Earnings call transcript: Xtant Medical Q2 2025 earnings beat expectations

Xtant Medical Holdings Inc (XTNT), a medical device company with a market capitalization of $81.82 million, reported a surprising profit for the second quarter of 2025, with earnings per share (EPS) of $0.02, surpassing the forecasted loss of $0.01. The company’s revenue also exceeded expectations, reaching $35.4 million compared to the forecast of $31.35 million. This strong performance led to a premarket stock price surge of 17.03%, reflecting investor confidence in the company’s strategic direction and financial health. According to InvestingPro analysis, the stock appears undervalued based on its Fair Value calculation.

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Key Takeaways

• Xtant Medical reported a profit, reversing a previous net loss.
• Revenue grew by 18% year-over-year, driven by new product launches.
• Gross margin improved significantly to 68.6%.
• The company raised its full-year revenue guidance.
• Premarket trading showed a 17.03% increase in stock price.

Company Performance

Xtant Medical’s second-quarter performance marked a notable turnaround from previous losses, with the company posting a net income of $3.5 million. This improvement was driven by strong revenue growth and enhanced operational efficiencies. The company’s focus on expanding its product portfolio and becoming a vertically integrated biologics manufacturer contributed to its success. Industry trends in the orthobiologics market, showing robust growth, further supported this performance.

Financial Highlights

• Revenue: $35.4 million, up 18% year-over-year.
• Earnings per share: $0.02, compared to a net loss in the previous year.
• Gross margin: 68.6%, up from 62.1% in 2024.
• Adjusted EBITDA: $6.9 million, a significant improvement from -$600,000 in 2024.

Earnings vs. Forecast

Xtant Medical’s actual EPS of $0.02 exceeded the forecasted -$0.01, resulting in a 300% surprise. The revenue of $35.4 million also surpassed the forecast of $31.35 million by 12.92%. This strong performance highlights the company’s successful execution of its strategic initiatives and operational improvements.

Market Reaction

Following the earnings announcement, Xtant Medical’s stock price surged by 17.03% in premarket trading, reaching $0.6873. This positive reaction indicates strong investor confidence in the company’s future prospects. With a beta of -0.22, the stock typically moves independently of broader market trends. Analyst price targets range from $1.50 to $2.00, suggesting significant potential upside. The stock’s movement is notable compared to its 52-week range, suggesting that the market views the earnings beat and strategic initiatives favorably.

Outlook & Guidance

Xtant Medical raised its full-year revenue guidance to between $131 million and $135 million, representing an 11-15% growth, building on its five-year revenue CAGR of 13%. The company plans to focus on achieving self-sustainability in 2025 and anticipates additional licensing revenue. However, it expects gross margins to decline by 4-5 points in the upcoming quarters, which could pose challenges.

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Executive Commentary

CEO Sean Brown emphasized the company’s progress towards self-sustainability, stating, "2025 is all about advancing towards self-sustainability." He also highlighted the company’s strategic focus, saying, "We are on a path to restoring the business to a sustainably profitable and cash-generating position." These comments underscore the management’s commitment to long-term growth and profitability.

Risks and Challenges

• Potential declines in gross margin in upcoming quarters.
• Dependence on successful new product launches for continued growth.
• Market competition and the need to maintain innovation.
• Economic uncertainties that could impact the orthobiologics sector.

Q&A

During the earnings call, analysts inquired about the company’s licensing revenue model and its impact on future growth. Management clarified that licensing revenue is volume-based, providing insights into the company’s revenue streams. Additionally, questions about the use of proceeds from asset sales highlighted the company’s focus on reducing debt and improving cash liquidity.

Full transcript - Xtant Medical Holdings Inc (XTNT) Q2 2025:

Conference Operator: Good morning, everyone, and welcome to the Xtant Medical Second Quarter twenty twenty five Financial Results. Please note this conference is being recorded. I will now turn the conference over to your host, Kevin Gardner of LifeSci Advisors. The floor is yours.

