Xtant Medical Stock

Good morning, everyone, and welcome to the Xtant Medical Second Quarter 2026 Financial Results Conference Call. [Operator Instructions] Please note that this conference is being recorded.

I will now turn the conference over to your host, Kevin Gardner of LifeSci Advisors. Please go ahead.

Thank you, operator, and welcome to Xtant Medical's Second Quarter 2026 Financial Results Call. Joining me today are Sean Browne, President and Chief Executive Officer; and Scott Neils, 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 Form 10-K 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 the Form 8-Ks that we filed with our financial results press releases provide detailed narratives that describe our use of such measures. For the benefit of those of you who may be listening to a replay of this call, it was held and recorded on August 11, 2026, at approximately 8:30 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 Browne, CEO. Sean?

Thank you, Kevin, and good morning, everyone. Thank you for joining our second quarter update call. As has been our practice, I will begin with a few prepared remarks about our operations, and then Scott will provide a deeper dive into the financials. We will then open the call to your questions.

Okay. During the second quarter, we achieved meaningful progress across several aspects of our business. We integrated the new Dilon sales reps into our own commercial organization, and we addressed a significant unmet need among surgeons with the launch of Trivium Shaped. While our reported revenue continues to face challenging year-over-year comps due to the sale of certain assets and businesses to Companion Spine last year as well as the cessation of certain license revenue due to changes in reimbursements that took effect January 1, we are building a solid, resilient foundation that we believe will support sustained, predictable and profitable growth in the future.

Now turning to the Dilon Technologies distribution agreement that we announced in April. Recall that through this agreement, we acquired exclusive U.S. distribution rights to Dilon's HEMOBLAST Bellows product for high-performance hemostasis following certain surgical procedures. This agreement adds a highly complementary hemostatic technology to our portfolio and gives us entry into an estimated $1 billion global addressable market for hemostatic products.

As part of that agreement, we hired Dilon's U.S. team of 17 salespeople and 2 of their regional managers that have been integrated into our own commercial organization and are being trained on our entire portfolio. This is in addition to our own investments that we have been making in our commercial organization, including, as we stated previously, doubling the number of regional sales reps in the field.

In 2026, we've been adding significant resources to our marketing and national accounts teams, and these professionals have had an immediate impact driving institutional adoption of our portfolio at scale across hospital systems and large practice groups. Now as a side note, the training and integration of these new reps consumed a significant amount of our time and resources and played a role in our soft Q2 sales. However, I'm more than excited than ever about Xtant's future with a significantly larger commercial team.

Now as for HEMOBLAST, HEMOBLAST orders during the quarter were in line with our expectations, but our recognition of this revenue from sales is lower than we expected since we didn't transition purchase orders for HEMOBLAST to Xtant until after the end of the second quarter, and our transition of certain customers to Xtant contracts remains ongoing. Accordingly, we are unable to fully recognize the revenue on orders submitted to Dilon during the quarter.

As we look out into the remainder of the year, we see significant sales synergies as our legacy commercial organization and the new specialty reps share very few overlapping call points in the field. As the specialty reps continue to get comfortable selling our other product lines, we anticipate that this will translate into accelerating biologics growth in Q3 and beyond. But at this point, while we are very pleased with the speed with which they are coming up the learning curve, we see significant untapped potential that we expect to penetrate once these additional sales resources are fully deployed. We view the newly integrated sales force as a foundational part of our future commercial strategy.

Now turning to Trivium Shaped. We are seeing strong early sales traction since the product's launch in May, joining CollagenX and OsteoFactor Pro as recent product launches that are key drivers to our overall biologics growth. Trivium Shaped is an extension of our Trvium bone graft portfolio available in pre-shaped configurations designed to support handling preparation and placement across a range of surgical applications. Trivium is a composite allograft that combines cortical fibers, cancellous bone and demineralized bone matrix into a single connected graft matrix.

Trivium Shaped builds on the Trivium sculptable format, which we launched in 2025 by offering surgeons ready-to-use graft forms, including boats and strips that are designed to improve consistency and handling in the operating room. Surgeons tell us that these pre-shape formats reduce preparation time and support more predictable placement, and that feedback is translating directly into the sales momentum we are seeing since launch.

Innovations such as Trivium Shaped, a demineralized bone matrix, together with our amnio and collagen product lines also position us to move into adjacent high-value markets, including chronic wound care and surgical repair, a combined TAM of approximately $6.5 billion. Now with the addition of hemostatic biologic, we gained access to an additional $1 billion of TAM, and we are uniquely positioned to be a partner of choice that can address a very broad range of surgeon and hospital needs in regenerative medicine. We believe that breadth of our portfolio, together with the quality control that comes with in-house manufacturing sets us apart from nearly everyone else in the field.

Now from a guidance perspective, reflecting lower-than-expected biologics revenue in the second quarter as well as the ongoing headwinds related to our amnio product line directly tied to the advanced wound care market that are expected to persist through the back half of the year, we are today modestly reducing our full year revenue guidance to a range of $99 million to $103 million, and that was from $101 million to $105 million previously. Notwithstanding this change, however, we continue to believe that our enhanced commercial presence and expanded product portfolio position us well to drive top line growth throughout 2026 and beyond.

With that, I'll turn the call over to Scott for a more detailed review of our financial results. Scott?

Thank you, Sean, and good morning, everyone. Total revenue for the second quarter of 2026 was $23 million compared to $35.4 million for the second quarter of 2025 or $24.8 million for the second quarter of 2025 on a pro forma basis, excluding the revenue from the noncore products and businesses that we sold to Companion Spine and nonrecurring license revenue. Note that a reconciliation of actual to pro forma revenue results for each quarter of 2025 can be found on the company's website at www.xtantmedical.com.

With respect to the Q2 comparison on a pro forma basis, headwinds related to our amnio product revenue directly tied to the advanced wound care market were the main driver for the decline in 2026 biologics revenue compared to the pro forma 2025 period, although this was partially offset by approximately $1.5 million of HEMOBLAST sales as well as higher-than-anticipated hardware revenue in the current year period, driven by sales of our Cortera Spinal Fixation System. Our second quarter revenue was also impacted by the time our legacy sales team spent getting up to speed on HEMOBLAST Bellows during the quarter, which created a modest additional headwind that we expect to abate in the second half of the year.

Staying on the topic of HEMOBLAST, the $1.5 million of revenue that we recognized in the second quarter was accounted for primarily on a net basis as it was shipped directly to customer sites from the Dilon Technologies facility under Dilon's customer agreements. We previously anticipated that significantly more of these transactions would be ordered from and shipped by Xtant, which would have increased reported revenue by approximately $600,000 to $700,000. Going forward, we believe that substantially all HEMOBLAST Bellows sales will be processed through our own customer agreements and distribution network and will therefore be recognized on a gross basis.

As Sean mentioned a moment ago, new product introduction and the new measured investments we've made in our field sales force on both the regional and national basis should drive accelerating biologics growth on a sequential basis for the remainder of 2026 and beyond. Gross margin for the second quarter of 2026 was 57.9% compared to 68.6% for the same period in 2025. The decrease is primarily attributable to the cessation of Q-Code license revenue from our amniotic membrane agreements that terminated at the end of 2025, together with reduced production efficiencies and increased charges for excess obsolete inventory, partially offset by improvements in production mix.

Second quarter 2026 operating expenses were $22.5 million compared to $19.7 million for the second quarter of 2025. The increase was primarily due to a $5 million exclusivity fee paid to Dilon Technologies in connection with our distribution agreement, which is recorded as an operating expense partially offset by lower general and administrative and sales and marketing expenses following the sale of our noncore Coflex and CoFix assets and international hardware businesses to Companion Spine in December 2025.

General and administrative expenses were $6.4 million for the 3 months ended June 30, 2026, compared to $7.5 million for the same period in 2025. The decrease was driven primarily by the divestiture of assets and businesses to Companion Spine in December of last year. Sales and marketing expenses were $10.4 million for the 3 months ended June 30, 2026, compared to $11.6 million for the same quarter last year. Approximately $2.4 million of the decrease resulted from the Companion Spine divestitures. The remaining change reflects $1.2 million of increased compensation expense related to headcount, a $0.3 million increase in independent agent commissions resulting from revenue mix and a $0.3 million increase in travel-related expenses, partially offset by a $0.9 million reduction in consulting fees.

