NuVasive, Inc.

Greetings and welcome to the New Basis Incorporated Third Quarter 2020 Earnings Conference Call. At this time, all participants are in a listen-only mode. A brief question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. As a reminder, this conference is being recorded. I would now like to turn the conference over to your host, Suzanne Hatcher, Vice President of Internal and External Affairs. Thank you. You may begin.

Thank you. Welcome to NuVasive's third quarter 2020 earnings call. The company's earnings release, which we issued earlier this afternoon, is posted on our website and has been filed on Form 8K with the Securities and Exchange Commission. We have also posted supplemental financial information on the IR website to accompany our discussion. We're going to begin with prepared remarks from our CEO, Chris Berry, and CFO, Matt Harbaugh. Then we'll open it up for Q&A. I would like to remind you the discussions during today's call will include forward-looking statements, which are based on current expectations and involve risks and uncertainties, assumptions, and other factors which, if they do not materialize or prove to be correct, could cause the basis results to differ materially from those expressed or implied by such forward-looking statements. In particular, there is significant uncertainty around the duration and the impact of COVID-19 pandemic on the company's business, operations, and financials. The COVID-19 pandemic continues to evolve, and it is important to note that our commentary reflects our best estimates as of today's date. Additional risks and uncertainties that may affect future results are described in Nuvasiv's news releases and periodic filings with the Securities and Exchange Commission. Nuvasiv assumes no obligation to update any forward-looking statements or information which speak as of their respective dates. This call will also include a discussion of several financial measures that are not calculated in accordance with generally accepted accounting principles or GAAP. We generally refer to these as non-GAAP financial measures. These measures include our cost of goods sold, gross margin, selling general and administrative expenses, research and development expenses, operating margin, non-GAAP earnings per share, pre-cash flow, and EBITDA. Reconciliation is the most directly comparable GAAP financial measures may be found in today's news release and the supplementary financial information, which are accessible from the investor relations section of NewBase's website. With that, I would like to turn the call over to Chris.

