Orthofix Medical Inc.

any background noise. After the speaker's remarks, there will be a question and answer session. If you would like to ask a question, please press star followed by the number one on your telephone keypad. And if you'd like to withdraw that question, again, press star one. Thank you. I will now turn the conference over to Julie Dewey. Julie, the floor is yours.

Thank you, operator, and good morning, everyone. Welcome to the OrthoFix second quarter 2024 earnings call. We appreciate you joining us. I'm Julie Dewey, OrthoFix's Chief IR and Communications Officer. Joining me on the call today are President and Chief Executive Officer Massimo Calafiori and Chief Financial Officer Julie Andrews. During this call, we'll 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, August 6, 2024. 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-Q filed this morning, August 6, 2024, 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 2024 results for information regarding our non-GAAP results, including our reconciliations of these non-GAAP financial measures to our U.S. GAAP results. Additionally, all revenue percentage changes discussed will be on a constant currency year-over-year basis. As a reminder, as noted in the first quarter call, we have annualized the impact of the C-spine merger and will, therefore, no longer be referring to pro forma growth. In addition, all results of operations that we refer to in our prepared comments will be on a non-GAAP as adjusted basis. With that, I'll now turn the call over to Massimo.

Thank you, Julie, and welcome to the team. Glad to have you on board with us. Good morning, everyone, and thank you for joining us for our second quarter earnings call. I'll spend some time providing business updates and information about other key initiatives. Before, I turn it over to our CFO, Julie Andrews, to cover the specifics of our Q2 results and revised guidance. Orsofix had a strong second quarter, delivering above-market growth across virtually the entire portfolio. Our team continues to execute to plan, and after two quarters in my role, I can very confidently say that the business fundamentals are excellent. We have the momentum to continue leveraging our strategic advantages and we have made considerable progress in cash usage, paving the way for much earlier than expected positive free cash flow for the second half of this year. Both operationally and commercially, I'm pleased with our first half performance and encouraged by what's to come in the remainder of 2024 and beyond. Net revenue. for the second quarter was 198.6 million, representing year-over-year growth of 6% on a constant currency basis. Growth was led primarily by strength in our U.S. spine and bone growth therapy, or BGT, businesses, as well as continued market penetration in U.S. orthopedics. U.S. pine fixation grew 12%, more than twice the market rate, and we are capturing increased market share with every quarter. Pine and fracture steam in the PGT markets were once again bright spots and have benefited from cross-selling efforts from our spinal and orthopedic implant business. During the second quarter, we began a limited market release for two new interbody designs. The features are to fix proprietary advanced surface technologies and expand our portfolio of lumbar interbody fusion products to address varying patient anatomies. Our new RIF-L lateral lumbar interbody is designed to maintain the favorable mechanical and imaging properties of peak while also supporting bone-on growth. Importantly, RIF-L further augments our competitive position in the 400 million lateral interbody fusion market in the US. Building on last year's successful launch the Meridian ALIF portfolio has been expanded to include additional solutions that pair our best-in-class 3D printed waveform surface technology with new options to address the vast majority of surgeon preferences. U.S. orthopedics grew 7% and we received 510K clearances for the fitbone trochanteric nail and fitbone transport and lengthening system, further bolstering our comprehensive portfolio used in limb reconstruction and deformity correction procedures. We are in a limited market release for both of these products, which we expect to launch in Q2 2025. In prior calls, I've outlined the key priorities that we're focusing on this year, including profitable growth, strategic innovation, and a synergistic and balanced approach to our portfolio and products platforms. We remain committed to these efforts and are benefiting from key decisions made as a result. In addition to those priorities, I'd like to call out some highlights relating to the leadership team, expanded commercial innovation opportunities, and successes across merger integration milestones. One of my first tasks in taking on this role was to recruit a world-class leadership team capable of shaping a culture of value creation and successfully executing on a long-term vision for Orthofix. I am pleased to report that we have finalized the executive leadership team with the latest addition of a seasoned business leader for our orthopedics team, who will start in mid-August. We have a blend of new and tenured talent ready to deliver on our commitments and fuel future profitable growth. Collectively, this team has more than 250 years of experience in the orthopedics and spine space. And now, more than ever, I believe we are poised to unlock the company's full potential in each of our respective markets. The team's focus is now on prioritizing the most impactful initiatives. that will fuel profitable growth. To achieve this, we will be bringing together a cross-functional group of leaders at the end of August to further define our long-range plan and align on the specific strategies and vital few initiatives to propel our business forward. We plan to share our