Research and development expenses were $695,000 for the 3 months ended June 30, 2026, an increase from $566,000 in the second quarter of 2025. Net loss for the second quarter of 2026 was $9.4 million or $0.07 per basic and diluted share compared to net income of $3.6 million for the second quarter of 2025 or $0.03 per basic share and $0.02 per diluted share.

Adjusted EBITDA for the second quarter of 2026 was a loss of $2.7 million compared to positive adjusted EBITDA of approximately $6.9 million for the second quarter of 2025. As of June 30, 2026, we had $9.9 million of cash and cash equivalents, total indebtedness of $23 million and availability under revolving credit facility of $0.7 million. This compares to $17.3 million of cash and cash equivalents, total indebtedness of $25.4 million and availability under a revolving credit facility of $3.8 million as of December 31, 2025.

That concludes the financial overview. Operator, you may now open the line for questions.

[Operator Instructions] Your first question is coming from Chase Knickerbocker with Craig-Hallum.

This is Jake on for Chase. Starting off, I'm just wondering, can you peel apart the layers of orthobiologics for us, please? What's kind of underperforming relative to expectations that you guys had earlier in the year when guidance was initially issued?

Scott, I'll start this and then if you want to add any color to it. I'd say there's a couple of key areas. One of the big areas has been like our old line like our OsteoSelect, OsteoSponge, 3Demin product lines, which have been the workhorses of our product line, and they're older product lines. And so those have been down more than we expected. The other area too that's been down, of course, has been the Amnio side, which we mentioned, which has been due and was somewhat expected. We did think that they would start to see green shoots of growth in that world in the Amnio world. But those would be the key areas that I would say that we have seen much more softness than we originally expected.

Scott, I don't know if you want to add anything to that.

No, I think you covered it with those two, Sean.

And then maybe just for my follow-up, turning to HEMOBLAST. Could you further talk about the cross-selling opportunities that are presenting themselves from the addition of the reps associated with HEMOBLAST? And then what does your guidance assume for HEMOBLAST from this year? And how does that compare to your expectations upon the acquisition?

Okay. So I'll start off with where do we see the synergies of these guys. First and foremost, so this is a group that when you look at the hemostasis business, they're in areas that we're typically not in. However, there are products -- we have products that fit perfectly within what they do, specifically our CollagenX products as well as our Amnio products. And so at a minimum, we've got these guys now carrying these products into these other areas that are not -- that are really non-orthobiologics in their normal space.

Now Additionally, our current HEMOBLAST guys do have some business within the spine world. The spine world actually turns out to be a very, very good market for the hemostasis world. And so we do have some new independent agents that have been tied into that. However, one of the big things that we see with this group is that they are going to help us extend our reach not only with what we can do in way of managing our current independent agent network, which even though we've doubled the size of our sales force, the core Xtant group went from 4 guys last year to we have roughly 8 people selling it on our core side. We now have 17 more people actually having it in their bag and carrying and managing some of our smaller, if not even guys that aren't doing that much business with our independent agent network.

So we see this as a great extension for us because the other piece of this, too, is that they have really great relationships within the -- not only in these areas outside the hospital or outside of where we normally go, but they also have a pretty strong relationship within the materials management world, which again is certainly something that we've not had in years past. And so when you have a portfolio, a biologics portfolio as broad as ours is, we want to make sure that the hospital knows that we're not just a spine company that we can actually touch several other areas within a hospital.

And so this group is really a nice little addition to us as we start to get our name out and make sure that at least as hospitals go we become a much bigger player, at least especially as you start looking at as contracts start coming up and other things like that, we become somebody that they look to as potentially that one-stop shop. So that's how I would answer that.

As for the HEMOBLAST guidance, what I'd like to do on that is maybe -- Scott, I think what I'd like to do is just kick the can a little bit or kick the ball on the -- and maybe I'll let you comment on that, Scott, if that doesn't make sense. But I'd rather -- I feel a lot better knowing that we had a lot more of that product going through our own Xtant POs versus the Dilon. And again, a lot of this is just the transition of these large, large hospital systems, hospital systems that, quite frankly, before we got in with HEMOBLAST/Dilon, we weren't in, places like Cleveland Clinic and Mass General and a number of really, really big institutions. So these are reahemus to get into. And so we're just thrilled that we're getting some business, and we're hoping to pull through other contracts that go along with that.

Scott, I'll let you add any color to that.

I think what I'd add to that is we haven't backed off of our expectation around transactional volume, which would be over $1 million per month on a gross basis. But I think what you're getting at, Sean, is the extent to which we're able to fully recognize that really depends on the extent to which we're able to ship all that. So we've made considerable progress towards that end, but we've left a little bit of a buffer to accommodate anything that would continue to ship out of Dilon during the course of Q3.

Your next question is coming from Naz Rahman with Maxim Group.

I just have a couple. Now regarding the Dilon sales force and just your overall sales force, exactly when in the quarter did they start or restart promoting products following training? And also, I know you've talked a little bit about expanding their bag. But in terms of their additional products in the bag, did you give them access to, I guess, all of Xtant prior products outside of HEMOBLAST? Or was it just a limited few products, like you said, CollagenX and Amnio? Or are you going to like roll that out to the sales force over time?

Yes. Great question because that timing is important. So we closed the deal on April, I guess, it was 13 is the official announcement of the date. So right as the quarter got going. So in the first couple of weeks, it was literally just the integration of these guys into our payroll system, our human resources elements, all those things. And then we quickly put in their bag our CollagenX and our Amnio products. And those do take some time to understand and explain how they can fit into the different worlds. Like for instance, we've got a really nice business within the OB/GYN world. How does an Amnio product fit into that, right? And it does. It's got a really nice place in it.

And so we spent a good part of the first, let's say -- actually, almost the entirety of the quarter, just getting them up and comfortable with those 2 product lines. Then at the flip of the -- after -- really after June, we then started giving them the entire bag. And so they are now, as we speak, coming up to speed on all of our orthobiologics. And at the same time, we're now starting to give to them this group of 17, some of our lesser covered independent agents that are part of our world today.

We have some 650 agreements, right? However, we do a lot of business with the top 200 to, say, 250, that leaves another 400 that are out there that are transactional at best. And so part of what we want to do is actually start getting touches to those other guys. And so that's what the 17 is now being tasked with. And so they're also, at the same time, getting comfortable with our orthobiologics product lines.

So it's a work in progress. And as you can see, just as I lay out for you, you can see where organizationally, we, in some respects, took a step back to sharpen the saw, so to speak, where you're saying, okay, these 17 people are really, really going to help us as we move forward. However, it's going to take some time to train. And so we lost a little bit of our sales momentum that was going into the second quarter because we were spending time working with these guys on a regional basis and also getting the word out about HEMOBLAST.

So yes, so there was -- there has been a fair amount of time and energy devoted to bring this group up. But I think in the long run, this is going to be a huge win for the business overall. And so if you think about, again, our commercial footprint from a year ago to where we are today, it's almost like night and day. I think we have 4 regional Vice Presidents, a national accounts guy and whatever, just a very small commercial footprint a year ago. Today, that number is over 25 reps and a couple of regional managers, and we got 3 and soon to have 4 national accounts people. So our foot is fully on the accelerator when it comes to our commercial presence. And I think you'll start to see that here in the second half start to take hold.

There appear to be no further questions in queue. This does conclude today's conference call. You may disconnect your phone lines at this time, and have a wonderful day. Thank you for your participation.

Good morning, everyone, and thank you, and welcome to the Xtant Medical First Quarter 2026 Financial Results. [Operator Instructions] Please note, this conference is being recorded. I will now turn the conference over to your host, Kevin Gardner of LifeSci Advisors.

Thank you, operator, and welcome to Xtant Medical's First Quarter 2026 Financial Results Call. Joining me today are Sean Browne, President and Chief Executive Officer; and Scott Neils, 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-K 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 the Form 8-Ks that we filed with our financial results press releases provide detailed narratives that describe 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 May 13, 2026, at approximately 8:30 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 Browne, CEO. Sean?

