Orthofix Medical Inc.

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Thank you, Operator, and good morning, everyone. Welcome to OrthoFix's fourth 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. Before we get started, please note that our earnings release and the supplemental presentation accompanying this call available on the events and presentations page of the investors section of our corporate website at orthofix.com also this call is being broadcast live over the internet to all interested parties and an archived copy of this webcast will be available in the investors section of our corporate website shortly after the conclusion of this call during this call we'll be making forward-looking statements that involve risks and uncertainties all statements other than those of historical facts or forward-looking statements. We do not undertake any obligation to revise or update such forward-looking statements. Factors that could cause actual results to differ materially are discussed in our most recent filings with the SEC and may be included in our future filings with the SEC. In addition, on today's call, we will refer to various non-GAAP financial measures. Please refer to today's news release announcing our fourth quarter and full year 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, and all results of operations that we will refer to will be on a non-GAAP as adjusted basis. Moving to today's agenda, Mossimo will open with comments on our performance and business updates. Julie Andrews will then review the specifics of our fourth quarter results and our financial guidance for 2025. With that, I'll now turn the call over to Mossimo.

Thank you, Julie. Good morning, everyone, and thank you for joining us for our four-quarter earning call. 2024 was a year worth celebrating for OrthoFix. We executed against our guidance, strengthened our market position, and accelerated innovation across the business. We continue to invest in our most important differentiators, our people, to support our ability to best service our surgeons' need and deliver excellence. and our technology to advance our portfolio pipeline and fuel our growth. We put a new leadership team in place that define a cohesive, long-term, profitable growth plan for our company and aligned our organization with our go-forward strategy. Throughout 2024, This team capitalized on orthofix competitive advantages to advance our strategic initiatives, taking advantage of significant cross-portfolio commercial opportunities and profitably growing our business. In Spine, we grew our US spinal fixation business more than double the market growth rate, including 24% growth in our top six implant systems, twice the market growth rate in thoracolumbar affixation, and triple the market growth rate in interbody and cervical fusion. Demand for our enabling technology was strong and included a record number of 7D flash navigation system placements. 2024, was a record-setting year for our bone growth therapy business. We generated more revenue, manufactured more devices, and support more surgeons and patients with our life-changing technology than any year in the company history with BGT. Collectively, we continue to expand our capabilities and build upon our best-in-class status market share leading position, and market expander in spine and orthopedics. Our orthopedics business also had an excellent year, setting a record for both global and US sales. We are redefining the category of limb reconstruction with a unique portfolio of solutions addressing the most challenging orthopedics conditions in patients of all ages. Under our new business unit leadership, we are executing towards an exceptionally focused strategy that optimizes the impact of our innovative portfolio and enables Orthofix to meaningfully gain traction in the USA market while growing our position internationally. Across the business, we continue to transform our commercial organization and strengthen relationships with our surgeon partners and their patients. Additionally, we are delivering on an exceptional pace of innovation with a number of key new product introductions across each of our portfolio's areas and leveraging our strengths in enabling technologies to continue to differentiate our products in the market. Organizationally, we sharpened our focus and launched new project teams to tackle our Vital Few initiative, the most essential priorities that will enable us to strengthen our market position, equip us to explore new growth opportunities and win in 2025. With our focus on innovating technologies, a commercial organization dedicated to delivering an unrivaled customer experience and discipline planning and execution strategies to guide our effort. We have significantly improved our operating financial position and paved the way for sustainable growth. During 2024, we made significant strides in improving our financial strength, including 21 million in positive free cash flow in the second half of 2024 and negotiating a new term loan with extra capacity, lower rates, and increased flexibility to further optimize the company's capital structure. Finally, we set long-term financial targets that reinforce our commitment to long-term profitable growth. And we are just getting started. Looking ahead, we will continue to focus on our vital few initiatives in our long-range plan that we believe will fuel