NuVasive, Inc.

Good day, ladies and gentlemen, and welcome to the NuVasive Second Quarter 2021 Earnings Conference Call. I would now like to introduce your host for today's call, Ms. Juliette Cunningham, Vice President of NuVasive Investor Relations. Please go ahead, Ms. Cunningham.

Thank you. Good afternoon, everyone, and welcome to our Second Quarter 2021 Financial Results Conference Call. Joining me today are Chris Berry, Chief Executive Officer of and Matt Harbaugh, Chief Financial Officer. Chris will provide an overview of Nuvasiv's recent business results and trends, and Matt will review our detailed financial results, as well as the company's 2021 financial guidance. Then we'll host a question and answer session. If you have not had a chance to review our earnings release, which was released after market closed today, it can be found on the investor relations section of our website, The release has also been filed with the SEC on Form 8-K. In addition, we've posted to our website supplementary slides to summarize our results. If you'd like to be on the distribution list for our IR materials in the future, please drop me a note and I'll be happy to add you to our list. This call today is being recorded and webcast live to all interested parties. The audio portion of this call will be available on the investor relations section of our website approximately two hours after this call, and it will be archived there for 30 days. Our remarks today will include a discussion of financial measures that are not calculated in accordance with generally accepted accounting principles or GAAP. For a full reconciliation of GAAP to non-GAAP financial measures, please see the reconciliation tables provided in our second quarter 2021 earnings release and the supplementary slides posted on our website. The discussion during today's call will include forward-looking statements. It's our intent that all forward-looking statements will be protected under the Private Securities Litigation Reform Act of 1995. Forward-looking statements are based on current expectations and are subject to risks and uncertainties. Actual results may differ materially from those expressed or implied by such forward-looking statements. In particular, there is significant uncertainty around the duration and impact of the COVID-19 pandemic on the company's business, operations, and financials. The COVID-19 impact continues to evolve And it's important to note that our commentary reflects our best estimates as of today. To better understand these risks and uncertainties that may affect our future results, we refer you to the documents that we file with the Securities and Exchange Commission, including Nuvasiv's most recent Forms 10-Q and 10-K. Nuvasiv assumes no obligation to update these statements. Before I hand the call over to Chris, let me summarize our top line performance. NuVase has delivered second quarter 2021 net sales of $294.8 million, an increase of 44.8% on a reported basis or 43.3% on a constant currency basis compared to the prior year period. Later in the call, Matt will provide detailed financials for the second quarter and commentary on our expectations for the remainder of the year. And now, I'd like to introduce Chris Berry.