Thank you, Kevin, and good morning, everyone. Thank you for joining our first quarter update call. As has been our practice, I'll begin with a few prepared remarks about our operations, and then Scott will provide a deeper dive into the financials. We will then open the call to your questions. Since our last quarterly update, Xtant Medical has achieved multiple significant milestones that position us for sustained growth. We strengthened our balance sheet with proceeds from the Companion Spine transaction, secured transformational license agreement with Dilon Technologies that moves us into the multibillion-dollar hemostatic agent market and advanced our innovation track record with the commercial launch of Trivium Shaped. With that as a backdrop, we are raising our full year 2026 revenue guidance to $101 million to $105 million.

First, I'd like to begin this morning with a recap of the Dilon Technologies distribution agreement that we announced in April. Through this agreement, we acquired exclusive U.S. distribution rights to Dilon's HEMOBLAST Bellows product for high-performance hemostasis following certain surgical procedures. This agreement adds a highly complementary hemostatic technology to our portfolio and gives us entry into an estimated $2 billion global addressable market for hemostatic products. HEMOBLAST is highly differentiated as the only hemostat containing collagen, human-derived thrombin and bovine-derived chondroitin sulfate, which provides cohesion between the wound and surrounding tissue. It is indicated across a range of bleeding types, minimal, mild and moderate and requires no preparation prior use. The addition of HEMOBLAST Bellows, together with our recent product launches, further broaden and differentiate our products -- our biologics portfolio, positioning us to better address the needs of surgeons and patients alike.

As part of the agreement, we have hired Dilon's team of 21 sales professionals. This is in addition to our own investments that we've been making in our commercial organization, including doubling the number of regional sales reps in the field in 2026. We still plan to add significant resources to our national accounts team, which will expand our ability to drive institutional adoption and scale across hospital systems and large practice groups.

Together, this combined team will further extend the reach of not only HEMOBLAST Bellows, but our entire line of biologic solutions. There is significant opportunity to leverage each team's call points and drive our entire portfolio to its full commercial potential. To reflect the addition of HEMOBLAST, along with the growth of our base business, we are raising our full year revenue guidance to be in the range of $101 million to $105 million.

Moving over to our Companion Spine transaction. We are pleased to announce that in March that we received the final $10.7 million from the Companion Spine related to its purchase of our noncore Coflex assets and Paradigm, OUS businesses in December 2025. The total purchase price for the 2 divestitures was $21.4 million. The transactions have now been finalized. As mentioned previously, we used those proceeds to reduce our borrowings and strengthen our cash position. We reduced total indebtedness by $13.3 million in the first quarter of 2026, including a $10.4 million reduction in amounts outstanding under the company's revolving line of credit and a $2.8 million reduction in our term loan balance.

More strategically, this transaction allows us to further sharpen our focus on our core high-margin biologics business, which is where our competitive differentiation and where our future growth lies. In terms of innovation, just a few weeks ago, we announced the commercial launch of Trivium Shaped, an extension of our Trivium bone graft portfolio that comes in pre-shaped configurations designed to support handling, preparation and placement across a range of surgical applications. Trivium is a composite allograft that combines cortical fibers, cancellous bone and demineralized bone matrix into a single connected graft matrix. Trivium Shaped builds on the success of the Trivium sculptable format, which we launched in April 2025 by offering surgeons ready-to-use graft forms, including boats and strips designed to enhance consistency and handling in the operating room.

The introduction of the pre-shape configurations represents a significant advancement in graft convenience and clinical utility, allowing surgeons to optimize surgical workflow while maintaining the exceptional performance characteristics of the Trivium platform. As we've noted previously, we internally produce solutions across all 5 major orthopedic categories, demineralized bone matrix, cellular allografts, synthetics, structural allografts and growth factors. This is a key point of differentiation for us relative to our peers. Additionally, with our amnio and collagen product lines, we are also well positioned to grow in the surgical repair and wound care markets. Now with the addition of a hemostatic biologic, we are giving hospital systems a single partner who can meet most of their needs. This breadth position us as a partner of choice in regenerative medicine, a position that has been further reinforced by the positive feedback we continue to receive from surgeons on these recent innovations.

Building on these milestones, Xtant Medical delivered solid first quarter results with revenue of $20.9 million, strong prior year bolstered by royalties from our amnio business and proceeds from the Coflex Paradigm divestiture enabled us to significantly strengthen our balance sheet by reducing debt and strategically investing in our commercial enterprise. Now with recent and planned addition to our sales organization and an expanded product portfolio, we are well positioned to drive top line growth throughout 2026 and beyond.

With that, I will turn the call over to Scott for a more detailed review of our financial results. Scott?

Thank you, Sean, and good morning, everyone. Total revenue for the first quarter of 2026 was $20.9 million compared to $32.9 million for the first quarter of 2025 or $32.9 million for the first quarter of 2025 on a pro forma basis, excluding the revenue from the noncore products and businesses that we sold to Companion Spine and license revenue not repeating in 2026. Note that a reconciliation of actual to pro forma revenue results for each quarter of 2025 can be found on the company's website at www.xtantmedical.com.

With respect to the comparison on a pro forma basis, headwinds related to our amnio product revenue directly tied to the advanced wound care market were the main driver for the decline in 2026 revenue compared to the pro forma 2025 period. As Sean mentioned a moment ago, the Dilon Technologies license agreement, together with contributions from new product introductions and the measured investments that we are making in our field sales force on both a regional and national basis should drive accelerating biologics growth for the remainder of 2026 and beyond. Gross margin for the first quarter of 2026 was 57.3% compared to 61.5% for the same period in 2025. The decrease is primarily attributable to the cessation of Q-code license revenue from our amniotic membrane agreements that terminated at the end of 2025 due to changes in the reimbursement environment, partly offset by improvements in product mix.

First quarter 2026 operating expenses were $14.9 million compared to $19.2 million for the first quarter of 2025. The decrease was primarily due to our sale of noncore Coflex and CoFix assets and international hardware business to Companion Spine in December 2025. General and administrative expenses were $6.3 million for the 3 months ended March 31, 2026, compared to $7.5 million for the same period in 2025. The decrease was primarily by -- or due to the divestiture of assets and businesses to Companion Spine in December of last year. Sales and marketing expenses were $8.2 million for the 3 months ended March 31, 2026, compared to $11.2 million for the same quarter last year. Approximately $2.5 million of the decrease resulted from the Companion Spine divestitures. The remaining decrease was primarily due to lower independent agent commissions of $0.4 million and $0.6 million in decrease in professional fees.

Research and development expenses were $435,000 for the 3 months ended March 31, 2026, essentially flat with $443,000 in the first quarter of 2025. Net loss for the first quarter of 2026 was $3.1 million or $0.02 per basic and diluted share compared to net income of $58,000 for the first quarter of 2025 or breakeven per share. Adjusted EBITDA for the fourth quarter of 2025 was a loss of $1.6 million compared to positive adjusted EBITDA of approximately $3 million for the same period in 2025. As of March 31, 2026, we had $12.2 million of cash and cash equivalents, total indebtedness of $12.2 million and availability under our revolving credit facility of $11.8 million. This compares to $17.3 million of cash and cash equivalents, total indebtedness of $25.4 million and availability under our revolving credit facility of $3.8 million as of December 31, 2025.

The reduction in total indebtedness was primarily due to a term-loan payment of $2.8 million from some of the February 2026 proceeds from the Companion Spine transaction and net repayments of $10.4 million on the revolving credit facility with cash and cash equivalents. The resulting increase in our availability under our revolving credit agreement from $3.8 million as of December 31, 2025, to $11.8 million as of March 31, 2026, is due to an effort to reduce interest expense by minimizing the outstanding balance on our revolving credit facility.

That concludes the financial overview. Operator, you may now open the line for questions.

[Operator Instructions] Your first question for today is from Chase Knickerbocker with Craig-Hallum.

Maybe first, guys, just on HEMOBLAST. Can you maybe just kind of give us an overview on kind of the relationships and capabilities this new sales force will be bringing over. Hemostatic agents have a couple of different use cases, obviously, from a specialty perspective. Maybe just speak to kind of where the volume has been in 2025 and then your opportunities for growth, which obviously will largely be spine focused, but just kind of where you see that going in '26 and beyond?

