Bacterin Announces Second Quarter 2013 Results

Bacterin Announces Second Quarter 2013 Results

Highlights:

  • Revenue increased to $8.3 million from $8.2 million reported during the second quarter of 2012

  • Revenues for the period, excluding distributor stocking orders, increased 13% over the first quarter of 2013

  • Revenues for the six month period ended June 30, 2013 increased 6% year over year to approximately $16.9 million

  • The Company closed an equity financing in June 2013 which resulted in net proceeds of approximately $4.5 million to the Company.

BELGRADE, Mt.--(BUSINESS WIRE)-- Bacterin International Holdings, Inc. (NYSE MKT: BONE), a leader in the development of revolutionary bone graft material and coatings for medical applications, today reported its financial results for the second quarter ended June 30, 2013. The Company reported revenues of approximately $8.3 million and a net loss for the second quarter of approximately $2.5 million, or ($0.05) per common share, compared to a net income of approximately $730,000, or $0.02 per common share, reported during the same period in 2012.


The Company also reported revenues of approximately $16.9 million and a net loss of approximately $4.2 million, or ($0.09) per common share, over the first six months of 2013. This compares to revenues of approximately $16.0 million and a net loss of approximately $316,000, or ($0.01) per common share, over the same period in 2012.

Revenue

Revenue for the second quarter was approximately $8.3 million, compared to approximately $8.2 million for the same period during 2012. The increase was primarily attributed to higher volume sales, which were partially offset by lower sales prices resulting from discounting associated with higher volume distributors and preferred vendors. For the first six months of 2013, revenues were approximately $16.9 million compared to approximately $16.0 million for the same period of 2012.

"Despite the challenges we incurred during the second quarter of 2013 associated with the resignation of our prior CEO, this was a satisfying quarter," said John Gandolfo, co-interim CEO and Chief Financial Officer of Bacterin International Holdings. "We were able to keep our senior management team intact, which has resulted in winning back previous accounts and stabilizing our core hospital business. As a result of our efforts, we realized a sequential increase in our core hospital business during the period over the first quarter of 2013. We are currently assessing sales strategies which will enhance the sustained growth of our core business during the second half of the year. There is a continuing opportunity to leverage new sales channels and we are well positioned to increase our market presence.

Gross Profit

For the second quarter of 2013, gross profit was approximately $4.7 million, a decrease of 20% from $5.9 million in the second quarter of 2012. Gross margin for the period was 57%, which compares to a gross margin of 72% reported for the same period last year. During the quarter, the Company took a charge of approximately $500,000 associated with the write off of expired products primarily related to an improvement being made to our hMatrix manufacturing process which we expect to result in an improved product in the future. Excluding this charge, gross margins in the quarter would have been 63%.The first six months of 2013 saw gross profit of $10.2 million, compared to $11.8 million for the same period of 2012. Gross margins for the first six months were 60% in 2013 compared to 74% in 2012.

Sales and Marketing Expenses

Sales and marketing expenses for the second quarter increased to $4.2 million as compared to $3.8 million for the same period during 2012. As a percentage of revenues, selling and marketing expenses increased to 51%, which compares to 47% reported for the second quarter of 2012. The increase was primarily the result of higher personnel costs incurred prior to the recent reduction of headcount and increased administrative fees for GPO Contracts initiated during the third quarter of 2012. In addition, we incurred $103,000 of severance costs associated with headcount reductions announced during the second quarter of 2013.

The first six months of 2013, sales and marketing expenses remained flat at $8.0 million compared to the prior year.

General and Administrative Expenses

In the second quarter, general and administrative expenses (G&A) remained unchanged at $2.3 million for the period as compared to the same period last year. The second quarter 2013 figure included $164,000 of severance costs associated with the previously announced headcount reduction program as well as $124,000 of non-recurring expenses associated with a legal settlement. As a percentage of revenues, general and administrative expenses were 27% in 2013 as compared to 28% for the second of quarter 2012.

The first six months experienced a slight increase of general and administrative expenses to $5.1 million, which compares with $4.9 million reported during the second quarter of 2012. As a percentage of revenues, G&A was 30% in the first half of 2013 compared to 31% in 2012.

