SeaSpine Holdings Corporation

Thank you for standing by and welcome to the quarter for 2020 C Spine Holdings Corporation 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 one on your telephone keypad. Please be advised that today's conference is being recorded. If you require any further assistance, please press star zero. I would now like to hand the conference over to your speaker today, Mr. Hunter Covey, Investor Relations. Thank you. Please go ahead, sir.

Thank you for participating in today's call. Joining me from C-SPIN is CEO Keith Valentine and CFO John Bostranczyk. Earlier today, C-SPIN released full financial results for the fourth quarter and year ended December 31, 2020. During this conference call, we will make forward-looking statements within the meaning of the federal securities laws in regards to our business strategy, expectations, and plans, our objectives for future operations, and our future financial results and conditions. All statements other than statements of historical fact are forward-looking statements. Such statements may include words such as believe, could, would, will, plan, and tend in similar expressions. Your caution to not place any reliance on forward-looking statements, which are only predictions and reflect our beliefs based on current information and speak only as of today, March 1st, 2021. For a description of risk and uncertainties that could cause material differences between our actual results and those stated or implied by the forward-looking statements, please see our news releases and periodic filings with the Securities and Exchange Commission, which are available on our corporate website at www.cspine.com. and at www.scc.gov. I will now turn the call over to Keith Valentine. Keith? Thank you, Hunter. Good afternoon, and thank you all for joining us. 2020 was a challenging year due to the significant and volatile business disruptions caused by the COVID-19 pandemic. Yet, I have never been more proud of our team's performance and their commitment to our mission to deliver cost solutions to surgeons and hospitals to improve the quality of patient lives.

