Orthofix Medical Inc.

Good morning, everyone, and welcome to today's All4Fix Medical First Quarter 2022 Earnings Conference Call. My name is Candice, and I will be your moderator for today's call. All lines will be muted during the presentation portion of the call, with an opportunity for question and answer at the end. If you would like to ask a question, please press Start, followed by 1 on your telephone keypad. I would now like to pass the conference over to our host, Alexa Werther. Senior Director of Investor Relations, Alexa Ovete.

Thank you, Operator, and good morning, everyone. Welcome to the OrthoFix first quarter 2022 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 matter 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, May 6, 2022. 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 31, 2021, and Form 10-Q for the quarter ended March 31, 2022, filed this morning, May 6, 2022. 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 2022 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 first quarter 2022 results conference call. On today's call, I will provide an update of our first quarter performance and review progress against our strategic initiatives before handing the call over to Doug, who will provide our financial update. I'll close the call with our perspectives on the balance of 2022 before opening the line for questions. Starting with our first quarter performance, total revenue in the quarter was $106 million, growing approximately 1% over 2021 on a reported basis and 2% on a constant currency basis. In January and February, we experienced a significant slowdown in procedure volumes due to hospital COVID restrictions and staffing shortages across most of our geographies in the US and Europe. In March, we saw an increase in procedure volumes highlighted by a strong month-over-month growth coinciding with the declining COVID hospitalizations and lessening of global restrictions. The March into April trends this year look similar to the prior year. Turning to the performance of each of our product categories, starting with bone growth therapies or BGT, sales for the quarter were 42 million, down 2% compared to the first quarter of 2021. The decline was due to the lingering effects of COVID, which impacted procedure volumes on complex cases. Despite the headwinds experienced broadly in BGT, we saw another quarter growth in our physio stem fracture therapy products. which are prescribed after 90-day period of nonunion of a fracture. As a reminder, the physio product portfolio is focused on nonunion fractures within the orthopedic market and will be a key growth driver for us in this year and beyond. I am proud of the team's focus despite the environment. Moving to spinal implants, which includes both spine fixation and motion preservation. Revenue is up 4% on a reported basis and constant currency basis as compared to the first quarter of 2021. We saw growth across the portfolio during this period, which was primarily driven by our international spine fixation sales and growth with the M6C artificial cervical disc in the U.S. Turning to our biologics portfolio, revenue was up 3% compared to 2021. The growth was driven by sales of fiber fuse and our other new offerings as we continue to broaden our biologics portfolio. Lastly, in our global orthopedics business, sales were up 2% on a reported basis and 7% on a constant currency basis over 2021. The increase was due to lessening COVID restrictions in our international markets, orders from international stocking distributors and continued strong contribution from the fit bone limb lengthening system. Before discussing the progress on against our key initiatives, I wanted to mention the recently announced leadership transition in our orthopedic business. Last month, Kim elting our chief legal and development officer became the President of the global orthopedic business she succeeds Paul gonzalez who left the company to pursue other opportunities. Kim has more than 25 years of medical device experience, including her more than five years at OrthoFix. She has significant experience in the medical device product lifecycle, supporting research and development and commercialization functions, and leading business development initiatives that strengthen organic and inorganic growth for our company. Since starting at OrthoFix in 2016, Kim has led many functions including regulatory and quality, corporate communications, and business development, in addition to her legal group. We will transition her current responsibilities over the near term, and the replacement search for the new chief legal officer has already begun. I am confident Kim will bring strong leadership and continue to drive growth in the orthopedic business, which has seen a significant investment over the past couple years. The team has responded very well to her new leadership role, and we believe the momentum we have in the business will continue. I'd like to take a moment to thank Paul for his contributions and wish him best of luck in his next endeavor. Now I'd like to provide an update on our key initiatives. Recall from our last earnings call, I provided our growth expectations over the coming years, targeting mid single digits for 2022 at constant currency and growth accelerating to mid to high single digits in 2023 and beyond with increasing adjusted EBITDA margins. All of this assumes the macro environments will cooperate, of course. In order to achieve that growth, we are focusing on two key initiatives, product innovation with differentiated technologies in our commercial channel. First, our focus on new product innovation and differentiation. This includes delivering near-term growth through our increased adoption of our recently launched products. In addition, We have also accelerated our organic inorganic investments and new products indications and procedural solutions that build on to our core strengths. In the first quarter, we made significant progress in this initiative across all of our product categories since January of 2020 we have launched 26 spine and orthopedic products. Starting with bgt. We recently expanded our portfolio in a meaningful way with the FDA PMA of a cell stem bone healing therapy, a low-intensity pulse ultrasound, or LIPAS, product for the healing of bone, both fresh fracture and non-union fractures. We've been building out and training the commercial team in preparation for the planned initial U.S. market launch, which will be staged during the second and third quarter. This product is the result of our exclusive license of the J portfolio and we will continue to evaluate and leverage our EJ a partnership, as we look to expand our bgt offerings into the future. We are proud of investment, we are making in the external bone growth stimulator market and, frankly, at a significantly higher level than any of our competitors, this will enable us to expand our leadership in this space. With biologics