2014

Bacterin Reports Third Quarter 2012 Financial Results Revenue Increases 18%; Company Reports 71% Gross Margins and Attains Operational Profitability

Conference Call at 4:30pm ET to Discuss Third Quarter 2012 Results

BELGRADE, Mont., Nov. 7, 2012 /PRNewswire/ -- Bacterin International Holdings, Inc. (NYSE MKT: BONE), a leader in the development of revolutionary bone graft material and antimicrobial coatings for medical applications, today announced its financial results for the third quarter ended September 30, 2012:

Highlights:

  • Revenue increased 18% to $8.9 million in the third quarter of 2012, compared to the $7.5 million for the same period a year ago;
  • The Company reported positive operating income of $213,000 for the third quarter of 2012.  In addition, the Company reported EBITDA of approximately $820,000 compared to $8,000 in the previous quarter and $(316,000) for the third quarter of 2011;
  • Gross Margin was 71% and within the Company's previous guidance of 70 to 75%;
  • The Company secured $25 million in financing with OrbiMed;
  • New marketing programs focused on surgeon education and training have already launched;
  • Inventory increased 54% to $14.5 million, compared to $9.4 million at the end of 2011. Q3 marks the first full quarter since exiting its back order status. Sales personnel are  building their pipelines and getting deeper into sales cycles without manufacturing limitation;
  • Positive clinical results were published on the use of Bacterin's OsteoSponge® SC product for regeneration of subchondral bone, in the peer-reviewed journal Foot & Ankle Specialist;
  • A fourth national GPO contract was announced, with Premier Healthcare Alliance.  
  • Hospital accounts in Q3 2012 increased to 900 facilities, compared to 768 facilities in Q2 2012.          

Management Commentary

"Bacterin had a very productive third quarter, reaching new milestones, and turning the corner from a slower first half that had been impacted by production issues that are now resolved," said Guy Cook, CEO of Bacterin. "We generated over $ 800,000 dollars in positive EBITDA, up from about break even in the previous quarter, and more than a quarter million loss one year ago. We delivered our first quarter of positive operating income, and continued to report strong gross margins at 71%. With the ramp in revenue, we are beginning to get a glimpse of the earnings potential of the company."  

Mr. Cook continued, "We expect revenue in Q4 to be even better and to further support this sales expansion, we have already launched new marketing investments. Bacterin has instituted a key opinion leader (KOL) program enabling top surgeons to travel to our Montana headquarters, witness the production of OsteoSponge and become greater advocates for our products. We have also started more training sessions in the field to help surgeons gain a comprehensive understanding of the intended uses, capabilities and performance of OsteoSponge. With the recent financing secured from OrbiMed, in addition to being EBITDA positive, we now have greater capital and flexibility to accelerate the awareness of our products, with these types of campaigns, which we did not have before.

"In the past, surgeons who had been introduced to our products, ordered it in such rapid abundance, we slipped into a backorder situation. New clean rooms will be ready to go by Q1 2013, an upgrade which supports throughput capacity of $120-$150 million. With capital and capacity needs met, we can now focus our attention more fully on restoring growth trends in sales and anticipated profitability, to industry best levels."

Q3 2012 Financial Results

Revenue for the three months ended September 30, 2012 increased 18% to $8,879,765 compared to $7,539,501 in the comparable prior year period. The increase was largely the result of increased sales generated from our direct sales force and independent distributors compared to the third quarter of 2011.

Costs of tissue sales consist primarily of tissue and medical device manufacturing costs. Costs of sales increased by 97% or $1.3 million to $2.6 million compared to $1.3 million for the three months ended September 30, 2011. As a percentage of tissue sales, cost of tissue sales was 29% of revenues for the third quarter of 2012 compared to 17% in the comparable prior year period.  In the last quarter of 2011, we experienced an increase to the percentage of our overhead expense allocated to cost of tissue sales based upon increased production which resulted in a higher cost of tissue sales than the prior year period.

Gross profit margin for the quarter was 71%, as compared to 72% in the previous quarter and 83% in the year-ago quarter.

Operating expenses decreased 22%, or $1.7 million for the three months ended September 30, 2012 compared to the three months ended September 30, 2011.

General and administrative expenses increased 13%, or $290,037, to $2.4 million for the three months ended September 30, 2012 compared to the same period of 2011. The increase is primarily due to higher administrative costs supporting the higher revenue in addition to added rental and maintenance expense for increased operational space.