profitable growth and propel our business forward. An innovation focus and continued development of differentiated products to meet diverse surgeon preferences. A commercial strategy enhancement to drive deeper market penetration through comprehensive portfolio offerings. A technology leadership that harness advanced system for improved surgical outcomes and efficiencies. on high-quality revenue streams and operational excellence through growth sustainability and disciplined cash flow management and strategic financial planning to sustain positive free cash flow. I'm excited and energized about the path we have set for ourselves and the opportunities for the business to deliver exceptional value to our surgeons, their patients, and our shareholders in 2025 and beyond. Now on to the number for the fourth quarter of 2024. Our fourth quarter net sales of $215.7 million represents year-over-year growth of 8% on a constant currency basis and reflect record above market performance across all three major product lines, providing further evidence that orthofix balance and complementary product mix offer a differentiated advantage across multiple markets. We had another quarter of strong adjusted EBITDA margin expansion with positive free cash flow of $15.2 million. far exceeding our original expectation that we set at the beginning of last year. I can confidently say that the business fundamentals are excellent and we have positive momentum to continue leveraging our strategic advantages in 2025 and beyond. USA's fund fixation grew 12%. Revenue growth was driven by continued strong market demand of the recently launched RIF and waveform interbody products, along with the strengthening of our distributor network. More specifically, our lateral portfolio grew 33%, and our ALIF and MIS portfolios both grew at over 19%. all significantly outperforming the market due to increased focus on procedural selling, the addition of new, larger, more dedicated distributors, and expanding our relationship with our top distributors. Growth within our spine segment has been supported by a 30% increase in our global 7D flash navigation system placement in 2024, including 150% year-over-year increase in the number of earn-out agreements. We are leveraging this differentiable platform to create long-standing relationship with our surgeon partners. With continued investment, Our next-generation advancement in enabling technology and our hardware portfolio will build upon this unique foundation and establish us as a partner of choice for surgeons seeking real-time, data-driven, intraoperative solution in the OR. At the end of the fourth quarter, we received FDA clearance for our FLUSH EVD, or external ventricular drain cranial navigation product. EVD is a common neurosurgical procedure, but can result in a high rate of catheter placement errors using the standard freehand technique, as well as high rate of infection. FLUSH EVD is designed to address these drawbacks. Although the cranial market is not a strategic focus for us, this clearance supports an increased footprint and presence at the hospital for our 7D system. As our enabling technology strategy continues to evolve, we are more confident than ever in its increasingly significant role in our portfolio. New product introductions are a driving force and continue to open doors to new surgeons. Beginning in Q2, we have several product launches planned, including the full launch of Reef-L lateral lumbar interbody, an additional solution in our Meridian A leaf portfolio. This new interbody design features our proprietary advanced surface technologies and expand our portfolio of lumbar interbody fusion products to address varying surgeon preferences and patients' anatomies. In parallel, we will integrate our hardware products with access and navigation, creating a comprehensive procedural solution to enhance efficiency and predictability in the OR. We believe that our comprehensive portfolio of spinal hardware, biologics, and enabling technology and steady cadence of innovation will enable us to attract top sales talent, increase exclusive distributor relationships, and drive secure relationships with surgeons and hospital accounts. which we expect to result in incremental product pull-through as well as ASP lift from mixed benefit. Now to bone growth therapies. Even as we continue to own the number one market share position in spine, BGT net sales still grew an impressive 9% overall in Q4. we continue to take share with more than 50% of the growth coming from new customer conversions, validating our strategy of capitalizing on multiple access points. In addition, investment in the fracture market sales channel drove 10% growth in BGT fracture with the Axel's team bone growth therapy device continue to outperform the market as a reminder the fracture market represents an opportunity of more than 200 million dollars and we are still in the very early innings of building our position in the market with a clear goal to become the number one player our bgt business is focused on maximizing our market-leading position with the most comprehensive portfolio and most indication of bone growth stimulation devices in the market. We will continue to focus on cross-selling with orthopedics and spine, add a new market channel with established sales representative, and drive penetration in the fracture market with Axelsteam. Later