Yes. Great question. One of the things about what made this a nice meet or I should say, a really good opportunity for us is that today, the HEMOBLAST business, which is a very small business starting out of the gate, but most of their business is in general surgery. And so for us, the idea that we could bring them into the spine world where it is the largest market within that hemostatic market. So it's something that we saw this as a real opportunity. Plus from their end, their reach into other call points within the hospital where, for instance, our collagen products and our amnio products could be used more readily as well as the rest of our portfolio.

And so their call point generally has been general surgery, trauma. They've also done some really nice work in some other areas. For instance, they just got clearance, they now can go into urology. And so that's another opportunity for us that we normally wouldn't have had. But it is an area that, quite frankly, our collagen and our amnio products can be used. So we're really excited about their focus and what they do and the idea that we could actually bring them into the spine world is opening up all kinds of opportunities for us.

And so will the expectation kind of be, Sean, that they'll kind of have access to the entire bag? Or how do you kind of expect to kind of segment things?

And then just secondly, Scott, maybe just talk about kind of how you expect this to impact expenses maybe with a little bit of a greater kind of detail, largely sales and marketing line, I would imagine a couple of million a quarter, but just kind of give us some thoughts there.

Yes. To give you a sense, out of the gate, what we're trying to do is, first and foremost, make sure they continue to hit their HEMOBLAST number. That is a commitment we made to the Dilon Organization. So we want to make sure that they stay focused -- and hitting the number they're supposed to hit. But then also, b, what we're initially going to do is give them those product lines like our collagen product line, like our amnio product line that are nice complementary products to what they do already. And then eventually, they'll get the entire bag as they become more comfortable and we are living up to or not living up to, but just making sure that we're doing first things first. And so initially giving them just the amnio collagen lines and then ultimately, they will have our full bag, but that's me a little bit down the path here.

And then, Sean, I'll jump in on the expense impact. I think the way to think about this is, as we mentioned, we're bringing on 21 employees. These, for the most part, are generally seasoned reps. So when you think about the compensation associated with such an individual and then you would add to that travel and marketing expense to the tune of $1.5 million annually, you're probably looking at, at least $2.5 million quarterly in way of additional sales and marketing expense.

Your next question for today is from Ryan Zimmerman with BTIG.

Sean, Scott, this is Izzy on for Ryan. I was hoping you guys could spend some time talking about what you're seeing in the ortho-biologics segment. Mostly curious about where your underlying unit growth is and how that's tracking relative to the broader market?

Yes. I would say that our broader where the unit growth is coming is coming again from these new products that we've introduced. So when you think about like our OsteoFactor Pro, which is a growth factor product, that's done very, very well as has our Trivium product lines are all really starting to take off just like we expected they would. And if we've seen any little bit of like a little bit of weakness that we -- well, and it has a little bit more to do with kind of how some of this is also OEM based and OEM is kind of a lumpy way in which we see our business going. It's been the stem-cell side.

So it's still a really great product. It's still one of our largest product lines, but that's an area that we've done a fair amount in the OEM world. And as I mentioned, we're seeing -- it was soft in the first quarter. And so that's one though that we expect throughout the year that will do very well. But our growth has really been driven by our advanced biologics sales, so including collagen and we expect that the amnio businesses -- amnio business, both in the surgical and in the advanced wound care side should start to see some pickup again in the second half of this year. I think you're seeing it with other companies that are out there today that took -- had some really difficult first quarter numbers in the advanced wound care side. Happily, that's not a lot of what we do. It is something though that is an OEM base for us. So we do expect that, though, to hopefully settle and be better in the second half of this year.

Got it. That's helpful. And then Scott, I was hoping you could spend some time just walking through the gross margin cadence for the remainder of the year. I believe last quarter, you were expecting it to be somewhere in the low 60s. So if you could talk about if that's still the right range and what we could see for 2Q through 4Q.

Yes, low 60s is still the way to look at it. We deviated a little bit from that here in Q1 just for some additional excess and obsolete expense and then a little bit for product mix, but we expect that to bounce back in Q3 through Q4.

Your next question for today is from Naz Rahman with Maxim Group.

Congrats on the progress. I only have 2. The first one is, I understand you only had HEMOBLAST for a little while in your bag. Could you give some comments or color on what kind of feedback you received from physicians or institutes regarding the product? And my second question is on the Trivium Shaped. Could you kind of talk about the opportunity there and how utilization may be a little different from your prior Trivium product and what the growth potential there is?

Sure. Starting off with HEMOBLAST. So first of all, HEMOBLAST is a terrific product. When you compare it to all the other hemostatic agents that are out there today, it really goes across the entire hemostatic because certain product lines are very good in certain cases. This is one that has broad global use as well as just again, it basically sells itself because of the way the product performs. So it's an outstanding product.

So with that, it's one that, quite frankly, because they're a really small and unknown company and the companies that they compete against are the J&J, the Baxter, the Bards, it's not really well known. So the idea that we can then put it into our 500-plus independent agents' hands in the spine side as well as in other orthopedic cases, we think that this thing could have a lot of run for us, certainly in where we are. Where we see a really great opportunity is that their reach into other parts of the hospital with these 21 salespeople are areas that we haven't touched and that we really feel good about where our other products can start playing. So that's really on the hemostatic side.

Now when we think about Trivium molded or Trivium Shaped, excuse me, what you're looking at is that if you think about our -- what we do, there's 3 main product lines that we have in our base DBM offering. It's really our OsteoSelect, our OsteoSponge and it's our 3Demin. So the OsteoSelect and 3Demin, those have been 2 of our 3 -- those 3 are the main workhorses for our business. What we've done with our Trivium, both the base Trivium Shaped and the Trivium Shaped is really giving a better solution or a higher end or more advanced solution to what that OsteoSelect, which is basically a 510(k) putty. We've now really upgraded that to what you look at and what we do at Trivium.

And then the Trivium Shaped is really something that would be an answer to what we do with our 3edomMI product line. So again, a more advanced, better product or at least a product that performs better and one that, quite frankly, we're really, really excited about because for all the reasons we've been handling to the -- all the pieces that's made this a really terrific product line for us writ large. So hopefully, that answers your question.

We have reached the end of the question-and-answer session and conference call. You may disconnect your lines at this time. Thank you for your participation.

Good morning, everyone, and welcome to the Xtant Medical Fourth Quarter and Full Year 2025 Financial Results. [Operator Instructions] Please note that this conference is being recorded.

I will now turn the conference over to your host, Kevin Gardner of LifeSci Advisors. Kevin, please go ahead.

Thank you, operator, and welcome to Xtant Medical's Fourth Quarter and Full Year 2025 Financial Results Call. Joining me today are Sean Browne, President and Chief Executive Officer; and Scott Neils, 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 Form 10-K 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 the Form 8-Ks that we file with our financial results press releases provide detailed narratives that describe our use of such measures. For the benefit of those who may be listening to a replay, this call was held and recorded on March 31, 2026, at approximately 8:30 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 Browne, CEO. Sean?

Thank you, Kevin, and good morning, everyone. Thank you for joining our fourth quarter update call. As has been our practice, I will begin with a few prepared remarks about our operations, and then Scott will provide a deeper dive into the financials. We will then open the call to your questions. Okay. We again turned in solid financial performance during the fourth quarter, highlighted by $32.4 million of revenue, representing growth of 3% over the fourth quarter of 2024. Now I want -- I would note that the Companion Spine transaction closed in early December, roughly a month ahead of our original assumption, which cost us about $2 million of revenue in the quarter.

Scott will provide the details, but I want to flag it upfront so the headline number is properly contextualized. Importantly, we again generated positive cash flow, adjusted EBITDA and net income, a continuation of the favorable trends we have seen over the past several quarters. Before covering the quarter in more detail, I want to briefly recap our recent sale of our noncore Coflex interlaminar stabilization assets and the international Paradigm Spine entities to Companion Spine, which closed in early December. The final purchase price was approximately $21.4 million, and I'm pleased to report that the transaction is now fully closed and settled. We use those proceeds to reduce our borrowings and strengthen our cash position, and we do not anticipate any need to raise additional outside capital in the foreseeable future.

