Orthofix Medical Inc.

Ladies and gentlemen, good afternoon. My name is Abby and I will be your conference operator today. At this time, I would like to welcome everyone to the OrthoFix Medical second quarter 2023 earnings conference call. Today's conference is being recorded and all lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question and answer session. If you would like to ask a question during that time, simply press the star key followed by the number one on your telephone keypad. If you would like to withdraw your question, press star 1 a second time. Thank you. And I will now turn the conference over to Louisa Smith at Gilmartin. You may begin.

Louisa Smith Thank you, Operator, and good afternoon, everyone. Welcome to the Orthopedics Second Quarter 2023 Earnings Call. Joining me on the call today are President and Chief Executive Officer Keith Valentine and Chief Financial Officer John Luskansky. During this call, we will make 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, August 8, 2023. 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 risk factors disclosed under the heading Risk Factors in our Form 10-K for the year ended December 31, 2022, and Form 10-Q filed this afternoon, August 8, 2023, as well as additional SEC filings we make in the future. 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 news release announcing our second quarter 2023 results for reconciliations of these non-GAAP financial measures to our U.S. CAF financial results. At this point, I will turn the call over to Keith.

Thank you, Louisa, and thank you, everyone, for joining us this afternoon. OrthoFix had a strong quarter marked by solid operational and financial performance following the merger in January. We grew order volumes and leveraged cross-selling opportunities across the complementary portfolios. And perhaps most significantly, continue to effectively manage through the revenue to synergy risk associated with the business combination. The Orthodox team is incredibly motivated by these successes, and our teams are working relentlessly to capture market share and deliver value. I'm pleased with the progress of the business, and I'm eager to share with you some high level achievements from the second quarter. Revenue for the second quarter of 2023 was $187 million, representing reported growth of 58% and pro forma constant currency growth of 7% year-over-year. The strong quarter reflects our commitment to delivering consistent above-market gains through innovative products and an expanded distribution reach. For this afternoon's call, I'll begin by providing color on each product category, including revenue, innovation initiatives, operational highlights, and commercial channel updates. Then John will provide a detailed look at financial performance and guidance for the full 2023 year before we open the call for your questions. Bone growth therapies, or BGT, revenue for the second quarter of 2023 was $52.7 million, an increase of 10% year over year. This marks two consecutive quarters of double-digit BGT growth, which was primarily driven by the fracture channel on the strength of the recently launched Excel stem product and investments made in 2022 to create a more focused sales organization. The spine channel also performed well, growing mid-single digits year over year, driven by cross-selling through the legacy C-spine distribution channel and from healthy, complex spine surgery volumes. Overall, both commercial channels have also benefited from the more than 6% rate increases that were approved by Medicare this year. Moving on to spinal implants, biologics, and enabling technologies, global revenue totaled $105.3 million, representing 145% growth year over year on a reported basis, and 5.4% on a pro forma basis. Growth in the U.S. exceeded 7% on a pro forma basis, while international revenue declined as a result of C-spine's exit from the European spinal implants market in the third quarter of last year. We continue to see strong growth generated by the larger, more exclusive distributor partners that we onboarded in recent years. which has allowed us to be more aggressive in rationalizing the less exclusive and revenue-inefficient distributors. From a product perspective, our cervical franchise, led by Northstar and Waveform C, was the fastest-growing franchise within the quarter. In June, we commercially launched the Waveform A interbody system to target anterior lumbar interbody fusion, or ALIF, procedures to better address the $200 million market in the U.S. Additionally, we see increasing interest in our foundational Mariner modular pedicle screw system technology as adoption of the Fathom pedicle-based retractor system for use with the Mariner MIS system accelerates as we participate in more complex spine procedures through the Mariner adult deformity system, which we launched earlier this year. With respect to the M6 motion preservation franchise, We were pleased to present in June initial results from a seven-year study of the M6 device at the International Society for the Advancement of Spine Surgery, or ISS. The abstract is the first public presentation of specific seven-year clinical results associated with the use of the M6C artificial cervical disc for the treatment of single-level symptomatic cervical radiculopathy. The study highlights that using the M6C artificial cervical disc leads to decreases in disability as measured by the neck disability index and decreases in the neck and arm pain scores that were observed at prior follow-up periods and were then retained through seven years post-op. Only 6.9% of secondary surgical interventions were observed among the M6C disc cohort, which is comparable to seven-year SSI rates reported for other commercially available artificial cervical discs. Within the biologic franchise, we were looking forward to the expected launch of osteocodes. an advanced synthetic collagen matrix in the fourth quarter, which should significantly strengthen our product offering and drive growth in this approximately $250 million market segment, which has not historically been a strong product category for the combined company. The biologics team also has several additional line extensions and new product launches scheduled in 2024. Turning to the enabling technologies franchise, we placed six 7D units in the second quarter, with five being placed in the U.S. and one of those via an earn-out arrangement. This brings the total number of 7D units placed via earn-out to eight, with an annual revenue commitment of $4.8 million in total. In the global orthopedic segment, revenue totaled $29 million, which represents 6.4% year-over-year growth on a reported basis and 5% on a constant currency basis. We posted mid-single-digit growth in both our U.S. and international markets. Our increased investments in product innovation, our sales channel, and our market-leading surgeon education programs continue to yield positive results. Revenue growth in the quarter was led by our recently launched TruLock Evo, Galaxy Gemini, and FitBone product lines. In June, we announced the launch of TruLock Phantom and Tornado Hinges, the latest addition to the TruLock circular frame portfolio, for which we recently celebrated 30 years of clinical use in more than 100,000 patients worldwide. Based on our progress to date and the meaningful market share-taking opportunities ahead of us, we are confident in our ability to drive top-line growth across multiple business segments. Coupled with an improving macro environment as a backdrop, the confidence led us to raise our guidance for full year 2023 revenue to be within a range of $752 million and $758 million, an increase of $2 million to the low and high end of our prior guidance. The integration of the two merged businesses continues to progress nicely. And the teams made many critical decisions and executed on many programs that will benefit revenue growth, reduce complexity, and generate future P&L and cash flow leverage for the combined organization. Some of those key decisions and actions include the implementation of a cross-selling capability to distributors for each of the legacy companies' spinal implant systems, decisions to meaningfully rationalize the many redundant spinal implant systems, final selection of critical ERP and other information systems, and the development of a new mission and vision statement for the company. We are also continuing to refine and identify new operating expense and cost of goods sold synergies, which John will provide more details on later. From a macro perspective, procedure volume trends are improving throughout the medtech sector, especially within the spine market, where OrthoFix is an advantage position to strategically capture additional share. Our broad and innovative products portfolio satisfies demand from patients and surgeons across the continuum of care. And with an increased number of product offerings, increased product utilization, higher revenue per case, and an effective cross-selling strategy, our commercial team is ready to capitalize on those underlying tailwinds. I'm thrilled with our momentum coming out of a successful second quarter, as a combined organization, and I'm confident that the best is yet to come. With that, I'll turn the call over to John for further detail with respect to our second quarter financial results and updated financial guidance for the full year.