Xtant Medical Holdings, Inc.

Greetings and welcome to the XTENT Medical fourth quarter and full year 2023 financial results conference call. A question and answer session will follow the formal presentation. Currently, everyone is in a listen-only mode. If anyone should require operator assistance during the presentation, please press star zero on your telephone keypad. As a reminder, this conference call 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 Xcent Medical's fourth quarter and full year 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 April 1, 2024, and in subsequent SEC reports and press releases. Actual results may differ materially. The company's financial results press release and today's discussion include 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 8-K filed 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 a replay, this call was held and recorded on Monday, April 1st 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 to everyone. 2023 was a transformative year for XM Medical. It was the culmination of a multi-year turnaround effort in which we established what we believe is now a robust platform for future growth. Now, with the foundation of exceptional market access and a nationwide distribution network established, we have created a scalable business model that resulted in record revenue in 2023 and has generated positive EBITDA adjusted EBITDA for the last three consecutive quarters. For the fourth quarter of 2023, we generated revenue of $28.1 million, an increase of 84% year over year. We're seeing positive returns of our business by achieving annual revenue growth of more than 58% in 2023, with our full year revenue of $91.3 million coming in ahead of our guidance range. Our organic revenue growth for the fourth quarter of 2023 was 9%. This excludes the contributions from our 2023 acquisitions and has adjusted for a reclassification of our GPO fees, as Scott will explain later. Full year fiscal 2023 adjusted organic growth was 17% over full year fiscal 2022. In summary, full year 2023 was transformative. As previously mentioned, we grew by over 58% with adjusted organic growth of 17%. In addition to our record revenues, we finished the year with three straight quarters of positive adjusted EBITDA. Secondly, we acquired three separate businesses. Third, operationally, we improved our clean room capacity by over 50%. Fourth, we dramatically improved our margins by 540 basis points through improved operational efficiencies and improved mix of products. And then lastly, we ended the year with an even stronger balance sheet with greater availability to our revolver to help us fund our growth. By driving solid execution of our key growth pillars, we have significantly enhanced our financial position, enabling us to take the next step in capturing greater share of the spine and orthobiologics market. At this time, I'll provide an overview of how we build a platform that gives us the confidence to execute sustainable long-term growth profiles. As a reminder, our four key growth pillars are focused on one, new product introductions, two, distribution network expansion and contract access, three, adjacent market penetration, and four, strategic acquisitions. Starting with new products, like every healthy, robust organization, we are continually innovating with a deep pipeline of new products. During the course of our turnaround, we expanded our biologics product offering from two product categories to five, which helped enhance our profitability profile. These higher margin products comprise of synthetics, viable bone matrix, and growth factor. When added with our legacy demineralized bone graft and allograft products, we are gaining operating leverage while also building our presence in the $2.4 billion U.S. orthobiologics market. Additionally, on the hardware side, we have a number of exciting new opportunities. Through the CoFlex acquisition, we not only added but continue to revive two product lines in the fast-growing ambulatory surgery centers and outpatient markets. This acquisition also provides a payer services component that deepens our longer-term market access capabilities. Through the SurgeLine acquisition, we filled in a number of missing pieces to our fixation line. In addition, we acquired a dynamic international business that is leading the way in motion preservation sign systems. We will be looking to bring some of those systems to the U.S. domestic market. Overall, the acquisition of SurgeLine has dramatically changed our product offering, which is now comprised of about two-thirds biologics and one-third fixation and hardware compared to where we were before, which was an 85% to 15% slit of biologics to hardware. The next pillar is our expanding distribution network and contract access. Our platform offers access to more than 450 IDNs and every major GPO that covers approximately 90% of all beds in the US. In addition, our growing distribution network, which now includes more than 650 independent agents, was further expanded by the COFLEX and SurgeLine acquisitions. Our vast network is selling our product today across various ASCs, outpatient clinics, and hospitals. which has helped us become a strong national company. Now, turning to our third pillar, leveraging adjacent markets, we continue to build a presence in other markets to drive OEM sales, enabling us to diversify and expand our revenue opportunities beyond our core spine market. We've gained traction within the foot and ankle trauma and orthopedic implant markets, and we remain focused on capitalizing within these various segments by leveraging our expanded capacity. Our final pillar focuses on achieving growth inorganically through targeted acquisitions. We are seeking to become the integrator of enabling technologies. We are targeting companies that are either undercapitalized or subscale today. As we have the prior COFLEX and SurgeLine acquisitions, our focus on acquisition targets is based upon three characteristics. First, capabilities. We are looking at companies or technologies that give us greater capabilities. particularly in the regenerative biologics. Additionally, we'll look at businesses that help complete extant offering in the spine fixation and motion preservation offerings. Second, capacity. Capacity targets that we can expand our longer term biologics production demand. So as we get bigger, we're going to need more space and more capacity to do that. Third, cash flows. businesses that are profitable or can become profitable through cost or margin synergies. We believe that making sound targeted and strategic acquisitions that fit within our stringent criteria will take us one step closer to achieving our long-term goals. Our unique platform and robust distribution network will provide future companies that we acquire the ability to take advantage of being part of a fast growing company. Furthermore, we believe we'll allow the entrepreneurs and other owners of those companies the ability to win when they are purchased, and then win even bigger over time as XTAN continues to grow, which we believe it will. As part of our strategy to meet increasingly strong demand and long-term profitability, we have dedicated our operational efforts to implementing crucial process improvement initiatives and expanding capacity. These measures have significantly increased both our production levels and overall efficiencies, enabling us to achieve scale in both product sales and deliveries. Furthermore, with the recent acquisition of the Nanos Production Operations from RTI Surgical announced in the fourth quarter of 2023, we are now better equipped to produce more of our own biologics in-house. Extant is committed to driving long-term sustainable revenue growth and maximizing shareholder value. To better support the fast pace of our growth initiatives, we are pleased to increase our revolving credit facility with mid-cap financial to $17 million from $8 million. Moreover, access to more capital positions us well to further execute on our strategy and capture greater market share within the orthobiologics market. Finally, we established our full year 2024 revenue range of $112 million to $116 million. This guidance range represents annual revenue growth of approximately 23% to 27% compared to the full year 2023 and includes contributions from the surge line transaction, in addition to the strength of our organic business. We anticipate that our growth will accelerate faster starting in the second quarter of 2024 and even more so in the second half of 2024. This is driven by normalized supply environment in our stem cell business that was adversely affected by the temporary market shortage in the second half of 2023 and the first quarter of 2024. And revitalizing the surge-aligned supply chain, More specifically, as Surgilign went through its financial troubles and eventual bankruptcy, important vendors naturally pulled back from producing products for fear of not getting paid. Some of those supply issues impacted our fourth quarter results, and we expect to continue to see some softness in key product areas, such as Coplex and Servilign for the first half of 2024. Moving forward, 2024 is focused on self-sustainability. Our goal is to be self-sustaining in our supply chain, where we are less reliant on production outside our control. We believe that self-reliance will allow us to be a larger and more diverse producer of biologics. Moreover, producing our own products should dramatically improve our margin profile, coupled with an expanded product line that brings additional transformative treatment options to a large and growing patient population. Most importantly, our progress in 2023 positions us well on a path to continue positive adjusted EBITDA. Now, I'd like to turn the call over to Scott, who will discuss our fourth quarter and full year 2023 financial results.