More strategically, this transaction was transformational for our company. It further sharpened our focus on our core high-margin biologics business, which is where our competitive differentiation lies and where we intend to grow. So for the full year of 2025, we generated total revenue of $133.9 million toward the upper end of our previously stated guidance of $131 million to $135 million. Again, remember, that guidance also included a full month of Coflex and Paradigm Spine revenues.

And this represented a growth of over 14% for the full year of 2024. Adjusted EBITDA for the full year was $16.3 million compared to a loss of $1.9 million in 2024, a result we are very proud of and one that reflects the sustained operational discipline our team has demonstrated over the past 2 years. Our biologics product family, which is the greatest potential for growth, both from a revenue and cash generation perspective, was essentially flat for the fourth quarter of last year. We have been direct with investors that our recent emphasis on self-sustainability, positive cash flows, tighter operating discipline, in-house manufacturing was intentional, and those goals are now achieved.

The strategic initiatives we implemented, our sharpened focus on higher-margin biologics, our emphasis on in-house manufacturing to improve quality and control costs and our more disciplined approach to operating expenses were all pursued with self-sustainability in mind. We are pleased to have delivered on each of them. With that foundation now firmly in place, we are turning our full attention to driving top line growth, leveraging the strength of our biologics product family. On the commercial side, we have been making measured but meaningful investments to expand our reach. In 2025 and into 2026, we have doubled the number of regional sales reps in the field. Those reps are now deployed, ramping up and calling on accounts.

This year, we plan to add significant resources to our national accounts team, which will expand our ability to drive institutional adoption at scale across hospital systems and large practice groups. Together, we believe these additions will have an accelerating impact on our biologics revenue as the year progresses. We continue to invest in R&D to bring innovations to surgeons and their patients, and we remain committed to the cadence of new product introductions that has characterized these past several years. So let's talk a little bit about new product launches. Innovation remains central to our strategy, and we continue to build out our portfolio during the quarter.

In December, we announced the commercial launch of nanOss Strata, our next-generation synthetic bone graft manufactured from hydroxycarbonapatite, a material with higher solubility than traditional hydroxyapatite, which is the most commonly used synthetic material. Increased solubility enhances the bioactivity of the graft, allowing for better integration and remodeling with surrounding bone tissue during the healing process. Early surgeon feedback has been excellent, and we are encouraged by nanOss Strata's prospects. We also launched CollagenX, our bovine collagen particulate for surgical wound closure designed to promote healing, prevent distance and help mitigate surgical site infection risk.

What makes CollagenX particularly compelling commercially is that it is a potential add-on to virtually every case type in our existing biologics portfolio, creating meaningful attach rate opportunity across our current procedure base as well as an entry point into adjacent surgical disciplines we do not currently serve. The size of that addressable market opportunity is significant, and we are very excited about what this product represents for both patients and for our business. As we have said before, but it bears repeating, we now offer and internally produce solutions across all 5 major orthobiologic categories, which includes Demineralized Bone Matrix, cellular allografts, synthetics, structural allografts and growth factors. Additionally, with our [ Amnio ] and collagen product lines, we are also well positioned to grow in the surgical repair and wound care markets.

This breadth positions us as the partner of choice in regenerative medicine, a position that has been further reinforced by the very positive feedback we continue to receive from surgeons on these recent innovations. Turning now to guidance. Our 2026 revenue outlook reflects the impact of the Companion Spine divestiture and the expiration of license revenue from our Q-code and amniotic membrane agreements, both nonrecurring items that Scott will address in detail. Offsetting these headwinds is continued anticipated organic growth in our core biologics business, which we expect to accelerate as our expanded commercial team is fully deployed and our newest products gain traction in the field. With that context, we anticipate full year 2026 revenue in the range of $95 million to $99 million.

On a pro forma basis, this represents solid organic growth in our core business. We are committed to maintaining positive free cash flow at these revenue levels. And as I noted, we do not anticipate any need for any outside additional capital. Story heading into 2026 is straightforward, a focus on our core business and expanding commercial footprint, an innovative and comprehensive product portfolio and a clean balance sheet. We believe we have the right strategy, the right team and the right foundation to deliver.

Now with that, I will turn the call over to Scott for a more detailed review of our financial results. Scott?

Thank you, Sean, and good morning, everyone. I'll start first with our financial results and then conclude by sharing some specific amounts related to our recent divestitures and license revenue for the benefit of looking ahead to 2026. Total revenue for the fourth quarter of 2025 was $32.4 million compared to $31.5 million for the same period in 2024. The slight increase is attributed mainly to higher license revenue during the fourth quarter of 2025 that Sean alluded to earlier, partially offset by declines in biologics and hardware. As Sean mentioned a moment ago, we expect that the measured investments that we're making in our field sales force on both a regional and national basis should drive accelerating biologics growth in 2026 and beyond.

Gross margin for the fourth quarter of 2025 was 54.9% compared to 58% or 50.8% for the same period in 2024. The increase is primarily attributable to favorable sales mix and greater scale, partially offset by a $1.3 million inventory charge associated with the launch of the Cortera Fixation System. Fourth quarter 2025 operating expenses were $18.7 million compared to $17.9 million in the same period a year ago. General and administrative expenses were $7.3 million for the 3 months ended December 31, 2025, compared to $5.7 million for the same period in 2024. The increase is primarily related to a $1.4 million of additional expense related to various compensation plans.

Sales and marketing expenses were $10.9 million for the 3 months ended December 31, 2025, compared to $11.7 million for the same quarter last year. The decrease resulted primarily from a $0.9 million reduction in commissions. Research and development expenses were $459,000 for the 3 months ended December 31, 2025, a decrease from $522,000 in the fourth quarter of 2024. Net income in the fourth quarter of 2025 was $57,000 or $0.00 per share on a fully diluted basis compared to a net loss of $3.2 million or $0.02 per share in the comparable 2024 period. Adjusted EBITDA for the fourth quarter of 2025 was $1.9 million compared to adjusted EBITDA of approximately $0.4 million for the same period in 2024. Turning now to full year results. For the full year 2025, total revenue was $133.9 million, representing growth of 14% over $117.3 million for the full year 2024.

Again, our revenue for the fourth quarter and the full year 2025 were negatively impacted by the closing of the sale of our Coflex assets and international hardware business to Companion Spine in early December, which is about a month sooner than we were anticipating. The assets of the businesses that were included in the transaction were generating about $2 million of revenue per month. Gross margin for the full year 2025 was 62.9% compared to 58.2% for the full year 2024. Of this increase, 530 basis points were due to sales mix and greater scale, partially offset by a decrease of 260 basis points due to increased charges for excess and obsolete inventory. General and administrative expenses were $29.5 million for the full year 2025 compared to $28.7 million for the same period in 2024. This increase is primarily attributable to $2.4 million of additional expense related to various compensation plans, partially offset by a $1.2 million reduction in expense for stock-based compensation.

Sales and marketing expenses were $45.5 million for the full year 2025 compared to $49.2 million for the full year 2024. This decrease is primarily due to reduced commission expense, $3.9 million resulting from revenue mix and $2.1 million of reduced compensation expense related to headcount, partially offset by $2.9 million of additional consulting fees. Research and development expenses were $2.1 million for the full year 2025, a modest decrease from $2.4 million for the full year 2024. Full year 2025 total operating expenses were $77 million compared to $80.3 million for the full year 2024. Net income for the full year 2025 was $5 million or $0.03 per share on a fully diluted basis compared to a net loss of $16.5 million or $0.12 per share for the full year 2024. Adjusted EBITDA for the full year 2025 was $16.3 million compared to an adjusted EBITDA loss of approximately $2.3 million for the full year 2024.

As of December 31, 2025, we had $17.3 million of cash, cash equivalents and restricted cash compared to $6.2 million as of December 31, 2024. As Sean alluded to earlier, our cash balance as of December 31, 2025, excludes the $10.7 million that we subsequently received from Companion Spine and satisfaction of the unsecured promissory note of $8.2 million issued to Xtant by Companion Spine related to the Coflex transaction, plus accrued interest and related working capital and other purchase price adjustments. Net accounts receivable was $17.8 million, inventory was $30.3 million, and we had $3.8 million available under our revolving credit facility as of the end of the year.