our goal is to continue to build on our leadership position in the marketplace by providing a comprehensive offering of products and solutions for surgeons. To use in both spine and orthopedic procedures during the quarter we launched and saw the first cases completed with our opus BA our synthetic bioactive bone graft solution for spine fusion procedures. Opus BA is an excellent complement to our Opus MG set technology, which we launched in the second half of 2021. We are working with hospitals, health systems, and our channel partners on commercial expansion to provide a comprehensive portfolio in this rapidly growing synthetics category. Earlier this week, we announced the extension of our agreement with MTF Biologics. Together, we have built out a highly competitive allograft portfolio and have worked tirelessly to become leaders in the cellular bone allograft space with our Trinity allografts. I'm happy to announce our continued investment in our partnership through the planned introduction of two new important allograft additions in our biological portfolio, Virtuous and Legacy. As you know, For the effects, together with mtf have been a pioneer and innovator in the cellular based paragraph market which resulted in our market leading position with the Trinity franchise. Today we are excited to announce the beginning of the next evolution of this space with an entirely new category, we are calling lyographs the first issue launched it's called virtual lyograph. which is derived from a breakthrough tissue processing and preservation approach developed by MTF. This innovative approach, called Lyograph preservation, is the process in which inherent growth factors and viable cells are preserved in the graft to provide a shelf-stable option for clinicians. Virtuose has been developed by MTF over the course of several years which preserves the inherent osteoconductive, osteoinductive, and osteogenic properties necessary for bone formation. Virtuose is the first of its kind, shelf-stable, complete autograft substitute. This tissue offers significant logistical advantages to the hospital, providing efficiencies in the operating room by being available for immediate use and supports sustainability. We'll begin an exclusive launch of Virtuose This month, with a broad commercialization later in the year. we're excited to enter into this next phase of revolutionizing biologics through our partnership with mtf biologics. Our second allograft offering legacy is an a separately process pre hydrated global dbm putty that is ready to use out of the syringe. Leveraging decades of experience with demineralized bone processing with MTF biologics, Legacy allows us to expand our DDM portfolio by providing a cost-effective option that has a strong history of positive clinical performance. Rounding out our portfolio with orthopedics. Our focus remains on investments within limb reconstruction and pediatric deformity, building on our strong portfolio of internal and external limb reconstruction and deformity correction solutions. We have long been a leader in the external training and during the quarter we announced the FDA clearance and first cases of the true lock Evo ring fixation system. Because of the only circular fixator in the market with both radio lucent rings and struts allowing for clear radiographic visualization which assists with clinical care. The Trulock EVO system is also the first circular fixator system kit available as a preassembled frame in a ready-to-use, single-use sterile packaging, allowing for ease of application and potential time-saving during surgery, particularly when treating post-traumatic injuries. Initial surgeon feedback has been encouraging, and we plan to prudently expand the launch of this system in the U.S. and international markets. We also released Galaxy Gemini Fixator in limited markets, the next generation of the modular fixation system for fracture treatments of lower and upper limbs. The Galaxy Gemini system combines two different procedure configurations to better address the customer needs, offers a versatile choice of clamps, radiolucent rods, and instruments in one sterile tray, and provides a wide choice of ready-to-use sterile kits and components for different anatomical applications. Importantly, this up-to-date pin-to-bar system can be used as a hybrid system in conjunction with our TruLock family of products, extending its functionality. These new products build on the already innovative and comprehensive limb reconstruction and deformity correction portfolio, and we expect them to contribute to our growth in Orthopeek's business in 2022 and 2023. Turning to our second initiative, the ongoing development of our commercial channel to expand patient and surgeon access to our products worldwide. In Q1, our US strategic channel partners, which we define as distributor partners that carry multiple orthofix product categories, such as hardware and biologics, grew revenue 19% compared to the prior year quarter. Most of our channel investment in the quarter was focused on adding US direct reps in our bone growth therapies business. Along with the channel expansion with direct rep hires, we are preparing for the initial launch of a cell stem with increased commercial readiness activities and training. We will continue to expand dedicated resources as we gain commercial traction. I would also like to highlight our continued investment in clinical data development. As we see this as a critical factor in supporting the clinical efficacy and safety of our current and future devices to support the long-term growth and expansion of product indications. One example is the M6C artificial disc where we are investing in the two-level study to support future indications, conduct IDE post-market surveillance, and collecting real-world evidence that will collectively highlight the safety and efficacy while protecting our innovation investment. We will continue to invest and build upon our clinical database of over 60,000 implanted M6C discs, which has created one of the most robust sets of data in the artificial cervical disc market. These efforts will be utilized to help expand the cervical disc arthroplasty market segment call assisting us in our marketing efforts as new products and companies enter the space and elevate the competitive environment. Overall, I'm very proud of our performance from the quarter, which highlights the team's hard work and the growing demand for our evolving portfolio of products in the marketplace. We've made great strides working towards our growth transformation and have capitalized on strong foundation built in 2021, despite some challenges with COVID early on. These developments provide us with elevated enthusiasm for our business, and we've had a great start to the year, putting ourselves in a great position for success in 2022 and beyond. With that, I'll turn the call over to Doug to review our financial performance. Doug?