As a percentage of revenue, selling and marketing expenses decreased to 38% in the third quarter of 2012 from 64% in the third quarter of 2011.  The decrease was primarily the result of more variable compensation paid to our direct sales force compared to salaries earned in the comparable period of 2011 and a lower corporate sales commission structure.

EBITDA for the quarter totaled $820,154, compared to EBITDA of $8,000 for the previous quarter, and an EBITDA loss of $(315,898) for the third quarter of 2011.

YTD 2012 Financial Results

Revenue for the nine months ended September 30, 2012 increased 18% to $24.9 million compared to $21.0 million in the comparable prior year period. The increase of $3.8 million was largely the result of increased sales generated from our direct sales force and independent distributors compared to the first nine months of 2011.

Costs of tissue sales consist primarily of tissue and medical device manufacturing costs. Costs of sales increased by 68% or $2.7 million to $6.8 million for the first nine months of 2012. The increase was largely the result of increased costs associated with our higher sales. As a percentage of tissue sales, cost of tissue sales was 27% of revenues for the first three quarters of 2012 compared to 19% in the comparable prior year period.  In the last quarter of 2011, we experienced an increase to the percentage of our overhead expense allocated to cost of tissue sales based upon increased production which resulted in a higher cost of tissue sales than the prior year period.

Gross profit margin was 73%, as compared to 81% in the previous period.

Operating expenses decreased 6%, or $1.3 million, for the nine months ended September 30, 2012 compared to the nine months ended September 30, 2011.

General and administrative expenses increased 22%, or $1.3 million to $7,349,852, for the nine months ended September 30, 2012 compared to the same period of 2011. The increase is primarily due to higher administrative costs supporting the higher revenue in addition to added rental and maintenance expense for increased operational space.

As a percentage of revenue, selling and marketing expenses decreased to 46% in the first nine months of 2012 from 64% in the first nine months of 2011.  The decrease was primarily the result of more variable compensation paid to our direct sales force compared to salaries earned in the comparable period of 2011 and a lower corporate sales commission structure.

EBITDA for the first nine months of 2012 totaled $292,657 compared an EBITDA loss of $(1.4) million for the comparable period of 2011.

Cash and cash equivalents and net accounts receivable was $15.8 million at September 30, 2012, compared to a total of $7.8 million at June 30, 2012.

"We believe that product constraints were a short term issue we have resolved and that the future and long term opportunity for Bacterin products, in multi-billion dollar addressable markets, remain very strong. Accordingly, we are narrowing our 2012 revenue guidance to $35 to $37 million, within the previously stated revenue guidance range of $35 to $40 million," said Mr. Cook.

Conference Call Details:

Conference Call Details:

Date: Wednesday, November 7, 2012
Time: 4:30 p.m. Eastern time (1:30 p.m. Pacific time)
Dial-In Number: 1-877-941-1429
International: 1-480-629-9857
Conference ID#: 4572762

The conference call will be broadcast simultaneously and available for replay here and at the investor section of the company's Web site at http://bacterin.com/index.htm.

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 Hayden IR at 1-646-755-7412.

A replay of the call will be available after 7:30 p.m. Eastern time on the same day and until December 7, 2012.

Replay number: 1-877-870-5176

International replay number: 1-858-384-5517

Replay pin number: 4572762

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.

 

Bacterin International Holdings, Inc. 

Reconciliation of Net (Loss) Income From Operations to EBITDA

(Unaudited)






Three Months Ended September 30,


Nine Months Ended September 30,


2012


2011


2012


2011

  Net Loss from ops


212,711



(1,565,632)



(1,407,809)



(3,781,928)

  Depreciation


88,112



119,213



302,392



253,259

  Allocated depreciation


94,486



94,486



283,458



283,458

  Stock option comp


237,978



327,505



623,565



708,704

  Non-cash stock comp


186,867



708,530



491,051



1,097,005



820,154



(315,898)



292,657



(1,439,502)

 

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 launch beta and full product releases, the Company's ability to obtain FDA concurrence use for anti-microbial coatings in a timely manner; the Company's ability to meet its obligations under existing and anticipated contractual obligations; 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, particularly during recessionary periods; 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 impact of increased taxation, 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 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



 September 30, 


December 31,



2012


2011



(unaudited)



