Orthofix Medical Inc.

Ladies and gentlemen, thank you for standing by, and welcome to the OrthoFix fourth quarter 2020 earnings call. At this time, all participants' lines are in a listen-only mode. After this speaker's presentation, there will be a question and answer session. To ask a question during the session, you will need to press star 1 on your telephone keypad. I would now like to hand the comments over to your speaker today, Ms. Alex Huerta, Senior Director of Investor Relations. Thank you. Please go ahead.

Thank you, operator, and good morning, everyone. Welcome to the OrthoFix fourth quarter and full year 2020 earnings call. Joining me on the call today are our president and chief executive officer, John Cervosic, and chief financial officer, Doug Rice. I'll start with the safe harbor statement and then pass it over to John. During this call, we will be making forward-looking statements that involve risks and uncertainties. forward-looking statements, including any earnings guidance we provide and any statement about our plans, beliefs, strategies, expectations, goals, or objectives. Investors are cautioned not to place undue reliance on such forward-looking statements as there is no assurance that the matters contained in such statements will occur. The forward-looking statements we will make on today's call are based on our beliefs and expectations as of today, February 26, 2021. We do not undertake any obligation to revise or update such forward-looking statements. Some factors that could cause actual results to be materially different from the forward-looking statements made by us on the call include the risk factors disclosed under the heading Risk Factors in our Form 10-K for the year ended December 31st, 2020 and filed this morning, as well as additional SEC filings we make in the future. If you need copies of these documents, please contact my office at OrthoFix in Louisville, Texas. In addition, on today's call, we will refer to various non-GAAP financial measures. We believe that in order to properly understand our short-term and long-term financial trends, investors may wish to review these matters as a supplement to the financial measures determined in accordance with US GAAP. Please refer to today's press release announcing our fourth quarter and full year 2020 results for reconciliations of these non-GAAP financial measures to our US GAAP financial results. At this point, I will turn the call over to John.