this year, we anticipate FDA approval for our Accel STEAM 2.0, which we expect to redefine the recovery experience by engaging patients and surgeons with their prescribed treatment through the STEAM on Track mobile app. Our global orthopedics business delivered record neck sales in Q4, representing constant currency growth of 18% compared to prior year. USA Orthopedics benefited from strong execution and grew a record 21%. Growth was led by the combination of our TrueLock and Fitbon products, as well as growth in the Galaxy fixation product family. We are in the very early stages of expanding into the USA orthopedics market, which presents incredible growth opportunities given our unique and innovative product lines. Our focus is on areas where we can win, specifically in redefining the category of limb reconstruction. an underserved market that includes limb preservation, deformity correction, limb lengthening, and complex fracture management. As the only company solely focused in limb reconstruction, we have a growing and unique portfolio solution to address the most challenging condition in patients of all ages. I am excited to announce that we received FDA clearance and CMARC registration for the TrueLock Elevate Transverse Bond Transport system, the latest addition of OrthoFix flagship TrueLock family of external fixators. TrueLoc Elevate is the first FDA-cleared device for TBT and is indicated to correct non-unions and bone or soft tissue deformities or defects, which could include non-healing wounds, ulcer, and deep tissue wounds. According to American Diabetes Association, Over 160,000 amputations occur each year in the United States as a result of diabetic-related complications, representing a sizable market opportunity of approximately $1.2 billion. In addition, published studies have shown that patients with diabetic foot ulcers who receive an amputation have a five-year mortality rate of 7%, and are burned with lifetime health care costs of just over $640,000 for care directly related to their amputation. Thus, Turok Elevate offers the potential to not only be a limb and cost-saving device, but most importantly, a life-saving solution to a challenging patient population. The TrueLock Elevate TBT system is currently in limited market release at select centers in USA and Europe. Orthopedic growth in 2025 will be fueled by a number of new product introductions. that we expect to capture additional market share with existing and new customers. These include the TrueLock Elevate TBT system, the FitBone bone transport and lengthening nail, the OnlyBone transport nail available in the United States, and the FitBone trochanteric nail. We expect all of these products to be in full market release in the second half of 2025. Underpinning our business strategies are significant cross-portfolio commercial opportunities. The breadth and depth of the orthophic spine and orthopedics offering provide multiple paths to growth that business has sustained above market rate. We continue to take advantage of opportunities to cross-sell our BGT products into spine accounts, as well as introducing spinal hardware, biologic, and navigation to our spine BGT surgeon. We also have additional opportunities with our biologic and fracture stimulation products through our orthopedics channel. Overall, OrthoFix is in a great position to capitalize on our recent product launch success and delivering meaningful innovations to improve outcomes and efficiencies for our surgeon customer and their patients. We remain the market leaders in bone growth therapies, have a comprehensive market-leading biologics portfolio, and differentiated products in several specialized orthopedic markets, such as complex trauma reconstruction and limb deformity correction. Additionally, our broadened spine portfolio is world-class and is fully supported by the highly differentiated and compelling enabling technology. In summary, is clear that Orsovic's focus on our main strategic pillars and executing the clear strategy for profitable growth is delivering compelling results, and I remain optimistic about the opportunities ahead. At the same time, we are confident that our emphasis on disciplined capital deployment within our business and the emphasizing areas we have a less scale or share, we also drive our transformation, support profitable growth and increase penetration of our technology and product platforms in areas where we can win. As we look to 2025 and beyond, we plan to build on our progress by number one, further sharpening our commercial focus and discipline for margin expansion. Number two, continue to innovate our enabling technology platform to support our renewed procedural focus on spine, in particular deformity. And number three, ensuring we are well positioned to create value for our shareholders over the long term. Our full year 2025 financial guidance reflects our confidence in sustainable growth trends, the strengths of our differentiated and expanded portfolio, which continues to win share, and our commercial strategy and focused execution. I believe we are very well positioned to accelerate our positive momentum and deliver on our commitment to drive discipline, profitable growth, and innovation, while increasing long-term shareholder value. With that, I now turn the call over to Julie to review our fourth quarter financial results and outline our 2025 guidance.