Thank you, Juliette, and good afternoon, everyone. Earlier today, we reported second quarter 2021 financial results. On this call, I will provide updates on our progress delivering multiple vectors of growth in key procedural segments in international markets and our upcoming commercial launch of the Pulse platform. We're evolving from an implant-focused company to the largest spine technology company in the world. As discussed, we continue to focus on multiple vectors of growth, making deliberate investments in select procedural segments where we've historically had underrepresented market share and commercial operations to further globalize our business. This was reflected in our quarterly performance, which was in line with 2019 results. and I'm encouraged by the progress and momentum we were building for the back half of the year. Our business continued to show signs of improved recovery across all procedural segments as we began to see stabilization in the U.S. and key international markets. Results in U.S. spinal hardware were driven by continued adoption of our C360 cervical portfolio, and improvement in thoracolumbar led by our ALIF procedure with modulus ALIF. As outlined previously, there is a $2.6 billion opportunity in cervical, and we are committed to taking share in this key subsegment. In Q2, we saw continued growth of C360, our comprehensive portfolio for anterior and posterior cervical spine surgery. Our new invasive ACP system The thinnest interior cervical plate currently on the market is procedurally integrated with our differentiated advanced material science technologies, the Modulus Cervical Implant and Cohere Cervical Implant. As we shared last quarter, the Nuvasiv Simplify Cervical Disc achieved a regulatory milestone of U.S. FDA approval for two-level cervical total disc replacement in April. making it one of only three devices approved for use in two-level CTDR procedures. This is a truly differentiated product in the market. These results, along with early surgeon feedback and adoption, validate our strategic investment and further our continued growth in one of the largest subsegments in spine. There's a $900 million opportunity in the anterior spine subsegment. and we are well positioned to continue leading in this space. In the second quarter, our ALIF procedure was the primary driver of thoracolumbar improvement, led by Modulus ALIF, which we commercially launched last week following successful clinical evaluations. Modulus ALIF is the latest 3D-printed porous titanium implant in our AMS portfolio, and it supports our goal of becoming number one in ALIF. In addition, a new journal article was recently published comparing single-position surgery, or X360, to dual-position lumbar fusion. The article helps validate the benefits of X360, outlining shorter hospital time and stays with X360 while maintaining similar clinical outcomes. These results build on our prior literature validation of X360, a comprehensive system enabling surgeons who access every single level of lumbar spine in lateral, pronolateral, ALIF, and posterior fixation procedures, all while keeping the patient in a single position. The integration of the XLIF, XALIF, and X fixation procedures into a single system helps deliver clinical, financial, and operational outcomes for all stakeholders. Posterior spine surgery is a $1.6 billion opportunity and remains an important growth driver for the company. In Q2, we saw continued improvement in our posterior fixation offering, particularly with RELYON 3D used in pediatric complex deformity procedures. Clinical evaluations for COHER T-LIFT-A and COHER T-LIFT-O are underway, which expands our porous peak technology to the T-LIFT procedure and will launch later this year. International continues to be a significant contributor to growth for the company in the near and long term. The recovery and second quarter 2021 net sales was supported by strong international growth. This quarterly performance is a testament to our investment in commercial operations, progressing our long-term strategy for low to mid double-digit growth in our international business. In particular, these results were led by the Asia Pacific and European regions where leadership, operations, and commercial execution led to continued expansion of our core spine business in these markets. I'm encouraged from what I've seen. However, we have more work to do to further globalize our footprint and bring our game-changing technologies to help more patients around the world. Now turning to innovation. We increased our investment in R&D expense year-over-year to advance our innovation roadmap in each procedural segment, and our spine portfolio has never been stronger. Like we did with the XLIP procedure, Pulse has the ability to transform spine surgery and the trajectory of the company. The evolution from a spinal hardware company to a provider of a comprehensive spine solution is supported by this first-of-its-kind technology. Let me be clear, Pulse is not just a navigation system. Pulse is an integrated platform with multiple applications that can be utilized in 100% of spine procedures. This differentiated platform helps address some of the most common clinical challenges in spine surgery with radiation reduction, imaging enhancement, rod bending, navigation, intraoperative neuromonitoring, wireless connectivity, and spinal alignment technologies. We recently received CE certification and clinical evaluations are underway in six European countries. we remain on track for an expanded launch in targeted global regions of the PULSE platform later this summer as we currently await U.S. FDA 510 clearance. During PULSE clinical evaluations, surgeons have completed a variety of cases from degenerative and deformity pathologies to cervical, thoracic, and lumbar procedures. Throughout each case, the seamless integration among all of the technologies in a single condensed footprint is one of the most significant differentiators of the technology. Throughout cases, it was evident Pulse's wireless connectivity, which allows everyone in the operating room to easily manage their respective roles while not interfering with the surgeon's display, is a major step in making surgery more efficient. Surgeon feedback continues to reflect our internal expectations and reaffirms our strategy with this highly differentiated technology platform. To further validate the platform, we recently completed a cadaveric study comparing screw placement with pulses navigation to traditional fluoroscopy. Pulse navigation significantly outperformed traditional fluoroscopy across all categories measured, including operating room efficiency, screws were placed 40% faster, accuracy, there was significant more accurate screw placement, and safety. Screw placement using fluoroscopy on average resulted in 14 times more radiation exposure to the surgeon. Incredible results, which demonstrate the superiority of PULSE and its ability to be an integral tool in the surgical workflow. It's still early days in enabling technology adoption, and we see incredible opportunity for the platform. PULSE is designed to increase safety, efficiency, and procedural reproducibility with unmatched benefits to the surgeon, hospital, and patient. With its ability for utilization in 100% of spine procedures, participation throughout the entire operating room workflow, and its extensible architecture for future applications, Pulse has the ability to disrupt the spine market. Nuvasiv is the industry leader in surgeon education and training. Our clinical professional development programs play a pivotal role in helping surgeons adopt our less invasive surgical techniques and enabling technologies. As COVID-19 restrictions eased and travel began to resume, we experienced a double-digit increase in surgeons trained quarter over quarter, which is in line with our 2019 numbers. Our surgeon training courses scheduled for the remainder of the year support increased surgeon interest and availability. In addition to a world-class training facility in San Diego, courses will take place at our East Coast Experience Center, which is on track to open later in Q3. As we shared earlier today, the company is providing full-year 2021 financial guidance. The return to more normal business conditions and elective surgery stabilizing provided us more confidence in formulating expectations for the remainder of the year. As I look ahead, we have immense opportunities in front of us with the strongest innovation pipeline in spine, which enables us to grow across all procedural segments. Pulse, a differentiated platform that has the ability to transform spine surgery and our continued expansion across all global markets. I'm being confident in our long-term strategy, supported by R&D investment, efficiency gains in the supply chain, and commercial execution. Our talented team is committed to becoming the largest spine company in the world, and I couldn't be more excited of what's ahead for Newvasive. I'll now turn the call over to Matt to discuss the company's second quarter financial results in more detail.