Kevin Gardner, LifeSci Advisors, LifeSci Advisors: Thank you, operator, and welcome to Xtant Medical’s second quarter twenty twenty five financial results call. Joining me today are Sean Brown, President and Chief Executive Officer, and Scott Neals, 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 Xtant’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 the Form 10 ks filed with the SEC 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. Please 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 eight ks 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 August 12 at approximately 08:30AM 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 Xtant Medical’s President and CEO, Sean Brown.

Sean Brown, President and Chief Executive Officer, Xtant Medical: Thank you, Kevin, and good morning, everyone. I will cover a few of our second quarter financial and operational highlights in a moment, but I would like to begin this morning with recap of our recent announcement that we entered into an agreement to sell certain non core coflex interlaminar stabilization implant assets and OUS entities of Paradigm Spine to Companion Spine, a French American company fully dedicated to posterior dynamic stabilization and motion preservation. Companion Spine is a portfolio company of the Viscoliosi brothers, a family owned investment firm specializing in the neuromuscular cell space. The proceeds of the transaction are expected to total approximately 19,200,000.0, consisting of 11,000,000 in cash, and 8,200,000.0 in short term seller financing in the form of an unsecured promissory note to be issued by Companion Spine to Xtant. The promissory note will mature on 12/31/2025.

Upon closing the transaction, anticipate to occur during the 2025, we intend to use the proceeds to reduce long term debt and provide additional cash liquidity. The sale of these non core assets will allow us to focus resource on driving growth in our biologics platform. Given the performance of the business and the proceeds of this transaction, we do not expect to require additional capital to fund operations. Now let’s turn to Q2 twenty twenty five highlights. I’m pleased to report that we delivered strong financial and operating results.

Scott will cover the financials in a detail in a moment, but I’d like to begin by touching on a few highlights. First, our total revenue for the quarter was 35,400,000.0, which represents growth nearly 18% versus the 2024. Notably, our second quarter twenty twenty five revenue includes nearly $5,000,000 in licensing revenue pursuant to the license agreement for Q codes and the SIMPLIMAX dual layer amniotic membrane that we announced in the third quarter of last year. As we indicated last quarter, CMS has extended the local coverage determination for skin substitutes to 12/31/2025, which opens the door for additional royalty income and cash generation during the 2025. Biologics also turned another solid quarter, growing more than 20% over the 2024, demonstrating that our sharpened focus on this core part of our business, including recent product launches, is having the anticipated positive effect on our results.

Building on our first quarter results, we again achieved positive adjusted EBITDA, net income and cash flow from operations for the second quarter, reflecting both our strong top line performance and greater contribution from higher margin biologics, as well as our ongoing focus on prudent expense management and driving operating leverage in our business. As for new product launches, the second quarter was also particularly active for us in terms of new biologic product introductions. Recall that during the first quarter, we achieved a significant milestone by becoming the first fully vertically integrated biologics company to manufacture all of our products in house. This gives us control over our supply chain, ensuring the highest product quality, while also driving improved gross margins, and at the same time delivering an enhanced customer experience. In May, we announced the commercial launch of OsteoFactor Pro, a naturally occurring cocktail of allergenic growth factors engineered to improve bone healing and support surgical success across orthopedic and spine procedures.

OsteoFactor Pro is an off the shelf, to use solution that is designed to integrate seamlessly with synthetic allograft or autograft scaffolds, and provide surgeons with exceptional versatility and biologic performance to support a wide range of bone regeneration approaches. Notably, the launch of this growth factor product, Xtant, now offers solutions across all five major orthobiologic categories, demineralized bone matrix, cellular allografts, synthetics, structural allografts, and now growth factors. Also during the second quarter, we took a major step forward in bone grafting technology with the launch of Trivium, a premium demineralized bone matrix with three synergistic elements designed to deliver exceptional performance in structure, handling, and biological activity. This advanced composition creates an ideal environment for healing and regeneration. Early feedback from surgeons has been encouraging.

And since DBM comprises greater than 60% of our biologics business, this favorable reception demonstrates the success execution of our go forward strategy. OsteoFactor Pro and Trivium are just two examples where we develop next generation biologics products in house, allowing us to capture higher revenue and margins while in parallel delivering superior patient outcomes. Okay, on to revenue guidance. As we indicated last quarter, 2025 is all about advancing towards self sustainability, emphasizing our organic revenue growth, profitability, and cash generation. With new products launched, targeted growth opportunities, recent cost cutting initiatives and the planned sale of certain noncore assets, we are on a path to restoring the business to a sustainably profitable and cash generating position as reflected in our second quarter results.