Thank you, Alexa. Welcome everyone and thank you for joining our fourth quarter and full year 2020 results conference call. On today's call, I'll provide an update of our fourth quarter performance. I will then review the progress we've made against each of our strategic initiatives throughout the year before handing the call over to Doug, who will provide our financial update. I'll close with perspective on the business in 2021 before opening the line for questions. Shifting to our fourth quarter performance, we are pleased with our performance for the quarter, delivering a total revenue of $118 million, which was down 3% on a reported basis and 4% on a constant currency basis compared to the prior year quarter, largely driven by strong performance of our spinal implants and a rebound of our BGT business, all offset by COVID-related elective procedure volume headwinds that impacted our entire business, including our biologics and extremities business, total revenue during October and November was flat to slightly up as compared to the prior year. But moving into December, we did see a negative impact on revenues in various geographies based on the COVID slowdown in elected procedures. On a sequential basis, total revenue grew 6% over the third quarter of 2020. Despite the uncertain operating environment, we were very pleased with our performance during the quarter, which reflects continued execution throughout our organization. Now let's turn to the performance within each of our business units. I'll first cover our spine products category starting with bone growth therapies. Sales were down 1% versus prior year with performance at many of our legacy accounts continuing to be impacted by COVID-19 and closely tracking with the trends we are seeing in the elective case volume. These declines were offset by revenue contribution from competitive conversions. On a sequential basis, bone growth therapies is up 7% over third quarter. The sequential growth in this business demonstrates our ability to continue to work with our physician customers to identify patients in need of our products. Our team has truly adapted to the environment to provide flexible service solutions for these patients, including remote and virtual fitting when necessary. Moving to spinal implants, we are excited to report that global revenue was up 9% as reported based on the fourth quarter of 2019. As a reminder, this category is made up of our spine fixation and motion preservation products, which are typically used in elective procedures. The primary driver of this result was an 11% growth in U.S. spine implant revenues, largely as a result of strong M6 disc cells. Within spinal implants, spine fixation was down 6% as compared to 2019, which was caused not only by the slowdown of elective procedures, but a reduction in the number of complex cases being performed. As a reminder, complex cases typically require overnight and lengthy hospital stays. The COVID environment has limited these cases by hospital policy in many regions. This softness was offset by continued strong performance in our U.S. motion preservation business, with sales growth of $3.7 million, up 129% over prior year quarter. The demand for our marketing-led M6 artificial cervical disc has continued, with strong transports towards surgeon training and revenue driven by new surgeon customers. This will be the last quarter that we will break out the motion preservation business from the rest of the spinal implants as we'll focus on our portfolio performance moving forward. Turning to our biologic portfolio, revenue was down 9% versus prior year, primarily as a reduction in elective procedure volumes during the quarter, combined with channel disruption and continued price pressure in the market. Now moving to our global extremities business, sales were down 15% on a reported basis versus prior year and 18% on a constant currency basis, primarily due to lower procedure volumes attributed to the COVID-19, particularly in our international markets and the non-reoccurrence of certain large stocking orders occurring in the fourth quarter of 2019. Next, I would like to provide an overview of the progress we have made within each of our four focus areas. Our commentary has previously focused on our accomplishments during the quarter, but given how chaotic 2020 was, I'd like to take a step back and review what we were able to accomplish during the COVID headwinds. Starting with our first initiative to improve structure and leadership, at the beginning of 2020, we looked significantly different than we do today. In a relatively short period, we overhauled a majority of our organization. Structurally, we completed the realignment of our business units to focus on spine and extremities, which has improved our coordination and set up an opportunity to maximize revenue across the enterprise. Along with that realignment, we also completed the integration of our biologics and spinal implants products under a single-cells management team. which has allowed us to better leverage our portfolio and our brand. One of the things that I'm most proud of is the team we now have at Autofix. Since becoming the CEO, we have brought an incredible amount of talent into the key roles throughout the leadership of the organization. This talent has complemented the solid foundation of legacy talent already within the organization. Within Spine, we added a president of Global Spine, a managing director of International Spine, a vice president of U.S. Spine and Biologic Cells, and a senior vice president of Motion Preservation. Late in 2020, we brought a new global president of extremities. On a corporate side, we added a global head of quality, regulatory, and clinical affairs, in addition to a head of global operations. Beyond the leadership team, which is now fully in place, we have and will continue to add talent throughout the organization to support our long-term growth strategy. Moving on to our second initiative, operational execution. During 2020, we made tremendous progress under the guidance of our new global head of operations. COVID surprised us early in 2020, but we managed to successfully operate through the uncertainty while beginning some of our long-term initiatives. In early stages of COVID, we strategically realigned our facilities and operations to ensure that we met near-term demand to be able to deliver to our customers and patients while we kept the team and members safe. For the last three quarters in a row, we have been dealing with COVID, yet we've had no manufacturing or supply disruptions. Today, we are fully operational at our facilities in the US and Europe, and will now be able to shift away from managing through uncertainty to beginning our longer-term initiatives to become a faster-moving, more efficient organization. Our third initiative is product innovation and differentiation, where we have focused on developing and acquiring products and procedure solutions to meet unmet needs in the marketplace. While COVID diverted some of our attention during the first half of the year, we were able to activate our product innovation and new product introductions in the back half of the year. On the spine side, we announced the launches of Firebird SI fusion system, the Ogenesis bone graft delivery system, and Eloquent Structural Allograft QPAC. In addition, early in the fourth quarter, we announced a partnership with Neo Medical where we were focusing on collaborating in the ASD space and the co-development of a cervical platform including single-use sterile pack procedure solutions. On the extremity side, we acquired, integrated, and launched the FitBone Intermedullary Lengthening System in some of our international markets and now well positioned to make a positive revenue impact in 2021 as we just recently announced the launch in the U.S. With the recent 510 clearance for FitBone, We are the first and only company in the market to have a pediatric cleared product, and this has bolstered our innovation commitment to the pediatric community. We have initiated our global launch in the first quarter of 2021. We have also just received FDA clearance for our OrthoNext surgical planning software platform, and we are preparing to launch this for use within our Juni Orthopedics portfolio of pediatric extremity treatment solutions. In support of these innovative products, we continue to focus on and value our investment in clinical data as highlighted at NASS in October of 2020. At the virtual event, we had a strong podium presence with five presentations. We recently announced a publication of strong two-year data of our M6C artificial cervical disc IDE study in the Spine Journal, demonstrating that the M6C quality of life scores and verifying the benefits of this unique next-generation technology. Our fourth and final initiative is commercial channel development. Our priority for 2020 is to invest in and begin transforming our commercial channels to create a stable and highly predictable distribution organization. One of our focus areas was to add or develop long-term strategic distribution partners. A number of the structural changes and leadership additions we have made in the early part of the year positively influenced our ability to optimize our commercial channel. And I'm very pleased with the initial progress we have made as we continue to add more high-quality distributor relationships and continue to capture synergies across product lines and geographies. In summary, I'm incredibly proud of what our organization was able to accomplish during one of the most challenging years we as a company, as an industry, and as a society have ever had to endure. Rebuilding an organization during global pandemic was not easy, but that's exactly what we did, which speaks to the dedication of our team and the excitement we have been able to build and generate in order to retain and attract such high-quality people. We have a solid foundation in place, and we are excited about what we can do and achieve in 2021. With that, I will turn the call over to Doug to review our financial performance. Doug?