section of the company's annual report on Form 10-K filed with the SEC on March 7, 2023, and in subsequent SEC reports and press releases. Actual results may differ materially. The company's financial results press release in today's discussion includes certain non-GAAP financial measures. These refer to the non-GAAP-to-GAAP reconciliations which appear in our press release and are otherwise available on our website. Note that our Form 8K, followed with our financial results press release, provides a detailed narrative that describes our use of such measures. For the benefit of those of you who may be listening to the replay, this call was held and recorded on Thursday, November 9th at approximately 9 a.m. Eastern Time. The company declines any obligation to update its forward-looking statements, except as required by applicable law. Now I'd like to turn the call over to Sean Brown.

Thank you, Matt, and good morning, everyone. In recent years, Axtent Medical's evolution has featured important value-creating acquisitions. We have refinanced debt, we have lowered our operating cost basis, and we have done key financing, and we have added new leadership. These critical initiatives have the company poised to achieve sustainable long-term growth and take additional share of the large and growing U.S. orthobiologics and spine markets. Our actions are starting to take effect as demonstrated in our third quarter financial results. Notably, we delivered record quarterly revenue of $25 million, an increase of 73% year over year. The strong growth was driven by our core Extant business, which includes organic growth of 18% and further bolstered by contributions from our recent acquisitions. I want to reemphasize our strong organic growth in a quarter when we were in the process of digesting two very complicated acquisitions. So I'm particularly thrilled with Extant team's continued focus on our core business. Our revenue growth and efficiently run operations are driving our bottom line as we recorded our second consecutive quarter of adjusted EBITDA. Altogether, our business is clicking on all cylinders, giving us more confidence regarding our future prospects. During the third quarter, as part of our expanding business, we completed the acquisition of Surgiline's biologics and spinal fixation business for $5 million in an all-cash transaction. We believe Surgiline's business is a perfect complement with Extant's offerings and primarily with their spinal fusion and motion preservation portfolio. So far, we've completed the commercial integration of the acquisition ahead of schedule. It has been a great fit that is helping us rapidly expand our commercial footprint with new contracts and distributors. We believe there is significant room for continued upside as we remain focused on streamlining operations and capitalizing on synergistic opportunities. Turning to a more detailed discussion of the quarter's performance, I first want to remind the listeners that our four key growth pillars are focused on one, new product introductions, two, distribution network expansion, three, adjacent market penetration, and four, strategic acquisitions. The sustained robust demand for our OsteoFactor and OsteoVive Plus products since their initial launch has been a driving force in our success with the $2.4 billion U.S. orthobiologics market. Our newly expanded Comprehensive product portfolio increasingly addresses this market, reflecting our commitment to patients in need. Looking ahead, we remain opportunistic on future product launches and acquisitions that position us to take greater market share. Now, turning to our distribution network expansion pillar, with the successful integration of Surge Alliance contract portfolio and distributor network, We've added roughly 50 new agreements for a total of over 450 IDN and GPO agreements. Additionally, we picked up 150 new distributors, so now we have a network of more than 650 independent agents in creating a national network. In the quarters ahead, we will work on getting greater penetration with our current distribution network, and we'll be opportunistic in adding new distributors where it makes sense. For our third pillar of leveraging adjacent markets, we continue to make inroads in penetrating these markets, particularly in the foot and ankle and trauma and orthopedic implant markets. Notably, our expanded capacity has translated into increased OEM sales. Finally, our fourth pillar focuses on achieving growth through M&A. Our approach to both tuck-in and transformational acquisitions remains a priority going forward. We continue to focus on acquisition targets based on our three Cs, capabilities, capacity, and cash flows. In terms of capabilities, we target businesses with our immediate needs of stem cells, amnion, motion preservation hardware, and a long-term focus on the higher end regenerative biologics. In terms of capacity, increasing our biologics production capacity that meets the demand we envision in the years ahead. In terms of cash flows, we seek businesses that are profitable or can become profitable by producing XStance products. The recent COFLEX, Surgiline, and now Nanos deals have met our acquisition criteria, marking significant milestones that are key for us in achieving our long-term goals. While we believe the Surgiline acquisition will be a long-term growth driver, in mid-July, their largest product line, BiBone, was pulled off the market due to a tuberculosis infection caused by Azeo, a contract manufacturer of Surgiline stem cell products. This not only impacts SurgeLine, but has had a significant impact on the entire stem cell market. Since then, the American Association of Tissue Banks, or AATB, released updated guidelines for donor screening requirements. We appreciate the AATB's efforts in proactively addressing these important concerns to ensure patient safety. However, since this recall, donor availability has been limited and has adversely affected our stem cell business. We anticipate that this current stem cell shortage will adversely impact fourth quarter revenues. We are working tirelessly to mitigate these external constraints and are optimistic that this is a temporary supply issue. And we anticipate that this will normalize by the second quarter of 2024. As part of our strategy to meet demand and achieve adjusted positive EBITDA, our operational efforts have been dedicated to the implementation of crucial process improvement initiatives and capacity expansion. These actions have successfully boosted both production and overall efficiency, and as a result, we can sell and deliver products on a greater scale. With the recently announced acquisition of the Nanos production operation from RTI Surgical, we are even better equipped to produce more of our own Orthobiologics products versus having to source these products from outside vendors. Having full control over Nanos enables us to begin the process of reviving and growing this important product line. Finally, we raised our 2023 full-year annual revenue range to approximately $88 million to $91 million, up from the previous range of $75 million to $77 million. This newly revised guidance range reflects annual revenue growth of 52% to 57% from the year-ago period. The updated guidance now includes contributions from the search line acquisitions in addition to the strength of our organic business. Overall, we have come a long way in a short period of time. Our business is performing exceptionally well, and we are excited about our growth potential, which continues to rise with our continued execution. Extent is strategically moving forward, and we have solid products, operations, and talent to back it up. Now, I'd like to turn the call over to Scott, who will discuss our third quarter 2023 financial results.