EBITDA

The Company defines earnings before interest, taxes, depreciation and amortization ("EBITDA") as net income/loss from operations before depreciation, amortization and non-cash stock-based compensation. EBITDA for the second quarter of 2013 was a loss of $1.4 million, compared to breakeven EBITDA for the second quarter of 2012. Excluding the write-off of expired inventory of approximately $500,000 and severance expenses associated with the headcount reduction of $267,000, the second quarter 2013 EBITDA loss was $637,000. See "GAAP to non-GAAP Reconciliation" below for further information on this non-GAAP measure.

Financial Liquidity

Cash and cash equivalents were $5.1 million and net accounts receivable were $6.2 million on June 30, 2013, compared to cash and cash equivalents of $4.9 million and net accounts receivable of $7.2 million on December 31, 2012.

Kent Swanson, Chairman of Bacterin International Holdings added, "The sequential growth of our recurring revenues is a clear indication of the success we are having with our base hospital business. Now with our recent clearance from the FDA to market the OsteoSelect DBM Putty for spinal fusion procedures, we are well positioned to leverage our products and execute on our sales strategies to further penetrate the marketplace and grow this business."

Conference Call Details

Management will hold a conference call to discuss its financial results at 10:00 a.m. ET, on Wednesday, August 7, 2013. Please refer to the information below for conference call dial-in information and webcast registration.

Please call the conference telephone number 5-10 minutes prior to the start time. An operator will register your name and organization. If you have any difficulty connecting with the conference call, please contact the Cockrell Group at 1-877-889-1972.

Conference Dial-in:

877‐269‐7756

International Dial-in:

201‐689‐7817

Conference Name:

Bacterin's Second Quarter and Six Month 2013 Results Call

Webcast Registration:

Click Here

Following the live call, a replay will be available on the Company's website, www.bacterin.com, under "Investor Info".

About the Presentation of EBITDA

EBITDA is not a financial measure calculated and presented in accordance with U.S. generally accepted accounting principles (GAAP) and should not be considered as an alternative to net income, operating income or any other financial measures so calculated and presented, nor as an alternative to cash flow from operating activities as a measure of liquidity. The company defines EBITDA as net income/(loss) from operations before depreciation, amortization and non-cash stock-based compensation. Other companies (including competitors) may define EBITDA differently. The company presents EBITDA because management believes it to be an important supplemental measure of performance that is commonly used by securities analysts, investors and other interested parties in the evaluation of companies in our industry. Management also uses this information internally for forecasting and budgeting. It may not be indicative of the historical operating results of Bacterin nor is it intended to be predictive of potential future results. Investors should not consider EBITDA in isolation or as a substitute for analysis of the company's results as reported under GAAP. See "GAAP to non-GAAP Reconciliation" below for further information on this non-GAAP measure.

About Bacterin International Holdings

Bacterin International Holdings, Inc. (NYSE MKT: BONE) develops, manufactures and markets biologics products to domestic and international markets. Bacterin's proprietary methods optimize the growth factors in human allografts to promote bone growth, subchondral repair and dermal growth. These products are used in a variety of applications including enhancing fusion in spine surgery, relief of back pain, promotion of bone growth in foot and ankle surgery, promotion of cranial healing following neurosurgery and subchondral repair in knee and other joint surgeries.

Bacterin's Medical Device division develops and licenses coatings for various medical device applications. For further information, please visit www.bacterin.com.

Important Cautions Regarding Forward-looking Statements

This news release contains certain disclosures that may be deemed forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 that are subject to significant risks and uncertainties. Forward-looking statements include statements that are predictive in nature, that depend upon or refer to future events or conditions, or that include words such as "continue," "efforts," "expects," "anticipates," "intends," "plans," "believes," "estimates," "projects," "forecasts," "strategy," "will," "goal," "target," "prospects," "potential," "optimistic," "confident," "likely," "probable" or similar expressions or the negative thereof. Statements of historical fact also may be deemed to be forward-looking statements. We caution that these statements by their nature involve risks and uncertainties, and actual results may differ materially depending on a variety of important factors, including, among others: the Company's ability to meet its existing and anticipated contractual obligations, including financial covenant and other obligations contained in the Company's secured lending facility; the Company's ability to manage cash flow and achieve profitability; the Company's ability to develop, market, sell and distribute desirable applications, products and services and to protect its intellectual property; the ability of the Company's sales force to achieve expected results; the ability of the Company's customers to pay and the timeliness of such payments; the Company's ability to obtain financing as and when needed; changes in consumer demands and preferences; the Company's ability to attract and retain management and employees with appropriate skills and expertise; the Company's ability to attract and retain a well qualified Chief Executive Officer; the Company's ability to successfully conclude government investigations; the impact of changes in market, legal and regulatory conditions and in the applicable business environment, including actions of competitors; and other factors. Additional risk factors are listed in the Company's Annual Report on Form 10-K and Quarterly Report on Form 10-Q under the heading "Risk Factors." The Company undertakes no obligation to release publicly any revisions to any forward-looking statements to reflect events or circumstances after the date hereof or to reflect the occurrence of unanticipated events, except as required by law.

