Orthofix Medical Inc.

Good day and thank you for standing by. Welcome to the OrthoFix Medical Incorporated Q1 2021 earnings conference call. At this time, all participants are in a listen-only mode. After the speaker 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. Please be advised that today's conference is being recorded. And if you require any further assistance, please press star 0. I would now like to hand the conference over to your speaker today, Alexa Huerta, Senior Director of Investor Relations. Please go ahead.

Thank you, Operator, and good morning, everyone. Welcome to the OrthoFix First Quarter 2021 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 a 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. All statements other than those of historical facts are forward-looking statements, including any earnings guidance we provide and any statements 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, April 30, 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 Form 10-Q for the quarter ended March 31st, 2021 and filed this morning, April 30th, 2021. 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 U.S. GAAP. Please refer to today's press release announcing our first quarter 2021 results for reconciliation of these non-GAAP financial measures to our U.S. 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 first quarter 2021 results conference call. On today's call, I'll provide an update of our first quarter performance. I will then review the progress we've made against each of our strategic initiatives before handing the call over to Doug, who will provide our financial update. I'll close with our perspective on the balance of 2021 before opening the line for questions. On this call and in the filings we made today, you will notice that we have changed how we refer to our global extremities business, reverting to the way this has historically been described within our company as global orthopedics business. Although there is not one label that exactly describes this business segment, we believe orthopedics is generally more descriptive of what we do and the products we offer in this business segment. Moving on to our first quarter performance, we are very encouraged with how the business performed during the quarter. Total revenue of $106 million, which exceeded our previously issued guidance range of $95 to $96 million. On a reported basis, revenue was up approximately 1% compared to the prior year and down approximately 1% on a constant currency basis. While we experienced continued global headwinds associated with COVID-19 during January and February, a sooner than expected rebound in procedures occurred in March. This was due to COVID restrictions easing and rescheduling procedures from the weather delays in certain U.S. markets in February. In addition, our team certainly executed well in many key areas. We increased adoption of our products within our expanded strategic channel, which drove a strong top line performance in the quarter. We saw strong contributions from certain focus products, including our M6 artificial cervical disc, as well as the FitBone lengthening nail. Complex cases, which we define as cases that require overnight stays or often multi-day hospital admissions, were up in our U.S. orthopedics and our U.S. spine fixation markets for the month of March, which was a shift from the decline we'd previously seen in Q4 of 2020 and the first two months of 2021. Now let us turn to performance within each of our business units. I'll first cover our spine products category, starting with bone growth therapies, or BGT. Cells for the quarter were down 2.5 million, or 5% versus prior year, largely impacted by COVID and the reduction in multilevel complex spine procedures during January and February, which are high utilizers of BGT products. Order volumes recovered in March to near pre-COVID levels, However, this volume was partially as a result of catch-up orders related to the weather-impacted geographies in the U.S. during February and rescheduling of cases previously postponed due to COVID restrictions. Moving to spinal implants, we are happy to report that global revenue was up 12% on a reported basis as compared to the first quarter of 2020. As a reminder, this category is made up of our spine fixation and motion preservation products. U.S. spinal implants grew 19% over prior year, and we saw growth in both spine fixation and motion preservation product categories during this period. The primary driver of growth was the U.S. M6C artificial disc cells, which grew over 100% in the quarter as compared to the prior year. This was due to strong new surgeon adoption and increased procedure volumes among existing surgeon users. We are pleased with our ability to attract new surgeon users of M6C and continue to see improved growth within existing surgeon users. We hit $30 million in total global trailing 12-month sales of M6 discs at the end of Q1 2021, triggering our first revenue milestone from the spinal kinetics acquisition and bringing our estimated market share in the U.S. to over 10%. The remainder of the U.S. spine fixation saw growth this quarter due to increased adoption of new products with existing surgeons and strategic