We are experiencing heightened levels of licensing revenue from the previously noted Q Code and amniotic membrane agreements, which have enhanced our revenue performance to date, and we anticipate should continue to do so through at least the remainder of this year. Reflecting these licensing contributions as well as our current outlook for product revenue, we are raising our full year 2025 revenue guidance to a range of $131,000,000 to $135,000,000 which represents growth of approximately 11% to 15% over the company’s 2024 revenue. This compares to prior revenue guidance of $127,000,000 to $131,000,000 representing 8% to 11% growth. Note that this updated outlook does not take into account the pending sale of our noncore Coflex and OUS businesses to Companion Spine. We intend to revisit this full year outlook after closing that transaction.

While the decision to close that transaction and the timing thereof is not solely at our discretion, we anticipate a closing during the 2025. For help with modeling in the interim, however, you can assume that the business being sold to Companion Spine are currently generating an annual revenue run rate for Xtant of approximately $23,500,000 Beyond the revenue effect, note that these businesses were modestly unprofitable on a stand alone basis, so the effect of the sale on our margins and bottom line metrics is anticipated to be neutral to slightly positive. With that, I will turn the call over to Scott for a more detailed review of our financial results.

Scott Neals, Chief Financial Officer, Xtant Medical: Thank you, Sean. Good morning, everyone. Total revenue for the 2025 was $35,400,000 compared to $29,900,000 for the same period in 2024. The 18% increase is attributed primarily to year over year growth in our biologics product family, as well as the impact of $5,000,000 of licensing revenue during the 2025 that Sean alluded to earlier. This increase was partially offset by a 20% or $2,700,000 year over year decline in our hardware product family.

Gross margin for the 2025 was 68.6% compared to 62.1% for the same period in 2024. The increase year over year was driven by favorable sales mix and by greater scale and improved production efficiency. Second quarter twenty twenty five operating expenses were $19,700,000 compared to $21,500,000 in the same period a year ago. As a percentage of total revenue, operating expenses were 55.5% compared to 71.9% in the same period a year ago. General and administrative expenses were $7,500,000 for the three months ended 06/30/2025, compared to $7,700,000 for the same period in 2024.

This decrease is primarily attributable to reduced stock based compensation expense. Sales and marketing expenses were $11,600,000 for the three months ended 06/30/2025, compared to $13,200,000 for the same quarter last year. The decrease was primarily due to reduced commission expense of $1,500,000 resulting from revenue mix and $700,000 from reduced compensation expense related headcount, partially offset by $900,000 of additional consulting fees during the current year period. Research and development expenses were $566,000 for the three months ended 06/30/2025, a decrease from $636,000 in the 2024. Net income in the 2025 was $3,500,000 or $02 per share on a fully diluted basis, compared to a net loss of $3,900,000 or $03 per share in the comparable 2024 period.

Adjusted EBITDA for the 2025 was $6,900,000 compared to an adjusted EBITDA loss of $600,000 for the same period in 2024. As a reminder, beginning in the 2024, we no longer include the exclusion of the phasing of the bargain purchase gain on our sell through of inventory acquired as part of our purchase of Surgerline Holdings hardware and biologics business in our calculation of adjusted EBITDA. Prior periods have been recast to conform to the current calculation. The related effect on adjusted EBITDA was a reduction of $1,100,000 in the 2024 to arrive at the recast amount. As of 06/30/2025, we had $7,000,000 of cash, cash equivalents and restricted cash.

Net accounts receivable was $27,000,000 Inventory was $40,100,000 and we had $5,000,000 available under our revolving credit facilities as of the end of the quarter. As a reminder, our cash balance as of the end of the second quarter does not take into account the anticipated gross proceeds from the sale of certain assets to Companion Spine that Sean discussed earlier. Operator, you may now open the line for questions.

Conference Operator: Thank you very much. We will now be conducting our question and answer Our first question is coming from Chase Knickerbocker of Craig Hallum. Chase, your line is live.