That focus translated into the 19 product launches successfully executed in 2020, the most in a single year, and nearly 9% year-over-year U.S. revenue growth in the second half of 2020, with an increased percentage of our U.S. revenue from an expanded and increasingly exclusive network of core Okay. Okay. until mid-November when U.S. hospitals began to restrict or cancel elective surgeries due to the surge in COVID-19 cases. While U.S. revenue continued to grow year over year in both November and December, it did so at a slower rate. We saw those restrictions on spine surgery volumes continue into January and early February. However, With recent decline in COVID cases, spine surgery volumes are improving once again, and many of our surgeon customers have communicated to us that they have once again accumulated a backlog of spine surgeries to work through. While we don't yet have sufficient market visibility to provide revenue guidance for full year 2021, based on these trends, we feel confident in our ability to grow total revenue in 2021 by 20% over full year 2020. Assuming COVID-19 cases and hospitalizations continue to decline. However, given the adverse impact COVID-19 had on spine surgery volumes in January and early February, we anticipate most of this growth will be later in the year and that total revenue growth for the first quarter of 2021 will be in the high single digits. Turning to our fourth quarter results, in line with our announcement in early January, total revenue was $46.4 million, the highest quarterly revenue reported since the spinoff. This reflects a 6.2% increase compared to the prior year period. In the US, which comprises more than 90% of our total revenue, we posted 7.2% year-over-year growth in the fourth quarter. In the U.S., growth was once again led by a higher sales by our core distributors of recently launched products and line extensions. Specifically, new and recent launched products contribute more than 68% of U.S. spinal implant revenue and more than 35% of U.S. orthobiologics revenue. Encouragingly, our growth came from increased spinal implant surgery volumes and from higher revenue per case. as recently launched products allow us to participate in more complex surgeries. We also benefited from increased utilization of our spinal implant systems and orthobiologics products per procedure, which we believe is the result of the more complete and complimentary product offerings we market today. For the fourth quarter of 2020, there was an average of 1.9 C-spine products and systems used per procedure, compared to 1.8 in the fourth quarter of 2019. From a distribution perspective, we have continued to add more committed and increasingly exclusive distributors in the US. For the fourth quarter of 2020, these core distributors collectively generated 56% of our total US revenue. We have opportunities to drive further growth in the US, both from our tenured core distributors continuing to hire more sales reps, which has been driving accelerating growth in existing territories, as well as from onboarding new core distributors in currently underserved markets. We are particularly excited by the recent alpha launches of our Admiral Cervical Plating System and Meridian ALIF Interbody System, as these products have been important catalysts in driving this progress. We are pleased to be generating meaningful revenue growth in the U.S. from all these important sources. We are confident they will be important drivers in our ability to take more market share and to grow meaningfully faster than the overall U.S. spine market, provided market conditions and surgery levels return to pre-COVID levels. Turning to our product launches, 2020 was an incredibly exciting year for innovation and execution. We completed the most ambitious launch schedule in the history of the company. The full commercial launches of two-line extensions to our Mariner platform for MIS and for more complex revision surgery and of our Shoreline RT cervical interbody implant system, featuring our proprietary reef topography, were major catalysts for revenue growth in 2020. We also launched many new systems in 2020, particularly in our cervical and interbody franchise. Key launches in our cervical franchise included the Waveform C 3D printed interbody implant system for use in ACDS, which offers the next level of 3D printed architectural innovation, balancing key geometric and manufacturing requirements without compromising clinical requirements. Wave4C represents the first 3D-printed interbody device to be co-developed with Restore3D. The NorthStar OCT system features screw technology with market-leading angulation of up to 90 degrees in a novel occipital plate with angled holes that facilitate a new cranial to caudal trajectory in the occipital keel. The performance and rapid market adoption of the Northstar system in alpha launch have consistently exceeded our high expectations, and we eagerly await the planned full commercial launch of this system in mid-2021. The alpha launch of the Admiral cervical plating system represents the next generation of anterior cervical plating designed to strike the optimal balance between strength, profile, and construct rigidity. Among the many alpha launches in our Interbody franchise, I want to highlight the launch of four additional Interbody systems featuring Reef topography, including the aforementioned Meridian ALIF system with Reef A Interbody, plus Reef TA, an articulating implant, Reef TH, a hinged implant, and Reef TO, which accommodates both direct impact insertion and insert and rotate techniques. In fact, we just announced earlier today the full commercial launch of the Reef Keo system. We also launched the Explore Keo expandable interbody system, an innovative posterior interbody solution that offers both parallel and lordotic expansion options, which is our first new product offering since 2017 in the estimated $400 million expandable interbody market. And in late December, we launched the Regatta lateral plate system, featuring our True Profile technology. This launch represents the first stand-alone lateral plate for C-spine, and allows for multiple plating options, including one, two, and four whole plates, to bring maximum fixation with minimum profile, and address a wide range of anatomy and pathologies. Looking ahead for the next 12 months, of our foundational mirror platform with an adult deformity indication in mid-2021. We also have four more 3D printed inner body systems scheduled to alpha launch in 2021, highlighted by the recently announced launch of the Waveform TA articulating inner body system, our first 3D printed lumbar inner body system. We will devote a significant amount of our product development and marketing resources in 2021 to enabling the timely and successful full commercial launches of the many systems we alpha launched in 2020. Those full launches are expected to be significant contributors to revenue growth in 2021 and beyond. In the Orthobiologics franchise, we continue to focus our efforts on conducting studies aimed at differentiating our products through strong science and compelling data in an otherwise crowded field. We are particularly proud of the recent publication in the Journal of Bone and Joint Surgery of the results of a preclinical study that concluded the cells in cellular bone matrix products do not improve fusion or bone formation and that our demineralized bone matrix product, Osteostrand Plus, outperformed the cellular graft products that were tested. This study substantiates the increasing payer and provider pushback we see around cellular bone matrix products. When combined with the previously published preclinical study comparing the osteostrand DBM fibers to six leading competitive DBMs, we have a robust set of scientific support for our differentiated DBM offerings. Finally, I want to highlight our continued enthusiasm for our strategic alliance with 7D Surgical to co-market their flagship machine vision image-guided surgery platform and to develop C-spine-specific instrumentation optimized to work with their platform. In addition to the systems we directly assisted 7D in selling to our hospital accounts in 2020, we continue to progress on many leads for the placement of 7D's system and are helping to grow awareness and interest in this enabling technology. Recognizing the relatively long lead time to place this type of equipment, we are optimistic that we will close these type of opportunities over the coming months. Our ability to place units of this enabling technology in a capital efficient manner for hospitals will be valuable in the current environment. As hospitals are likely to continue restricting their capital purchasing budgets due to the financial impacts of COVID-19. Continued investment in product innovation and in the deployment of more of our highly utilized foundational spinal implant systems combined with our best-in-class PBN portfolio gives our larger and increasingly exclusive distribution network confidence that we can support their aggressive growth plans as we emerge from the COVID-19 pandemic. Despite the business challenges and changes to the market landscape throughout 2020, We are very proud to have delivered on our efforts to continue expanding our product portfolio and to capture market share. And now, I'll turn the call over to John for a recap of Q4 financial results. John?