Turning now to nonrecurring revenue and related expenses for 2026. Total revenue for the business sold to Companion Spine was $20.3 million for 11 months ended November 30, 2025. We will include disclosure of the 2025 quarterly revenue amounts on Xtant's investor website. Cost of sales and operating expenses for those disposed businesses were $6.6 million and $15.4 million, respectively, for the same period. Also, with respect to the $18.7 million of license revenue recognized during 2025, please note that the related sales and marketing expense was $3.7 million. That concludes the financial overview.

Operator, you may now open the line for questions.

[Operator Instructions] Your first question is coming from Ryan Zimmerman with BTIG.

Scott, this is Izzy on for Ryan. So I just wanted to start out on the outlook for 2026. I know guidance excludes Coflex, Cofix and the OUS business. But I was curious if you could kind of unpack what your thoughts are for underlying organic growth, especially in the core biologics business. .

Scott, I'll let you dive in, and I'll add any color.

Sure. I think as we look out through 2026, we're going to be looking for sequential quarter-over-quarter growth, which will reflect the growing contributions of the new product offering Sean mentioned as well as the expanding impact from additions to our commercial organization. I will note, though, that seasonality will still be present. So thinking of Q3, for instance, we're likely to see less sequential growth there than in other quarters.

I think maybe setting Q1 as a baseline, for example, starting biologics or with biologics to your point, I expect biologics in the first quarter to be down low double digits compared to Q1 of 2025 in response to headwinds related mainly to lost Amnio product and for hardware to be down approximately mid-teens after adjusting for the revenue associated with the divestiture in 2025. Does that help, Izzy.

Yes, that's really helpful. And then you kind of touched on it already with the low double-digit decline for first quarter. But how much of a headwind are you expecting in 2026 from the loss of the license revenue relating to the Q codes?

I think it's more -- okay, so first of all, all of that, the Q code revenue all goes away. However, what we are waiting to see and is still shaking out is what is the base of that business now going to be because we still manufacture a really terrific product line that will be used in advanced wound care by distributors and others. Now what's going to be different is that as this continues to shake out, more of those distributors will be using our contracts, and it will be actually [ Xtant ] brand.

So we expect as the year progresses, we'll see that business begin to ramp up, and we feel good about some of the discussions we've had with many of the groups that are out there today looking for a product to sell into hospitals because, as you know, in the advanced wound care world, we're going to see a lot more patients being shifted from the non-acute facilities to acute.

And so we see an upside that's going to be coming our way really starting probably -- well, I guess, guys who are in this market a little more than we are, would tell you it's probably going to be looking more like sometime in the late second quarter to the second half of the year where we'll start to see the pickup on that. But in the first quarter, we [ OEMed ] a fair amount of product for guys last for manufacturer, I should say, distributors last year under their brands. And so that business has gone away. But now the business that will come back will most likely be product that will sell under our brand, and it will be into hospitals. Does that answer your question?

Yes, that's really helpful. And then just the last one for me. I was curious how quickly you guys are expecting to see a decline in the hardware business throughout 2026.

I think the best way of looking at hardware is we will see a slow decline throughout the year. So yes, so I'll just leave it at that. Scott, do you want to add any color to that?

Yes. I'd simply say that we've already seen a decline in the hardware that remains post divestiture, and we expect that, that decline will continue at a reasonably steady rate approaching high teens in 2026.

Your next question is coming from Chase Knickerbocker with Craig-Hallum.

Maybe I just wanted to start on kind of that cadence of biologics growth that's kind of implicit in all that commentary that you just gave. It calls for, call it, kind of last 3 quarters kind of acceleration and kind of organic year-over-year biologics growth. Sean, can you maybe just walk us through kind of which products in particular you kind of expect to support that kind of the -- just help us, I guess, bridge to their kind of by product as far as what you see accelerating growth? And then kind of same question as far as how much of that comes from your distribution network versus kind of white label contracts, white label business that you have visibility on?

Sure. So starting off with the different products. So all of the advanced biologics products that we're now manufacturing. So when you think about our OsteoVive Plus, which is the stem cell product, our OsteoFactor Pro which is our growth factor product, the CollagenX product we just rolled out our Trivium product, which is an advanced demineralized bone matrix product. Those are the ones that I see, quite frankly, all of them expect to grow, but those are the ones that are going to be the big drivers. And those are the ones that if you look at our funnel today, which I'm really excited about because this is something with the added sales people new opportunities that we're looking at these days is substantially greater than what we've had really, quite frankly, ever.

And with this advanced portfolio, we're touching on a lot more -- a lot of areas in and around spine. So when we start looking at the number of trauma, foot and ankle and other opportunities that have come our way, it's become substantially greater. So those would be the product lines that I would say that will be driving what we see as our growth.

And then just as far as channel, Sean, white label versus your own distribution network?

So yes. So when we think again about the biologics business, we'll look at our channel or our OEM channel about 20%. Scott, is that right? About 20% of our growth this year or 5% of our overall biologics business will be in the OEM channels that maybe a little higher, like 22%. Is that about right, Scott?

Yes, that is about right, Sean.

Yes.

And then a couple as we think kind of longer term, Sean, as we think about kind of direct -- your distribution network, white label, potentially kind of some larger contracts with institutions, like where do you see over the medium term, your business kind of showing the most growth? Is it these white label contracts? Is it continuing to be in your distribution network? Just some thoughts there as far as kind of where you're really leaning in.

Yes, especially given the fact that we had -- it will definitely be the Xtant branded product working through our independent agent networks, mostly because, quite frankly, that's where we had the most significant reduction over the 2024, 2025 years in way of we lose a person didn't replace them. And so we had -- and that was strategically a choice we made. Strategy is about choices. And our strategy was we need to get to self-sustainability and that meant building products internally, being able to have our own products that we feel really good about that are advanced, give us the much higher ASPs and better margins.

And so these are decisions we made. Now we've replaced and then added basically doubled the size of the sales force. And that sales force is focused on our Xtant branded products. And so when you see the growth that will be coming out, it will be coming from really what I see has been a down to flat independent agent network. We have a real opportunity to really start growing that world again. And so we're feeling really good about where that's going.

And then two, just to finish for me on -- maybe on hardware. That business is obviously a lot smaller than it has been for you in the past. You expect it to decline. What are your kind of plans there over the medium to long term? Is that a little bit of a melting ice cube for the business that's obviously kind of drawing down growth on the overall top line? Just kind of give us your strategic thoughts there. And then just with kind of all the movement in the portfolio, can you give us a little bit more kind of color on gross margin in 2026? And sorry if I missed that during your prepared remarks, Scott.

I'll let Scott address the 2026. I'll address the hardware issues. So hardware for us, where we are good in hardware, we're really good. Like we have this new Cortera line, which is outstanding. We have a cervical offering that is as good as -- it's actually better than almost anything else that's out there. So we do adult degenerative spine really well. The question is, at what point in time does this become something that becomes a strategic distraction. And at this point in time, it's still helping to set the table for some of our biologics business.

So I guess the point is at what point do we kind of look at this and say, when doesn't it? And does the, I guess, the drag on growth become more than it's worth. And so we're not there right now. And -- but it is something we're looking at. So I'll -- without getting too deep into that, but that is clearly high on our strategic list of things to choose or decide. And so that's something that we'll be working on over the course of the next year or so. Scott, do you want to answer the gross profit margin question?

Sure. I think over the course of 2026, we're probably going to be running low 60s in terms of gross margin. As far as the puts and takes within that, -- the new product launches, these higher-margin biologics launches that we've done have had the desired effect in terms of what they've done to our overall biologics product margins. However, what we've seen out of hardware is that really the nonproduct costs, say, excess and obsolete charges, for example, have offset to some extent, the positive contributions from those new biologics product offerings. So net-net, I think we're probably running low 60s in way of gross margin during the course of 2026.

Thank you, everyone. This does conclude our Q&A session at this time. This also concludes our conference call. You may disconnect your phone lines at this time, and have a wonderful day. Thank you for your participation.

Thank you.

Good morning, everyone, and welcome to the Xtant Medical Third Quarter 2025 Financial Results. [Operator Instructions].

Please note, this conference is being recorded.

I will now turn the conference over to your host, Kevin Gardner of LifeSci Advisors. Kevin, the floor is yours.