distribution partners ramping up. Turning to our biologic portfolio, revenue was down 2% compared to 2020, primarily as a result of COVID headwinds combined with the anticipated channel disruption. Moving to our global orthopedic business, sales were up 3% on a reported basis versus prior year and down 3% on a constant currency basis. Continued COVID-related headwinds and shutdowns in certain European geographies impacted procedure volumes, which were offset by a solid contribution from Fitbon, which generated $1.6 million in revenue during the quarter. In the first quarter of 2021, there was approximately 1.5 million in one-time sales related to stocking orders across the portfolio that will positively impact future sales. Next, I would like to provide an overview of the progress we have made within each of our four focus areas. Starting with our first initiative to improve structure and leadership, we have a full executive management team in place and have effectively completed this initiative. but will certainly continue to recruit and develop talent throughout the organization, we can now accelerate the execution of the rest of our initiatives. Moving to our second initiative, operational execution, we're focused on the refinement of our global supply chain to become more efficient and agile as an organization. This will allow us to more rapidly introduce new products, integrate new distributors, focus on working capital management, and deliver innovation to our customers and patients. We view this as an ongoing initiative. Our third initiative is product innovation and differentiation, where we have focused on developing and acquiring product and procedure solutions to meet unmet needs in the marketplace. We have developed a comprehensive portfolio roadmap to refresh our current products and bring new innovations to ORCAfix. I'm proud of the team and our direction as we have been able to set good progress in 2021 with the introduction and early adoption of new products, launching 19 products in the last 12 months. Looking ahead over the next 12 to 24 months, we anticipate contribution coming from both organic and inorganic strategies. As a reminder, our near and medium-term priorities on the organic side will focus in key spinal procedure segments of anterior spine care, posterior cervical, minimally invasive surgery, and deformity care. For the orthopedic business, we'll focus on organic and inorganic investments in our key markets of pediatric deformity and reconstruction, foot and ankle, and especially trauma, as well as enhancements to our existing products and continue to pursue additional indications to expand to our addressable markets. As we look deeper within each business, I'll share some key progress within spine. We recently received FDA clearance for the 3D printed titanium construct mini titanium spacer system, as well as the Forza Ti T-lift spacer system, both with Nanovate technologies. Nanovate technology is a service finish that differentiates this in the marketplace. The Construct Mini Titanium Spacer, which was developed to enhance ACDF procedures, is the first 3D-printed titanium inner body introduced into the market by OrthoFix and adds an innovative technology to our ever-expanding portfolio of comprehensive cervical spine solutions. The Forza Ti 3D-printed titanium T-lift spacer system with NanoVid technology was developed to enhance our T-lift lumbar procedures. These launches are important to our near and long-term growth, and we are excited about their potential to impact the market. Within the orthopedic business, we successfully launched the FitBone Lengthening Mill in the back half of 2020 internationally. There have been over 3,500 cases completed using the system since its design inception, which validates the efficacy of the product. In Q1 of 2021, we did receive the first and only FDA pediatric 510K clearance for fit bone, which includes smaller diameters, further demonstrating our commitment to the pediatric market. Late in the first quarter, we launched our OrthoNext surgical planning software platform for junior ortho deformity plating system. The OrthoNext platform allows physicians to create 3D preoperative surgical plans to facilitate a more efficient procedure. Both the FitBone pediatric 510 gate clearance and the launch of the OrthoNext planning software underscore our commitment to pediatric deformity correction. Our fourth and final initiative is commercial channel development, where we are continuously looking to invest to create a stable and predictable channel that is highly effective. During the quarter, we continue to target, attract, onboard, and strengthen our strategic partnerships. in march we saw an increased adoption and usage of our products including pull through from these strategic partners in summary i'm very proud of our performance in the quarter during which we were able to exceed our own expectations and return to year-over-year growth many of the strategic investments we've made over the last 15 months are starting to pay off and we look forward to building off the momentum of the past few quarters during the balance of 2021. With that, I'll turn the call over to Doug to review our financial performance.