Bacterin International, Inc. Reports Third Quarter 2011 Results

BELGRADE, Mont., Nov. 10, 2011 /PRNewswire/ -- Bacterin International Holdings, Inc. (NYSE Amex: BONE), a leader in the development of revolutionary bone graft material and antimicrobial coatings for medical applications, reported results for the third quarter ended September 30, 2011.

Q3 2011 Financial Highlights

• Revenue up 80% from the same year-ago quarter to $7.5 million, marking the eighth consecutive quarter of record revenue
• Operating loss improved by 25% over prior year results
• Secured $15 million credit facility with MidCap Financial and Silicon Valley Bank

Q3 2011 Operational Highlights

• Acquired assets of Robinson MedSurg LLC, a medical device distribution company focused primarily on maxillofacial and craniofacial surgery devices
• New hires and management reorganization helped drive the company’s most active processing quarter in its history
• Increased hospital accounts to 584 facilities, an increase of 70% over 343 facilities in Q3 2010
• Achieved quarterly gross margin of 82.5%, above the company’s targeted guidance of 75%-80%

Q3 2011 Financial Results

Revenue for the quarter was a record $7.5 million, up slightly from the previous quarter and an increase of 80% compared to $4.2 million in the same year-ago quarter. For the first nine months of 2011, revenue totaled a record $21.0 million, up 108% versus $10.1 million in the same period in 2010. The increase in revenue was primarily attributed to the company’s continued market penetration, driven by unique product benefits for both the patient and medical care provider, combined with the continued expansion of the company’s direct sales force.

Gross profit margin for the quarter was 82.5%, as compared to 76.8% in the previous quarter and 83% in the year-ago quarter. For the first nine months of 2011, gross profit margin was 80.8% versus 81.9% in the same year-ago period.

Operating expenses for the quarter totaled $7.8 million, as compared to $6.0 million in the previous quarter, and $5.6 million in the third quarter of 2010. For the first nine months of 2011, operating expenses totaled $20.8 million, as compared to total operating expenses of $12.9 million in the same year-ago period. This increase was largely the result of increased sales, salaries and commission expenses associated with the revenue increase between the periods.

Operating loss for the quarter was $1.6 million, versus $0.3 million in the previous quarter, and compared to $2.1 million in the third quarter of 2010.

Net loss was $3.2 million or $(0.08) per basic share for the quarter. This compares to net loss of $405,000 or $(0.01) per basic share in the previous quarter, and a net loss in the same year-ago quarter of $9.0 million or $(0.26) per basic share. The third quarter net loss includes $1.3 million for a one-time write-off of a debt discount associated with the Midcap financing transaction and $371,000 for the prepayment of interest expense.

In the first nine months of 2011, net income was $1.3 million or $0.04 per basic share, including the decrease in non-cash warrant derivative liability of approximately $7.5 million. This compares to a net loss of $12.7 million or (0.42) per basic share in the same period of 2010, which included an increase of approximately $6.8 million in non-cash warrant derivative liability.

EBITDA for the quarter totaled a loss of $316,000, compared to positive EBITDA of $35,000 for the previous quarter, and EBITDA loss of $818,000 in the third quarter of 2010. The sequential decrease in EBITDA for the third quarter of 2011 was primarily due to increased sales salaries and commissions expenses (see the definition and an important discussion of EBITDA, a non-GAAP term, in “About the Presentation of EBITDA”, below.)

Cash and investments at September 30, 2011 totaled $1.8 million, as compared to $1.4 million at June 30, 2011. The increase in cash during the quarter was primarily due to increased sales, and the net proceeds after the repayment of debt from the company’s recently secured $15 million credit facility. The $15 million dollar credit facility included an initial draw down of $7 million and has $8 million available for future acquisitions.

Management Commentary

“We increased our revenue 80% in third quarter over the same year-ago period, and it marked our eighth consecutive quarter of record revenue growth,” said Guy Cook, Bacterin’s chairman and CEO. “While revenue was up marginally on a sequential quarterly basis, we were able to overcome the typical seasonally down quarter for the industry.

“This success was largely due to the fact that we strengthened our infrastructure with new hires and completed a management restructuring, both of which increased the efficiency of our operational platform in terms of procuring donor tissues and processing capacity. This led to our best processing performance for a quarter, and we believe our platform is now set to support $120 million to $175 million in revenue without further expansion.

“We also significantly improved our donor supply during the quarter by signing four new procurement organizations, doubling the number of procurement agencies since 2010. We now believe our donor supply is sufficient to support our anticipated growth through 2013.

“Supporting our existing product growth outlook is a new orthopedic implant product line that we anticipate being able to distribute in 2012. Following anticipated FDA approval in 2012, we also plan to enhance these orthopedic implants with our anti-microbial coating technology. In the quarter, we secured a credit facility of which $8 million is available for potential acquisitions that would be synergistic and complementary to our business.

“For the remainder of the year, we will continue to leverage our higher margin business model and sales force to execute on further market penetration within our expanding networks of hospitals and medical providers.

“We believe this sales ramp-up will help drive another record revenue quarter and believe our annual revenues will be in the range of $30 million to $32 million. Based upon the achievement of the midpoint of this range, we believe we will have positive operating income in the Q4. And now with our strengthened infrastructure, broadened donor supply, and comprehensive product portfolio, we remain comfortable with our previously stated expectation of $53 million to $56 million in revenue in 2012.”

Conference Call

Bacterin will hold a conference call later today, November 10, 2011 to discuss these financial results. Bacterin’s management will host the call starting at 4:30 p.m. Eastern time. A question and answer session will follow management’s presentation.

The conference call will be broadcast simultaneously and available for replay here and at the investor section of the company’s Web site at www.bacterin.com.

Please call the conference telephone number 5-10 minutes prior to the start time. An operator will register your name and organization and ask you to wait until the call begins. If you have any difficulty connecting with the conference call, please contact Liolios Group at 1-949-574-3860.

A replay of the call will be available after 7:30 p.m. Eastern time on the same day and until November 10, 2011:

About Bacterin International Holdings

Bacterin International Holdings, Inc. (NYSE Amex: BONE) develops, manufactures and markets biologics products to domestic and international markets. Bacterin’s proprietary methods optimize the growth factors in human allografts to create the ideal stem cell scaffold to promote bone, 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, employs, and licenses bioactive coatings for various medical device applications. Bacterin’s strategic coating initiatives include antimicrobial coatings designed to inhibit biofilm formation and microbial contamination. For further information, please visit www.bacterin.com.