strategy as well our intermediate to longer term goals and financial targets with you on a third quarter earning call in November. As it relates to reaching other key milestones post-merger, I'm pleased to say that the integration with C-SPINE has gone exceedingly well from an operational and cultural perspective. including the recent successful achievement of a key milestone to complete the ERP system implementation at CISPINE. We are laying the foundation for sustainable above-market growth across our portfolio with a more focused commercial strategy to drive meaningful innovation to improve outcomes and efficiencies for our patients and surgeon customers. At high level, this strategy includes three key components. One, going deeper into existing accounts. Two, taking advantage of multiple commercial access points across our product portfolio. And three, leveraging our 7D flash navigation system to drive surgeon engagement and build brand loyalty. I'll now spend the next few minutes covering each of these in more detail. First, following the C-Spine merger and recent product launches, we believe we are well positioned to serve over 90% of the spine surgeon's needs with a comprehensive product portfolio which includes spinal hardware, biologics, and enabling technologies. We also believe that our comprehensive portfolio and steady cadence of innovation will enable us to attract top sales talent, increase exclusive distributor relationships, and drive sticker relationships with surgeons and hospital accounts, which we expect to result in incremental product pull-through as well as an ASP lift from mixed benefits. Second, the breadth and depth of the orthophic spine and orthopedic offerings provides multiple paths to grow the business and sustain above market rates. For example, we are already taking advantage of cross-selling opportunities to sell our BGT products into C-spine accounts, as well as introducing spinal hardware, biologics, and navigations to our spine PGT customers. We also have additional opportunities with our biologics and fracture simulation products through our orthopedics channel. Finally, we believe that our 7D flash navigation system represents a unique opportunity to drive surgeons and hospital account interest in the broader Orthofix portfolio. As announced last quarter, we have reorganized parts of our commercial structure such that 7D flash navigation will be under the leadership of our spine team. This commercial innovation has positioned 7D as an asset to drive growth across our portfolio, as evidenced by our success in spine fixation. As the world's first machine vision image-guided surgical system, 7D continues to revolutionize spinal navigation, making it faster, more efficient, and radiation-free. With the capability for registration in mere seconds versus 30 minutes or more for competitive systems, and requiring no intraoperative radiation, 7D technology is proving compelling to surgeons, especially those performing open surgeries. Keep in mind that open surgery still represents approximately 80% of total current span interventions, positioning 7D as a key driver of incremental navigated procedure penetration. The ambulatory surgery center market for 7D is also of interest to us, since some spine surgery procedures have been slowly moving into the ASC settings. We believe the 7D system is well positioned for MIS procedure in the ASC, with its small relative footprint, efficient workflow, and pricing. Although still in the very early stage, we've been able to gain some initial experience in the ASP with a few accounts where we have placed a 7D system. With the evolution of our 7D strategy, we are more confident than ever in its increasingly significant role in our portfolio. Additionally, This shift will allow our enabling technologies team to drive software innovation and enhance product integration alongside the R&D pipeline as we launch impactful products across all our franchises. We are highly motivated by the opportunity to differentiate ourselves through the combination of our hardware portfolio with our enabling technology platform system. Our surgeons and patients have become the product focus and we will continue to provide them with a unique approach to navigation in the OR. Overall, Orsofix is in a great position to capitalize on our recent product launch successes. and deliver meaningful innovation to improve outcomes and efficiencies for our patients and surgeon customers. We remain the market leaders in bone growth therapies, have a comprehensive market-leading biologic portfolio and differentiated products in several specialized orthopedic markets, such as complex trauma reconstruction and deformity correction. Additionally, our broad and defined portfolio is best in class and fully supported by the highly differentiated and compelling enabling technology. In summary, I am pleased with our second quarter performance and remain optimistic about the opportunities ahead. Based on continued positive momentum, the strengths of our differentiated and expanding product portfolio which continues to win share and our confidence in sustainable growth trends, we are raising our full year net sales and adjusted EBITDA guidance. And as I mentioned earlier, we are on track to achieve a positive free cash flow for the second half of this year, much earlier than we originally anticipated. With a clear line of sight, I believe we are well positioned to achieve our objectives this year and beyond. We are not letting up on the operational efficiencies and strategic execution it will take to deliver long-term value for customers, patients, and shareholders. I'm looking forward to a productive second half of 2024 and what's to come for Orthofix. With that, I now turn the call over to Julie to review our second quarter financial results and updated guidance.