Thank you, operator, and welcome to Xtant Medical's Third quarter 2025 Financial Results Call. Joining me today are Sean Browne, President and Chief Executive Officer; and Scott Neils, 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-K 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 the Form 8-Ks that we filed with our financial results press releases provide detailed narratives that describe our use of such measures. For the benefit of those who may be listening to a replay, this call was held and recorded on November 11 at approximately 8:30 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 Browne, CEO. Sean?

Thank you, Kevin, and good morning, and Happy Veterans Day to all those who have served or are serving. [ One quick ] note since today is best [indiscernible] is closed, although, as you know, the market is open. And so we released our 10-Q last night.

So with that behind us, thank you for joining our third quarter update call. As has been our practice, I will begin with a few prepared remarks about our operations, and then Scott will provide a deeper dive into the financials. We'll then open the call to your questions.

We again turned in solid financial performance during the third quarter, highlighted by 19% revenue growth over the third quarter of 2024. We again generated positive cash flow, adjusted EBITDA and net income, and a continuation of the favorable trends that we've seen over the past few quarters.

Before covering the quarter in detail, however, I would like to begin the morning with an update on the [ pending ] sale of our noncore Coflex and Cofix [ interlaminar ] stabilization implant assets and all international entities of [ Paradigm Spine ] to [ conhanion ] spine. The proceeds of the transaction when completed are anticipated to be $19.2 million in total. We intend to use the proceeds to reduce our long-term debt and to provide additional cash liquidity.

Importantly, as a result of this transaction and the cash flow we are generating from operations, we do not expect to require additional external capital to fund our operations from this point forward. This transaction will be truly transformational, one for our company as it will further enhance our focus on our core biologics business, while strengthening our financial position. In terms of timing, we anticipate we'll close by the end of the year, it is worth mentioning that the [ scolio Brothers ] have already paid us approximately $7.5 million, including a $2.5 million payment just last week toward the total consideration of this deal.

So they are as committed as we are to ensuring its completion. As a reminder, the business included in the sale, generate annual revenue to [indiscernible] of approximately $23.5 million. As previously mentioned, these products 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 in 2026 and beyond.

In the meantime, until this transaction closes, we continue to support those products in the field, and we will benefit from the associated hardware revenue for an additional few months. So now turning now to our third quarter. I'm pleased to report that we delivered strong financial and operating results.

Scott will cover the financials and details in a moment, but I'd like to begin by touching on a few highlights. First, our total revenue for the quarter was $33.3 million which represents a growth of more than 90% versus the third quarter of 2024. Notably, our third quarter 2025 revenue includes $5.5 million of licensing revenue pursuant to the license agreement for [ Coach ] and the SimpliMax dual layer [ amniotic ] membrane that we announced in the third quarter of last year.

As we indicated in Q1, CMS has extended the local coverage determination for [ skin subsites ] to December 31, 2025. Our biologics product family, which is our core business, grew 4% over the third quarter of last year. This was below our long-term expectation for growth in the Biologics product family. However, it's important to take a step back and recall that our focus over the past several quarters has been on prioritizing self-sustainability, particularly positive cash flows as part of our long-term growth strategy -- as a broader part of our long-term growth strategy.

The strategic initiatives that we have implemented, our sharpened focus on higher-margin biologics, our emphasis on in-house manufacturing to improve quality and control costs and our more disciplined approach to operating expenses were all implemented with self-sustainability in mind. With those goals now achieved, we are turning our focus back to driving top line growth in our orthobiologics business.

We continue to invest in R&D to bring innovation to surgeons and their patients. At the same time, we have started making investments in our commercial team to maximize the reach of our broad portfolio of orthobiologic solutions. From a new product launch perspective, since our last quarterly update, we also continue to innovate to bring new orthobiologic solutions to surgeons and their patients.

Earlier this month, we announced the commercial launch of [ Collagen X ] our bovine collagen particulate product for surgical wound closure that is designed to promote healing, prevent dehiscence and help mitigate concerns related to surgical site infections. [ Collagen X ] complements our existing orthobiologics product line as it represents a potential addition to every case that our portfolio currently addresses as well as procedures performed in other surgical disciplines.

This is the latest example of our commitment to innovation as we work to meet the diverse needs of our surgeons and patients. As a reminder, we now offer and internally produced solutions across all 5 major orthobiologic categories, demineralized [ BioMatrix ], cellular allograft, synthetics, structural allografts and now growth factors.

Additionally, with our [ amino and collagen ] product lines, we are well positioned to grow in the surgical repair and wound care markets. This positions us as the partner of choice in the field of regenerative medicine, a position that has been further solidified by the very positive feedback that we have received from surgeons on these recent innovations. Now turning to 2025 revenue guidance. Recall that last quarter, reflecting the heightened levels of licensing revenue and the previously noted [indiscernible] and amniotic membrane agreement that we are experiencing, we increased our full year 2025 revenue guidance to a range of $131 million to $135 million, which represents growth of approximately 11% to 50% over 2024 revenue with the sale of our noncore coflex and cofix spinal implant assets and OUS business to companion spine now anticipated to close. [ Closer to ] the end of the year, we are reiterating our 2025 revenue guidance at this time. We anticipate providing initial 2026 revenue guidance concurrent with our Q4 results in March of next year.

With that, I will turn the call over to Scott for a more detailed review of our financial results.

Thank you, Sean, and good morning, everyone. Total revenue for the third quarter of 2025 was $33.3 million compared to $27.9 million for the same period in 2024. The 19% increase is attributed primarily to $5.5 million of licensing revenue during the third quarter of 2025 that Sean alluded to earlier as well as $576,000 of additional biologics revenue, partially offset by a 6% or $736,000 year-over-year decline in hardware product revenue.

Gross margin for the third quarter of 2025 was 66.1% compared to 58.4% for the same period in 2024. The increase is primarily attributable to favorable sales mix and greater scale. Third quarter 2025 operating expenses were $19.5 million compared to $20.1 million in the same period a year ago.

The reduction in operating expense is primarily attributable to reduced compensation and commission expenses which were partially offset by an increase in professional fees related to sales and marketing. General and administrative expenses were $7.1 million for the 3 months ended September 30, 2025 compared to $7.5 million for the same period in 2024.

The decrease is primarily attributable to $0.5 million of reduced stock-based compensation expense and $0.5 million of reduced retention and severance expense, partially offset by a $0.5 million increase in bonus expense. Sales and marketing expenses were $11.7 million for the 3 months ended September 30, 2025, compared to $11.9 million for the same quarter last year.

The decrease is primarily [ attributable ] to reduced commission expense of $0.7 million, resulting from revenue mix partially offset by $1 million of additional consulting fees during the current year period. Research and development expenses were $634,000 for the 3 months ended September 30, 2025, a decrease from $701,000 in the [indiscernible] quarter of 2024. Net income come in the third quarter of 2025 was $1.3 million or $0.01 per share on a fully diluted basis compared to a net loss of $5 million or [ $1 ] per share in the comparable 2024 period.

Adjusted EBITDA for the third quarter of 2025 was $4.5 million compared to an adjusted EBITDA loss of approximately $1 million for the same period in 2024. As a reminder, beginning in the fourth quarter of 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 [ Surgalign ] Holdings, Hardware and Biologics business in our calculation of adjusted EBITDA. Prior periods have been recast conformed with the current calculation. The related effect on adjusted EBITDA was a reduction of $773,000 in the third quarter of 2024 to arrive at the recast amount.

As of September 30, 2025, we had $10.6 million of cash, cash equivalents and restricted cash. Net accounts receivable was $25.6 million, inventory was $40.7 million, and we had $5.7 million available under revolving credit facilities as of the end of the quarter. As a reminder, our cash balance as of the end of the third quarter does not take into account the anticipated remaining proceeds from the pending sale of certain assets to companion Spine that we anticipate closing by year-end that Sean discussed earlier.

Operator, you may now open the line for questions.

[Operator Instructions] Our first question is coming from Ryan Zimmerman of BTIG.