Chase Knickerbocker, Analyst, Craig Hallum: Good morning, guys. Congrats on the quarter and thanks for taking the question. And maybe just first on the licensing revenue. Can you just remind us, is that all volume based or sales based royalties or kind of transfer payments? Or were there any kind of chunkier milestones within that in q two?

Sean Brown, President and Chief Executive Officer, Xtant Medical: No. It’s it’s pretty straightforward. It’s all revenue based. So what our partners whatever they sold is how we get reimbursed for that.

Chase Knickerbocker, Analyst, Craig Hallum: Got it. And sorry if I missed this, but can you kinda just delineate a little bit as far as how we should think about that line as we go through the remainder of the year with your partner?

Sean Brown, President and Chief Executive Officer, Xtant Medical: Yeah, well, we have two partners in particular and because of the changes that are taking place in, again, you saw the latest thing that came out from CMS. We expect that we’ll probably see at least another good quarter, But after that, it’s anybody’s guess, quite frankly. And I and that’s one thing, or I shouldn’t say it’s anybody’s guess, but we we definitely are not as confident that things will be as strong in the fourth quarter as they’ve been so far. Scott, do wanna add anything to that at all?

Scott Neals, Chief Financial Officer, Xtant Medical: Yeah. I think as we see in building out the guidance, we’re anticipating approximately another $5,000,000 during 2025 in Wave royalty revenue.

Chase Knickerbocker, Analyst, Craig Hallum: Helpful. Thanks guys. Maybe just on broader orthobiologics. Can you just kind of help us dig in a little bit on what portion of year over year growth was kind of from each of your growth drivers, call it your new DBM products, VBM and then Growth Factor and Amneal? Just what kind of portion of growth was being driven by which, if you can kind of just help us dig into that line a little bit more.

Sean Brown, President and Chief Executive Officer, Xtant Medical: Sure. I guess a couple of things. First of all, the new introductions, they are brand new, right? So especially with one of the product lines, the OsteoFactor Pro, that’s a product line that we already sell in OsteoFactor, and that would replacing that current product line. So that in itself is our target is to make sure that we have a complete replacement at a minimum of what we sold of that this past year.

As for Trivium, literally a brand new product, so we expect to see probably more positive, or at least I say things that will be contributing more to our bottom line and our top line really in the second half of this year. When we think about what was driving the growth for us this past quarter, you got to look at our viable matrix products or osteophyte plus. Yes, we saw some osteofactor pro in there as well, which helped us a lot. And then just kind of around the bend, if you looked at our DBM products and yeah, guess those would be what else would you say Scott?

Scott Neals, Chief Financial Officer, Xtant Medical: We saw growth in synthetics as well.

Sean Brown, President and Chief Executive Officer, Xtant Medical: Synthetics too. Yeah. That’s right. Synthetics as well popped up. So yeah.

So I would say across the board, we saw a nice growth.

Chase Knickerbocker, Analyst, Craig Hallum: Got it. And Scott, one for you and then one final one for you, Sean. Sorry to get so many in here. But Scott, just on gross margins, kind of how we should think about it to the end of the year here, particularly obviously with some of that royalty revenue continuing to come in? And then Sean, just on hardware, with the decision to kind of divest some of those key pieces, can you just speak to kind of your thoughts on the rest of the portfolio and kind of how you see that business progressing?

Sean Brown, President and Chief Executive Officer, Xtant Medical: Scott, you want to go first?

Scott Neals, Chief Financial Officer, Xtant Medical: Yes, I’ll jump on margins. I think we see a somewhat sizable decline in H2, maybe around five points just as we see the effects of that royalty revenue coming down as well as some decline in the hardware growth. That’ll be offset to a degree with the continued sell through of what we’re doing with the vertically integrated product, namely the OsteoFactor and the viable bone matrix, but look forward to come down four to five points in Q3 and Q4.

Sean Brown, President and Chief Executive Officer, Xtant Medical: And then to answer the hardware question. So yes, selling the non core assets of both the Paradigm OUS business, as well as the Coflex business. Now, just one little note on both of those businesses. From a business, just running a shift this year running your company, that was about 16% of our total revenue, but it took up you know, off the cuff 40 to 50% of our time. Certainly from a sales management perspective, it took up well over 50% of our sales sales managers time managing just even the co flex business here domestically.

