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Xtant Medical Holdings, Inc. (XTNT)·Q4 2024 Earnings Summary

Executive Summary

  • Q4 2024 revenue was $31.5M (+12% YoY), with GAAP gross margin of 50.8% (down 1,020 bps YoY) as inventory clean-up and reduced throughput weighed on margins; adjusted EBITDA turned positive at $0.44M versus a $(0.70)M loss in Q4 2023 .
  • Management initiated FY2025 revenue guidance of $126–$130M (+7% to +11% organic), and expects to begin generating free cash flow in 2H 2025 without the need for additional capital .
  • Q4 margin compression was driven by a ~$1.5M Surgalign inventory charge (~680 bps impact) and reduced yields/throughput (~570 bps impact), but OpEx fell to $17.9M from $20.9M YoY; OpEx leverage and internally produced biologics are expected to lift margins through 2025 .
  • Operational actions included cost reductions (~$5M annualized since Q3) and ~13% headcount cuts tied to integration and facility consolidation—supporting the path to sustainable profitability and cash generation .
  • Consensus EPS/Revenue estimates for Q4 2024 could not be retrieved via S&P Global due to service limits; comparisons vs estimates are therefore unavailable (S&P Global data unavailable).

What Went Well and What Went Wrong

What Went Well

  • Adjusted EBITDA turned positive: $0.44M in Q4 2024 vs $(0.70)M in Q4 2023; full-year 2024 adjusted EBITDA loss narrowed to $(2.3)M .
    Quote: “we again delivered positive adjusted EBITDA of $438,000 in the fourth quarter” .
  • Organic growth: Q4 revenue growth was all organic; Biologics grew 21% YoY (excl. $1.5M licensing), aided by OsteoVive Plus and Amnio launches; OEM channel opportunities expanding .
    Quote: “Fourth quarter 2024 revenue growth was 12% year-over-year, and importantly, it was all organic growth” .
  • Cost discipline: Operating expenses cut by >$5M annualized since Q3; throughput and vertical integration expected to improve margins in 2025 .
    Quote: “we have reduced our operating expenses by approximately $5 million…most of which was tied to the closing of the Greenville facility and other acquisition-related integration activities” .

What Went Wrong

  • Gross margin compression: Q4 GM fell to 50.8% from 61.0% YoY due to a ~$1.5M inventory charge (~680 bps) and reduced throughput (~570 bps); full-year GM slipped to 58.2% from 60.8% .
  • Hardware revenue decline: Spinal implants down 10% YoY ($1.3M) in Q4; hardware rationalization and EU supply chain issues persisted .
  • Q3 softness lingered into Q4 setup: Product launch delays and summer procedure seasonality slowed momentum before Q4 rebound; adjusted EBITDA for Q3 was negative $(0.20)M .

Financial Results

Core P&L vs Prior Periods and Prior Year

MetricQ4 2023Q3 2024Q4 2024
Revenue ($USD Millions)$28.1 $27.9 $31.5
EPS (Basic, $USD)$(0.03) $(0.04) $(0.02)
Gross Margin (%)61.0% 58.4% 50.8%
Operating Expenses ($USD Millions)$20.9 $20.1 $17.9
Adjusted EBITDA ($USD Millions)$(0.70) $(0.20) $0.44

Notes:

  • Q4 gross margin drivers: ~$1.5M Surgalign inventory charge (~680 bps impact) and reduced throughput (~570 bps impact) ; CFO quantified Biologics +21% YoY ex-licensing and hardware −10% YoY .

Segment Drivers (Q4 2024)

Segment/DriverDetail
Biologics+21% YoY or +$3.2M (excluding $1.5M licensing in Q4)
Hardware−10% YoY or −$1.3M
Licensing$1.5M upfront fee recognized in Q4 (Amnio Q-code/license)

KPIs and Balance Sheet

KPIQ3 2024Q4 2024
Cash & Cash Equivalents ($USD Millions)$6.6 $6.2
Net Accounts Receivable ($USD Millions)$20.5 $20.7
Inventory ($USD Millions)$41.9 $38.6
Revolver Availability ($USD Millions)$3.8 $4.2
Cash from Operations (Quarter)N/A>$0.5M (first positive since 2022)

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Revenue ($USD Millions)FY 2025N/A$126 – $130 Initiated
Free Cash Flow2H 2025N/AExpect FCF generation (no additional capital required) Initiated
Revenue ($USD Millions)FY 2024$112 – $116 (original) → $116 – $120 (raised May) ; reaffirmed Aug/Nov Actual: $117.3 Maintained guidance; delivered within range