So appreciate the commentary and everything. Maybe I want to start, Sean, you talked about making some investments in the commercial organization. It would be good. Just now you want to get more feet on the Street. I mean is this refilling the pipeline? Maybe talk to us a little about kind of a little more color on kind of what that means. And then my second question, I'll just ask upfront here. There's a lot of moving parts as we go into next year. I know you're not guiding to '26, but maybe any early thoughts, broad strokes around kind of where you think the orthobiologics business can grow when we strip out some of the other pieces that may be in [indiscernible]

Sure. Okay. I'll start off with the profitability question. Well, that's a profitability question to sales question, which got to profitability. So last year, really in the second half of the year, we started making decisions on how do we conserve cash because we knew that we were going to have a lot of revenue coming in from the [indiscernible]. We knew that we were going to have actually a very good year just operationally. So in the fourth quarter of last year, we dramatically cut back the business overall.

You can see it in our OpEx expense with the idea of being profitable. As part of that, we reduced a fair number of our commercial not necessarily overly highly performing assets. And so over the course of the last really quarter, we've now been replacing a lot of those spots in areas that make more sense. And so just to give you the scale to which we're doing. So we had roughly 4 reps that were selling the Xtant branded products. Today, we've upped that and will, by the end of the year, we'll be at 8. So we'll double that. And then again, in 2026, we expect to add probably 4 more.

So this is a fixable problem -- not a problem, but a fixable opportunity for us. And so I feel really good about where we're going and even what I'm seeing from just having those new assets out in the field already. So it is something that was somewhat predicted or predictable when we made those decisions last year and in the beginning of this year. To give you some guidance with respect to 2026. As you mentioned, we are not going to be giving full guidance until really the year completes because there's a lot going on like good things. And so if I were to give you some general guidance, we do expect still to be in the low double digits with respect to our overall orthobiologics growth. And then as for the hardware, we're still working through some things right now. But I would still say that that really that's what we can expect to see in 2026.

No. That's very helpful. And even just the broad strokes, I didn't give us a sense of what you can do. And then looking at this coming up, what, next week or this week, I should say. I just...

This Friday, [indiscernible] Sunday.

Yes, this Friday. So anything you want to highlight for people for [ NAS ] or anything that you'd say is worth checking out to [indiscernible]

Yes, thanks for asking, it actually a setup. Yes, 3 things. First of all, our growth factor product, brand new, it's outstanding. We're replacing another growth factor probably you're selling previously that someone else was making for us. This is our own product. We feel really good about it. We've done a great job of keeping the business that we once had and we're now starting to grow.

So that's absolutely something people should check out. Second of all, we've now created a new advanced DBM called Trivium, which is really a terrific product that we would encourage our surgeons and distributors to look at, not only is the growth factor count and just basically the overall characterization of the product outstanding, but the handling is even better.

And then the third thing is what we just rolled out this [ Collagen X ] product, which literally can be used in almost every procedure and even procedures outside spine. So those would be 3 big things that we feel really, really good about. And just the fact that the entire portfolio of our product line are now things that we make, we have a hand in, where you control the supply chain. But also just in general, we just think we make really great products. So please stop by, and we'd love to give you a rundown of our really exciting portfolio.

Our next question is coming from Chase Knickerbocker of Craig-Hallum.

Sean, maybe just to start, if you could just help me kind of dive a little bit deeper into that 3% year-over-year growth in orthobiologics. Just as far as what supported growth in the quarter on a year-over-year basis, what detracted from it on a kind of product-specific kind of basis, if we can [ refund ] that for a second.

Sure, absolutely. So the -- actually was 4% growth year-over-year, which we had for our -- and again, the areas that we're still continue to grow [ were actually ] continue to be our [ stem cell ] business are -- again, the growth factor business is basically we're holding serve in that, which is good because, again, we released a brand-new product line. The [indiscernible] product line continues to be a nice product line, product growth area for us.

And we realize there's going to be some changes with respect to the wound care world, but some of -- and a good chunk of some of the growth that we've also seen is in the surgical side, which shouldn't change. And so those would be a couple of the areas that I would say that really helped. What hurt us this past quarter was maybe some of our old line demineralized bone products.

And that's why the addition of things like FibreX and [ Trivium], these higher-end much, much better -- much higher, not only from a handling perspective, but from a production perspective and from, again, a growth factor characterization side of things. It is just outstanding products. And so we really hope and we really see that those things will be helping offset maybe some of the slide that's been taking place from those old very -- still very good product lines.

But you realize that [ OsteoSelect ], OsteoSponge and [ Freedom ], I think OsteoSelect started -- OsteoSponge started in 2008, OsteoSelect started in 2010, and I think [indiscernible] was 2013. So these are some [ old ] products that we're now finding upgrades to that we just believe that we've really knocked on the part with some of the new things. And they're just starting to get traction, those new products. And so as a matter of fact, for our -- if you look at the [ Tribune ] product, it had one of its best months yet, just recently. So we're really, really excited about where that's going to take us.

And just maybe on the kind of legacy [indiscernible] side, was it mainly kind of white label or direct channel that...

Definitely more direct channel -- Yes, definitely more direct channel. So as I mentioned, when we pulled those resources out of the field or at least eliminate them and really kind of reshuffling them now, it hurt us. I'm not going to lie. It's something that -- but we knew what we were going into.

Those were, again, probably suboptimized assets when we did it. That's part of the reason why we pulled it out and said, all right, profitability is the most important thing we're going to do right now. We feel we can hold serve for most of what we have for our business and with the growing biologics portfolio. We really feel like, okay, we might come across some [ rocky waters ] which we have. And so now over the course of really the summer, we started adding back those resources in more strategically important areas.

And then as I mentioned, we're going to continue to add more in 2026.

Got it. And then maybe -- just on the Amnion side, the changes that were announced in the final [indiscernible]. Maybe just any thoughts as far as how [indiscernible] your business as we take an eye into 2026. And then just last one for me, Sean. As I think about [ Collagen X ] probably a bigger market for similar products than than people realize. Just kind of speak to your plans for that even outside of Spine as far as how you plan to distribute that product into what is a fairly large market for those particulars.

Yes. So let's start with Amnion. So we're -- we manufacture Amnion. Most of the people who sell the Amnion [indiscernible] products, today are not manufacturers. As a matter of fact, they need a fairly high price in order to be able to make real money. We, on the other hand, are the very low end of the value creation.

So when you think about what it costs for us to make something, it's quite low. And so when the price went to $127 per square centimeter, it's a very good -- it's actually a very good price for us as somebody who can actually serve the wound care -- or I should say, the acute care market.

If you recall and if you see what happened in that world, this reimbursement opened the door for a real movement from the [ out of hofer], the acute care or the non-acute world into the acute or at least the allocation clinics tied to the hospitals.

We feel that we can do really well with the hospital contracts we have. There are many distributors out there today who don't have the kind of hospital contracting we do and they need it. And so we think that there's an opportunity there. So we'll see what happens. I mean this is something that we're just getting our arms around right now, speaking to various people, making sure our contracting is tight. But we, again, have a very, very robust contract portfolio.

And so it is something we're trying to leverage as we speak. So that's the Amnion side. Secondarily, when you think about the collagen-based products, one of the things that we acquired through the [ Surgeon line ] acquisition was a product called nanOss. And the basis of nanOss was even -- even more interesting product called [ eMatrix ]. And that [ eMatrix ] was a collagen-based product that had extraordinary clinical data behind it, actually, as the product was originally created.

It was created as a wound care product. As a matter of fact, it was going through its own [ PMA ] and the company essentially was running out of money and said, okay, let's create something that we can start generating money from. And then they created nanOss, which was taking [ eMatrix ] and then putting in hydroxy appetite with it.

And so it became a product that was ultimately purchased by one of the predecessor companies of Surgalign. And so we acquired [ e-Matrix ], which in itself is a [indiscernible] collagen-based product. So we see that as a really terrific platform for us moving forward because there's a number of other areas, we think that we can touch with it. So there's more to follow on that, but it's a platform technology that we're really, really excited and we've got some FDA work that we need to do, but we're really pretty pumped about where that's leading. So hopefully that answers your question there, Chase.

Thank you very much. Well, we appear to have reached the end of our question-and-answer session. And therefore, we have reached the end of the conference. So thank you very much.

This does conclude today's conference, and you may disconnect your phone lines at this time. We thank you for your participation.