BACTERIN INTERNATIONAL HOLDINGS, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

As of

June 30,

As of

2013

December 31,

(Unaudited)

2012

ASSETS

Current Assets:

Cash and cash equivalents

$

5,135,974

$

4,926,066

Trade accounts receivable, net of allowance for doubtful accounts of $518,419 and $1,576,955, respectively

6,226,619

7,154,065

Inventories, net

13,803,063

13,141,421

Prepaid and other current assets

667,871

353,271

Total current assets

25,833,527

25,574,823

Non-current inventories

1,238,225

1,238,225

Property and equipment, net

5,458,272

5,234,867

Intangible assets, net

564,693

592,378

Goodwill

728,618

728,618

Other assets

1,295,718

1,126,643

Total Assets

$

35,119,053

$

34,495,554

LIABILITIES & STOCKHOLDERS' EQUITY

Current Liabilities:

Accounts payable

$

4,245,745

$

3,997,789

Accounts payable - related party

478,762

418,922

Accrued liabilities

2,391,313

2,400,090

Warrant derivative liability

1,374,044

984,356

Current portion of capital lease obligations

160,267

149,729

Current portion of royalty liability

804,250

698,408

Current portion of long-term debt

46,320

45,135

Total current liabilities

9,500,701

8,694,429

Long-term Liabilities:

Capital lease obligation, less current portion

162,880

245,703

Long term royalty liability, less current portion

6,677,474

6,839,935

Long-term debt, less current portion

15,342,246

14,483,102

Total Liabilities

31,683,301

30,263,169

Commitments and Contingencies

Stockholders' Equity

Preferred stock, $.000001 par value; 5,000,000 shares authorized; no shares issued and

outstanding

-

-

Common stock, $.000001 par value; 95,000,000 shares authorized; 51,528,544 shares issued and outstanding as of June 30, 2013 and 42,877,770 shares issued and outstanding as of December 31, 2012

52

43

Additional paid-in capital

55,253,597

51,897,890

Accumulated deficit

(51,817,897)

(47,665,548)

Total Stockholders' Equity

3,435,752

4,232,385

Total Liabilities & Stockholders' Equity

$

35,119,053

$

34,495,554

BACTERIN INTERNATIONAL HOLDINGS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

Three months ended June 30,

Six months ended June 30,

2013

2012

2013

2012

Revenue

Tissue sales

$

8,196,554

$

8,113,605

$

16,719,902

$

15,784,554

Royalties and other

70,294

94,667

165,753

193,719

Total Revenue

8,266,848

8,208,272

16,885,655

15,978,273

Cost of tissue and medical devices sales

3,572,674

2,329,432

6,693,360

4,188,154

Gross Profit

4,694,174

5,878,840

10,192,295

11,790,119

Operating Expenses

General and administrative

2,256,287

2,319,851

5,113,369

4,910,623

Sales and marketing

4,205,333

3,835,209

8,003,710

7,981,552

Depreciation and amortization

100,470

95,206

206,848

214,280

Non-cash consulting expense

(932)

(24,069)

(31,229)

304,184

Total Operating Expenses

6,561,158

6,226,197

13,292,698

13,410,639

Loss from Operations

(1,866,984)

(347,357)

(3,100,403)

(1,620,520)

Other Income (Expense)

Interest expense

(1,174,648)

(266,200)

(2,238,636)

(409,052)

Change in warrant derivative liability

460,270

1,301,576

1,095,625

1,519,127

Other income

98,271

42,498

91,065

194,167

Total Other Income (Expense)

(616,107)

1,077,874

(1,051,946)

1,304,242

Net Loss Before (Provision) Benefit for Income Taxes

(2,483,091)

730,517

(4,152,349)

(316,278)

(Provision) Benefit for Income Taxes

Current

-

-

-