Thank you, Suzanne. Good afternoon, everyone, and thank you for joining us. I hope everyone is well and remaining healthy during these times. In the third quarter, we continue to make progress on our business, financial, and operational strategies while keeping safety of invasive employees and customers a top priority. Over the next few minutes, I will discuss our third quarter performance and market trends that led to the company's return to net sales growth year over year. Then Matt will provide details on Q3 financial results, the company's current cash position, and share initial thoughts on our fourth quarter outlook. NuVasive experienced a faster-than-expected recovery from the impact of COVID-19, with net sales of approximately $295 million, representing a growth of 1.5% on a reported basis and 1.2% on a constant currency basis from prior years. These results were primarily driven by a strong international performance, along with several spinal hardware product lines growing at high single digits or better. Offsetting this growth is the clinical service businesses and certain legacy products that declined year over year. Let me provide some additional commentary on quarterly trends. As we track the recovery throughout Q3, month-to-month case volumes and results were relatively consistent. indicating that market volatility has likely flattened. While these trends are encouraging, the market recovery still lacks uniformity, with certain U.S. regions and across the globe. Particular to the invasive U.S. footprint, the Northeast and Southeast regions reached a steadier state more quickly, with others lagging behind. Centrical case volumes in key international markets accelerated, like Japan and Germany and certain regions in the E.U., while others like the UK, Spain, and certain countries in Latin America continue to recover at a much slower rate due to ongoing local COVID-19 impacts. Also throughout the quarter, our clinical professional development team continued to pivot on how we deliver surgeon training to our current and new surgeon partners. Early in the pandemic, we developed a suite of online training resources, and over the last quarter, started to ramp up regional and localized in-person training labs closer to surgeons due to ongoing COVID-19 travel and safety concerns. In the third quarter, the CPD and commercial teams completed about 30% more remote labs than in Q2. In addition, in-person training in our Surgeon Experience Center has increased during the past quarter. And although we have not yet returned to pre-COVID levels, we are seeing steady training events on a weekly basis. In addition, we are moving forward with our commitment to further surgeon development and clinical education with the planned opening of our East Coast Experience Center next year. Surgeons are excited about this new opportunity as it will be located near major transportation hubs, facilitating convenient access for those traveling from domestic and international markets. The team is constantly working with surgeons to best meet their training needs, and they've done a great job given the circumstances over the past year. I'd like to share an update on the Pulse system and Pulse robotics development, as well as the company's innovation roadmap. The engineering and development teams have made significant progress on Pulse, and we still anticipate launching the platform next summer with revenue to be recognized in the back half of 2021. I'm pleased with the team's accomplishments over the last quarter, including the successful completion of the key technical milestones for the hardware and software components. Overall, the platform development is essentially complete. We have now transitioned to integrating testing of the technologies, including neuromonitoring, alignment assessment, patient-specific rod bending, navigation, and our proprietary radiation reduction application, LESRAE. We continue to believe that an integrated system that combines multiple technologies to both meet and advance clinical needs, but also advance and enhance workflow efficiencies will ultimately win in the market. And we are more confident than ever in our enabling technology strategy. Another accomplishment over the last quarter has been surgeons resuming weekly hands-on cadaveric labs of the Pulse platform to validate the integrated technologies and help enhance surgical workflows. Feedback on the technology's enhancements has been very positive, with surgeons citing that it's a one-of-a-kind platform, categorically advantaged over what's on the market today, with the navigation component exceeding their expectations. As previously communicated, we need to file a submission with the FDA, given some of the recent hardware-level updates. While we've been working on the new FDA submission, we also have been focused on dual-track work on our CE-Mark submission, which creates potential for a simultaneous launch of the Pulse platform. We'd originally planned for a phase launch, but our current timeline provides the opportunity for a broader launch. With Pulse development now largely completed and the platform in surge in testing, resources have shifted back to developing Pulse robotics in parallel with Pulse. We've hired several robotic engineers, built a key development leadership position, and further built internal capabilities to advance Nuvasiv's robotic program. Our timeline expectations for first in human use for Pulse Robotics in 2022 remains unchanged. It can't be overstated that focusing on a successful launch of the Pulse platform followed with an add-on of Pulse Robotics application is key to our long-term enabling technology strategy. We believe the value proposition of an integrated platform proceduralizing spine surgery with safer, more predictable outcomes with the robotic capability resonates more than ever with surgeons and hospitals. As we execute on our enabling technology roadmap and further proliferate the benefits of less invasive surgery, there are also several significant technologies we plan to launch by year end. First and foremost is the launch of our new cervical portfolio branded C360. The C stands for cervical and 360 refers to the comprehensive procedurally integrated solutions to treat cervical, degeneration, trauma, and deformity. The C360 portfolio includes several new products with highly differentiated features and integrates best-in-class access, implants, anterior and posterior fixation systems, enabling technologies, and biologic materials into a procedural solution for cervical spine. A key technology set to launch in December is an anterior cervical plate system, featuring the thinnest plate currently on the market and designed to help reduce common postoperative complications. In 2021, we plan to launch a posterior cervical system with new instrumentation and implant options that seamlessly integrate with our market-leading Reliant Thoracolumbar System. This includes Reliant Cervical which will round out the C360 portfolio and feature similar design principles of the current reliant system to provide a complete posterior spine fixation solution. With these additions to our portfolio, we believe our complex cervical spine surgery solutions will be the most comprehensive on the market. With a global cervical market opportunity at approximately $2.6 billion and the basis current share in the low single digits, there is a tremendous opportunity for growth ahead. This new full line of cervical products also demonstrates New Basics' ongoing commitment to being a surgeon partner of choice in cervical and execution against our five-year strategy. In addition to the new cervical systems, we are furthering our advanced material science portfolio with the launch of Coher X-Lift next month, the first FDA-cleared porous peak implant that will be brought to market for use in X-Lift. In conjunction, the company will introduce the Cohere EXLIF AMS plate, which is a low-profile anti-migration plate that allows for up to two points of fixation in EXLIF surgeries and rounds out the advanced material science portfolio. Recent clinical research studies have been completed on porous peak antibodies, which demonstrate the efficacy of this first-of-its-kind technology. Further preclinical studies have shown that porous peak technology improved cellular response with three times the integration strength of smooth or titanium coated PEEP technology, as well as durability, imaging capabilities, and stiffness. Cohere XLIP is yet another example of Nuvasiv combining its expertise in lateral implant design with the clinically validated porous surface technology. Lastly, As the leader in less invasive lateral spine surgery and focused on procedural techniques that help improve patient outcomes, Nuvasiv has been pioneering single-position procedures in both lateral and prone patient positioning for many years. Our global KOL team started performing excellent prone cases in early 2010, and we continue to partner with our KOLs to further enhance the safety profile and reproducibility of this procedure. NuVasive is uniquely positioned to be able to offer comprehensive single-position surgery for all levels, patient anatomy and pathology, in addition to developing a robust education framework to apply these techniques to maximize both surgeon and patient benefits. Regardless of which single-position approach and procedures surgeons deploy, XLIF, X360, XLIF-prone, or TL-posterior procedures, NuVasive is well-positioned to continue to lead in the lateral surgery market. As I wrap up my formal remarks, I'd like to emphasize that I'm encouraged by the faster recovery in the market and the more stable spine environment over the last several months. Although it remains unclear when pre-COVID case volumes fully return, especially as we face a recent global resurgence of coronavirus, leading to some governments reimposing lockdowns and healthcare facility restrictions, the management team is committed to executing our five-year strategic plan. We continue to maintain the same level of R&D investment we budgeted for at the beginning of the year and are excited to launch some game-changing technology in cervical and our AMS portfolio over the next months. With this ongoing commitment to innovation in 2021, we have approximately 20 new alpha and commercial launches planned to support our position as the innovator in spine. These new technologies directly align with our leveraging our leadership position in less invasive and lateral surgery to drive increased share investing in penetrating favorable open markets and procedurally integrating with enabling technologies in less invasive and open surgery. We are making solid headway on many commercial and operational initiatives while maintaining rigor and discipline on expense management throughout the organization. I'm confident in our long-term plan, and we continue to invest in key growth drivers of the company to create and drive shareholder value. Thank you, and I'd like to turn the call over to Matt to discuss the company's financials.