Greetings and welcome to the Xtant Medical Second Quarter 2022 Financial Results Conference Call. At this time, all participants are in a listen-only mode. As a reminder, this conference is being recorded. I would now like to turn the conference over to Matt Steinberg of FINN Partners. Please go ahead.

Thank you, operator, and welcome to Xtant Medical’s second quarter 2022 financial results call. Joining me today is 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 Factor section of the company’s Annual Report on Form 10-K filed with the SEC on March 8th, 2022, 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 the tables of our press release and are otherwise available on our website. Note that our Form 8-K, filed with our financial results press release, provides a detailed narrative that describes our use of such measures. For the benefit of those of you who may be listening to the replay, this call was held and recorded on Thursday, August 4th, at approximately 9:00 A.M. Eastern Daylight Standard 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.

Thank you, Matt, and good morning, everyone. For the second quarter, total revenue increased by 2% year-over-year, led by growth in our biologics products of 8% year-over-year. More importantly, this was our highest revenue quarter since the start of the pandemic, a positive indication that demand trends are becoming more favorable. Xtant remains focused on delivering our products to patients who seek life-altering spine procedures and other much-needed care. Under a challenging market environment, we achieved revenue growth on both a sequential and year-over-year basis, even while passing on revenue opportunities due to multiple open positions under production lines. As we review our overall performance and market conditions, recall that the first quarter of this year started off with spine and other elective surgical procedures resuming slowly due to the spread of the Omicron variant of COVID-19, but ramped up starting in the middle of the first quarter. The second quarter was a more normalized environment for elective procedures. We generated strong demand throughout our selling channels during the second quarter, particularly from our newer biologics products led by the OsteoFactor, a marrow-derived growth factor product, and OsteoVive Plus, a cellular allograft product. As a reminder, our four key initiatives that we believe will continue to drive our growth are one, new product introductions; two, distribution network expansion; three, adjacent market penetration; and four, strategic acquisitions. The strength of our new products gives us a good roadmap in creating organic opportunities in future years. While we are currently focusing on our most recent products that expand our reach into new markets, we are also looking at future product launches over the longer term that will support our penetration of the $2.4 billion U.S. orthobiologic market. Now turning to our distribution network, over the past few years, we have built an extensive sales channel of independent commission agents and distributors in the U.S., while also enabling our agents to gain access to integrated delivery networks or IDNs and through group purchasing organizations or GPOs. We have established contracts with all the major GPOs as well as over 385 IDN contracts across the U.S. For the second quarter, we are pleased to have hit our target of adding more than 10 distributors per quarter. However, given the robust demand environment combined with current production labor constraints, which I will elaborate more on shortly, we may temper the speed of bringing on future distributors to align with the speed that we are able to build inventory. Our third key pillar targeting adjacent market penetration remains an important part of our strategy that represents a total market opportunity of $625 million. Based on current demand trends and production labor constraints, our primary focus was delivering into existing private label and OEM business and less on new opportunities. Nevertheless, we view the adjacent markets as an important part of our growth and an opportunity to diversify our revenue. Our last pillar is leveraging our growth platform to find technologies that we can acquire. As we have previously communicated, we feel this strategy can provide a path to accelerate growth, but it is a strategy that takes time to execute. We will remain diligent in our approach to acquisitions. Now, to discuss our operations and the broader supply chain challenges that are not only affecting our market, but the global economy, we continue to incur higher production costs, which are adversely affecting our gross margins, and we anticipate these higher costs will linger in the near term, especially if inflationary pressures continue. Additionally, due to heightened demand, we are working to expand the size of our production team, enhance our production efficiencies, and create higher yields. Moreover, we are temporarily outsourcing our non-core product lines that typically carry lower margins to help us with capacity. This is a process that takes time, but we are moving quickly in an effort to optimize our capacity, which we believe will enhance our bottom line. To recap, our team continues to do a great job running the business, executing on our commercial strategy, and managing operations. Achieving the strongest quarterly revenue since the onset of the pandemic gives us added confidence that our growth strategy is starting to take hold. Entering the second half of 2022, our efforts will be centered around our goal to take share of the vast U.S. orthobiologics market, accelerating growth opportunities, and improving production efficiencies. With continued execution, we're optimistic that we can build on this momentum going forward. Now, I'd like to turn the call over to Scott, who will discuss our second quarter 2022 financial results.

Thank you, Sean. Good morning, everyone. Total revenue for the second quarter of 2022 was $15.3 million compared to $14.9 million in the same quarter the prior year. This 2% increase in revenue is attributed, primarily to introductions of new products and increased private label and OEM sales. Gross margin for the second quarter of 2022 was 54.8% compared to 63.5% for the same period in 2021. The decrease is primarily attributable to higher product costs and decreased charges for excess and obsolete inventory. Operating expenses for the second quarter of 2022 totaled $9.7 million compared to $10 million for the second quarter of 2021. As a percentage of total revenue, operating expenses were 63% compared to 67% for the same period a year ago. General and administrative expenses were $3.8 million for the three months ended June 30th, 2022 compared to $4.2 million for the same period in 2021. This decrease is primarily attributable to legal settlement expenses incurred during the prior year period. Sales and marketing expenses were $5.6 million for the three months ended June 30th, 2022, which is comparable to the prior year period. Net loss in the second quarter of 2022 was $1.7 million or $0.02 per share compared to a loss of $0.7 million or $0.01 per share in the comparable 2021 period. Non-GAAP adjusted EBITDA for the second quarter of 2022 totaled a loss of $0.4 million compared to non-GAAP adjusted EBITDA of $0.9 million for the prior year period. As of June 30th, 2022, we had $16.8 million of cash and cash equivalents, $8.6 million of net accounts receivable, $16.5 million of inventory, and $4.1 million available under a revolving credit facility. Now, I'll turn it back to Sean for closing remarks.

Thank you, Scott. To recap, we closed the first half of 2022 on a positive note, with the best quarterly revenue in nearly three years, reflecting promising business trends and returns of our four key pillars. Of note, we are pleased with the growth in our biologics business and the strong demand throughout our selling channels, particularly from our latest product introductions. While we continue to navigate through the challenging supply chain environment and broader inflationary pressures, our team has taken prudent measures to mitigate its effects on our overall business. Most importantly, we are ensuring that production yields are at the highest levels and operations are efficiently managed. Finally, each and every day our employees live by our mission of honoring the gift donation by allowing our patients to live as full and complete a life as possible. I appreciate and thank them for their dedication and commitment in ensuring that we successfully fulfill this mission and deliver critically needed solutions to patients desperately in need of treatment. Thank you for joining us today for your continued support. I will now turn it back over to the operator.

Thank you. This concludes our call. All parties may now disconnect.