ASSETS





Current Assets:





Cash and cash equivalents


$

8,615,988


$

751,111

Trade accounts receivable, net of allowance for doubtful accounts of $1,369,443 and $1,232,806, respectively



7,184,558



7,083,354

Inventories, net



13,409,540



8,479,710

Prepaid and other current assets



630,403



289,326

Total current assets



29,840,489



16,603,501








Non-current inventories



1,083,208



920,542

Property and equipment, net



4,883,231



3,774,140

Intangible assets, net



586,975



656,133

Goodwill



728,618



728,618

Other assets



1,324,338



486,914








Total Assets


$

38,446,859


$

23,169,848








LIABILITIES & STOCKHOLDERS' EQUITY







Current Liabilities:







Accounts payable


$

4,055,348


$

2,654,263

Accounts payable - related party



429,081



513,193

Accrued liabilities



2,250,617



3,762,211

Warrant derivative liability



951,361



2,344,516

Current portion of capital lease obligations



175,175



33,791

Current portion of royalty liability



845,999



-

Current portion of long-term debt



44,465



1,632,978

Total current liabilities



8,752,046



10,940,952

Long-term Liabilities:







Capital lease obligation, less current portion



335,368



89,580

Long term royalty liability, less current portion



6,546,180




Long-term debt, less current portion



14,221,640



6,638,270

Total Liabilities



29,855,234



17,668,802








Commitments and Contingencies







Stockholders' Equity (Deficit)







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;  42,864,250 shares issued and outstanding as of September 30, 2012 and 40,841,218 shares issued and outstanding as of December 31, 2011 



43



40

Additional paid-in capital



51,378,943



45,452,732

Retained deficit



(42,787,361)



(39,951,726)

Total Stockholders' Equity



8,591,625



5,501,046








Total Liabilities & Stockholders' Equity


$

38,446,859


$

23,169,848

 

BACTERIN INTERNATIONAL HOLDINGS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS



Three Months Ended September 30,


Nine Months Ended September 30,


2012


2011


2012


2011

Revenue








Tissue sales

$

8,643,299


$

7,237,118


$

24,427,853


$

20,476,090

Royalties and other


236,466



302,383



430,185



572,690

Total Revenue


8,879,765



7,539,501



24,858,038



21,048,780













Cost of tissue and medical devices sales


2,600,452



1,318,606



6,788,606



4,048,049













Gross Profit


6,279,313



6,220,895



18,069,432



17,000,731













Operating Expenses












General and administrative


2,439,229



2,149,192



7,349,852



6,027,377

Sales and marketing


3,352,394



4,809,592



11,333,946



13,405,018

Depreciation and amortization


88,112



119,213



302,392



253,259

Non-cash consulting expense


186,867



708,530



491,051



1,097,005

Total Operating Expenses


6,066,602



7,786,527



19,477,241



20,782,659













Income (Loss) from Operations


212,711



(1,565,632)



(1,407,809)



(3,781,928)













Other Income (Expense)












Interest expense


(867,894)



(541,163)



(1,276,946)



(1,039,703)

Change in warrant derivative liability


(125,972)



245,024



1,393,155



7,471,409

Other income (expense)


(1,738,202)



(1,302,533)



(1,544,035)



(1,302,533)













Total Other Income (Expense)


(2,732,068)



(1,598,672)



(1,427,826)



5,129,173













Net Income (Loss) Before (Provision) Benefit for Income Taxes


(2,519,357)



(3,164,304)



(2,835,635)



1,347,245













 (Provision) Benefit for Income Taxes












Current


-



-



-



-

Deferred


-



-



-



-













Net Income (Loss)

$

(2,519,357)


$

(3,164,304)


$

(2,835,635)


$

1,347,245













Net income (loss) per share:












Basic

$

(0.06)


$

(0.08)


$

(0.07)


$

0.04

Dilutive

$

(0.06)


$

(0.08)


$

(0.07)


$

0.03













Shares used in the computation:












Basic


42,796,244



39,574,952



42,341,796



38,378,027

Dilutive


42,796,244



39,574,952



42,341,796



43,204,930

Contact:

Hayden IR
James Carbonara, Regional Vice President
646-755-7412
james@haydenir.com

Brett Maas, Managing Partner
646-536-7331
brett@haydenir.com

 

SOURCE Bacterin International Holdings, Inc.



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