Earnings Call Themes & Trends

TopicQ-2 (Q2 2024)Q-1 (Q3 2024)Q4 2024Trend
Supply chain and vertical integrationMoving stem cells and Amnio in-house; expecting Q4 margin uptick; Cortera rollout Launch delays in Q3; self-sustaining model; margin improvements planned Throughput optimization; inventory clean-up hit Q4 margins; expecting 4–5pt GM improvement by Q4’25 Improving control; short-term margin pressure, medium-term margin tailwind
OEM licensing & Wound CareAmnio launched; OEM is largest opportunity; sourcing placentas is bottleneck Signed licensing: $1.5M upfront; minimum $3.75M in 2025 Q4 recognized $1.5M license; OEM mix supports faster DSO, less consignment Expanding OEM/licensing contribution
Stem cells (VBM)Inventory phase-out; in-house production to lift margins in Q4/Q1’25 Vertical integration progressing; OsteoVive Plus expected to be largest product line in 2025 Mix ~50/50 white-label vs Xtant brand in 2025; capacity build underway Transition from sourced to in-house; margin accretive
Hardware (Cortera, Coflex)Cortera rollout planned; Surgalign lines cannibalize older X-spine Cortera release at NAS; expected Q4 pickup; ASC-focused hardware suite Hardware down 10% YoY in Q4; rationalizing lines to preserve capital Rationalize legacy lines; targeted hardware growth via new launches
Cost actions & OpEx leverageSequential OpEx improvement; positive OpCF target Q4 Lower OpEx in Q3; sequential improvement; 2025 OpEx leverage expected ~$5M annualized cuts; 13% headcount reduction; OpEx down YoY in Q4 Sustained cost discipline; leverage improving
Capital needsPrivate placement $5M in Aug No formal 2025 guide yet; double-digit growth contemplated No additional capital expected; FCF in 2H 2025 Moving to self-funded growth

Management Commentary

  • Strategy and operational progress: “we have come out leaner and better prepared to create a self-sustaining growing and profitable company” .
  • Organic growth and product drivers: “Two main drivers for the growth of Biologics were…OsteoVive Plus… [and] our new Amnio product line” .
  • Margin roadmap: “by the time we get to Q4 of 2025, I think we pick up 4 or 5 points [in gross margin]” .
  • Capital discipline: “we plan to leverage our cost-cutting measures to return our business to sustainable cash flowing…we will not need to raise additional capital” .
  • CFO margin details: “inventory charge…was just under 700 basis points…difference in throughput was about 570 basis points” .

Q&A Highlights

  • Biologics mix and branding: Management expects roughly a 50/50 split between white-label and Xtant brand for VBM in 2025; Q4 was primarily white-label due to distributed inventory sell-through .
  • Growth factor timeline: Product to be finished in Q1 2025; margin pickup expected in 2H 2025 as product opens more channels .
  • Gross margin drivers and outlook: Q4 GM impacted by ~680 bps inventory charge and ~570 bps throughput; CFO targets 4–5 pts GM improvement by Q4 2025 .
  • 2025 guidance pacing: Seasonality similar to 2024; less dramatic Q1→Q2 step-up due to Amnio licensing; OpEx leverage expected in S&M/G&A .
  • Capital allocation: Hardware upgrades require significant CapEx; management prioritizing profitability over revenue-only growth .

Estimates Context

  • S&P Global Wall Street consensus for Q4 2024 EPS and Revenue was unavailable due to service limits, so explicit beat/miss vs consensus cannot be assessed at this time (S&P Global data unavailable).
  • Given Q4's strong organic revenue growth and adjusted EBITDA positive print, near-term estimate revisions may focus on: (i) gross margin recovery timing into 2025, (ii) OEM/licensing revenue phasing, and (iii) OpEx leverage and cash conversion benefits from reduced consignment .

Key Takeaways for Investors

  • Q4 shows operational progress: organic revenue growth and adjusted EBITDA profitability despite temporary margin headwinds; OpEx down meaningfully YoY—a constructive setup into 2025 .
  • Margin recovery likely in 2025 as vertical integration (VBM/growth factor/Amnio) and throughput improvements scale; CFO targets +400–500 bps GM by Q4 2025 .
  • OEM/licensing is a high-margin, faster-cash-conversion growth vector; $1.5M Q4 license recognized and minimum $3.75M 2025 licensing expected, subject to LCD dynamics—potential upside if LCD is delayed or broader indications benefit OEM partners .
  • Hardware strategy is rationalization-first: prioritize capital efficiency; Cortera and ASC-focused suite can drive pull-through of higher-margin biologics while avoiding heavy CapEx .
  • Cost and cash discipline: ~$5M annualized cost saves and reduced consignment should enhance working capital efficiency; management guides to 2H 2025 FCF and no need for external capital—an important stock narrative catalyst .
  • Watch near-term catalysts: growth factor launch, VBM brand mix shift to Xtant, OEM capacity additions, and margin trajectory in 2025; monitor LCD changes impacting Wound Care licensing .
  • Model implications: focus on revenue quality (OEM/licensing vs distributor), OpEx leverage in S&M/G&A, and inventory/receivable trends as vertical integration scales .