So from our side, we were able to really help our business get a lot more focused. So when you think about the hardware business, our domestic hardware business is a very, very good product line. It just needs the focus and the love. And so that’s one of the best things that’s going to come out of this. Aside from reducing debt and putting cash on the balance sheet, this is going to really help our business get that domestic focus.

So not only will it help our biologics business, but also our core hardware will also, I think, see a nice pickup just because again, being able to focus like we should be. So hopefully that answer your question, Chase.

Chase Knickerbocker, Analyst, Craig Hallum: Yeah, yeah, good to see the focus on orthobiologics for sure. So thanks guys. Yeah.

Conference Operator: Thank you very much. Our next question is coming from Ryan Zimmerman of BTIG. Ryan, your line is live.

Izzy, Analyst, BTIG: Hi. Good morning, everyone. This is Izzy on for Ryan. Thanks for taking the questions. Just to start off

Scott Neals, Chief Financial Officer, Xtant Medical: you, Hi,

Sean Brown, President and Chief Executive Officer, Xtant Medical: Izzy. How are you?

Izzy, Analyst, BTIG: Doing well. How are you?

Sean Brown, President and Chief Executive Officer, Xtant Medical: Great.

Izzy, Analyst, BTIG: Just to start out, now that manufacturing is entirely in house, I was curious what kind of margin benefit we should expect from the production of orthobiologics for maybe the remainder of the year, but also, you know, as we start to think about 2026 and beyond?

Scott Neals, Chief Financial Officer, Xtant Medical: You know, I think in the second half of the year, we’re probably picking up a point or two, maybe even a hair more than that. What you’ll notice though is that’ll be overshadowed by the effect of the royalty revenue coming down. So net net, like I said, I think we see overall gross margins coming down four or five points. But within that, you do see that pickup, or that pickup will be present for the effect of that internally produced product.

Izzy, Analyst, BTIG: Got it. Helpful. And then of the cash you guys are picking up from the sale of Coflex and Cofix in the OUS business, what are you going to apply to the debt pay down versus just general working capital?

Sean Brown, President and Chief Executive Officer, Xtant Medical: Right. Oh, I’ll let you go ahead, Scott. By the way.

Scott Neals, Chief Financial Officer, Xtant Medical: We’ll split that $50.50. So of the 19,000,000 and change, half that will go down pay down our long term debt, and then we’ll keep the remainder for working capital purposes.

Sean Brown, President and Chief Executive Officer, Xtant Medical: And again, that’s not reflected in our, the statement you saw today. So if you wanna add that into what we have in way of our cash, plus what we see for the second half of this year, we think that we’ll be in a very, very strong cash position, you know, really propelling our way through into 2026.

Izzy, Analyst, BTIG: Got it. That’s helpful. And then last one for me. How would you guys characterize the distributor dynamics when we think about the context of the changes among larger players in the company?

Sean Brown, President and Chief Executive Officer, Xtant Medical: Yeah. You know, we’re we’re seeing some dynamic changes is that, you know, you’ve you’ve got some of the big guys that have shifted ownership, and that has actually created some opportunities for guys like us. And so a lot of that is really focused more on the hardware side. And since we have such a strength in biologics, we’re not seeing as big of a shift for us, but the opportunities are clearly there. And so so yeah.

So there’s a lot of a lot of a lot of, I think, positive things happening in the market for guys like us. So let me put it that way.

Izzy, Analyst, BTIG: Got it. Thank you for taking the questions.

Sean Brown, President and Chief Executive Officer, Xtant Medical: Great.

Conference Operator: Very much.

Sean Brown, President and Chief Executive Officer, Xtant Medical: Thanks, Izzy.

Conference Operator: Just a reminder, if there are any remaining questions, you can still join the queue by pressing star one on your phone keypad now. Okay. We appear to have reached the end of our question and answer session and also the end of the call. So we’d like to thank you very much for joining us. This does conclude the conference.

You may now disconnect your phone lines at this time and have a wonderful day. We thank you for your participation.

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