Bacterin's CEO Discusses Q2 2012 Results - Earnings Call Transcript

Bacterin International Holdings, Inc. (BONE)

Q2 2012 Results Earnings Call

August 9, 2012 4:30 PM ET

Executives

John Gandolfo – Chief Financial Officer

Guy Cook – Founder and CEO

Analysts

Matt O'Brien – William Blair

Nathan Cali – Noble Financial

Anthony Vendetti – Maxim Group

Bruce Jackson – Northland Capital Markets

Greg Garner – Singular Research

Presentation

John Gandolfo

Good afternoon. And thank you for participating in today’s conference call to discuss Bacterin’s Second Quarter Financial Results for the period ended June 30, 2012. My name is John Gandolfo. I’m the Chief Financial Officer of Becterin and with me today is Guy Cook, our Chief Executive Officer and Founder. Following Guy’s remarks as well as my own, we will open up the call for your questions.

Before the conclusion of today’s call, I’ll provide the necessary precautions regarding forward-looking statements made by management during this call. I would like remind everyone that the replay of this call will be available for one month starting later this evening. A webcast replay will also be available via the link provided in today’s press release, as well as at the Investor section of our website at www.bacterin.com.

Now, I would like to turn the call over to our Chief Executive Officer, Guy Cook.

Guy Cook

Thank you, John. Good afternoon, everyone. Thank you for joining us today to discuss our second quarter 2012 results. We issued a press release this afternoon announcing our earnings results.

Revenue for the quarter was $8.2 million, compared to $7.8 million in the previous quarter, an increase of 9%, compared to $7.5 million in the second quarter of 2011. Excluding the $1.2 million stocking order sale included in our second quarter 2012 revenue figure, second quarter 2012 revenues increased 30% over second quarter 2011.

Revenue for the first half of 2012 achieved 45% of our annual guidance. We have substantially increased our available inventory and marketing costs, as well as increase in our processing capabilities, which we expect to have a positive impact on revenue in third quarter of 2012 and from thereon.

Inventory increased 42% by the end of quarter from $9.4 million at the end of 2011 to $13.3 million. As of June 30, 2012, we have approximately $1.3 million of inventory at costs on consignment hospital account, which translates to approximately $7.1 million of inventory at retail value.

Inventory is now readily available through our sales force and by end of the second quarter we had 768 active facilities. We are optimizing our processing facility to meet the demand for our products, including hMatrix, which we believe will be positively impacted on our new reimbursement cost.

Largely the 72% remain solid, including the guidance range of 70% to 75%. At June 30, 2012, we had approximately $1.2 million in cash and net account receivables of approximately $6.6 million.

Before we go much further, I’d like to turn the call over to our CFO, John, who will set us the summary of the quarter and year’s financial results, when he is finish, I’ll return to give a more detail operational update and a look ahead. John?

John Gandolfo

Thanks, Guy. Now turning to our results in the second quarter of 2012, as Guy mentioned, revenue for the quarter $8.2 million, compared to $7.8 million in the previous quarter, and an increase of 9% compared to $7.5 million in the second quarter of 2011.

Second quarter 2011 sales included a stocking order sale of distributor of approximately $1.2 million and excluding this sale, quarterly revenues increased approximately 30% over the prior year.

The year-over-year increase was largely the result of increase sales generated from the company’s direct sales force and independent distributors compared to the second quarter of 2011.

Gross profit margin for the quarter was 72%, as compared to 76% in the previous quarter and 77% in the year ago quarter, reflecting the addition of the second production shift in 2012, as well as increased allocation of G&A expenses due to increase production.

Operating expenses for the quarter totaled $6.2 million, as compared to $7.2 million in the previous quarter and $6.1 million in the second quarter of 2011.

Operating loss for the quarter was $347,000, compared to $1.3 million in the previous quarter and $280,000 in the second quarter of 2011.

Net income was approximately $731,000, or $0.02 per basic share for the quarter and this compares to a net loss of $1.1 million, or $0.03 per basic share in the previous quarter, the net loss in the second quarter of 2011 of approximately $405,000, or a penny per share.

EBITDA for the quarter totaled a positive $8,000, and this compared to an EBITDA loss of approximately $540,000 for the previous quarter and EBITDA of $35,000 in the second quarter of 2011.

Please see definition and important discussion about our use of the EBITDA and non-GAAP term in today’s earnings release which is now available in the Investor section of our website.

Now turning to the balance sheet, cash and cash equivalents and net accounts receivable was $7.8 million at June 30th, this compared to a total of $7.8 million at December 31, 2011.

We also have future access to approximately $3 million on non-dilutive revolving AUR credit facility, which closed in April of this year. The formula for drawing this fund is based upon 80% of our eligible accounts receivable balance.

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