SeaSpine Holdings Corporation

Welcome to C-SPAN's 2021 First Quarter Financial Results Conference Call. At this time, all participants are in a listen-only mode. Following management's prepared remarks, we'll hold a Q&A session. To ask a question at that time, please press star followed by one on your touchtone telephone. If anyone has difficulty hearing the conference, please press star zero for operator assistance. As a reminder, this conference call is being recorded today, May 3rd, 2021. I would now like to turn the conference over to Lee Salvo, Investor Relations. Please go ahead.

Thank you, and thank you for participating in today's call. Joining me from C-SPINE is CEO Keith Valentine and CFO John Bostjanczyk. Earlier today, C-SPINE released full financial results for the first quarter ended March 31, 2021. During this conference call, we will make forward-looking statements within the meaning of federal securities laws in regard 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, intend, and similar expressions. You are cautioned not to place undue reliance on forward-looking statements, which are only predictions and reflect our beliefs based on current information, and speak only as of today, May 3, 2021. For description of risks 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 SEC, which are available on our corporate website, www.cspine.com and at www.sec.gov. Our discussion today will also include certain financial measures, such as adjusted EBITDA loss that are not calculated in accordance with generally accepted accounting principles or GAAP. Management believes that the presentation of these non-GAAP financial measures provides important supplemental information in management and investors regarding financial and business trends relating to the company's results of operations. These non-GAAP financial measures should not be considered replacements for and should be read together with the most directly comparable GAAP financial measures. Reconciliations to the most directly comparable GAAP measures are provided in the tables accompanying the press release we issued earlier today. I will now turn the call over to Keith Valentine. Keith?

Thank you, Lee. Good afternoon, and thank you all for joining us. Despite a slow start to the first quarter due to restrictions on spine surgeries resulting from the winter COVID surge, I couldn't be happier with how strongly we closed the quarter. We saw a positive inflection point in late February, and that momentum continued throughout March and April. With a favorable outlook for more robust spinal surgery volumes for the remainder of 2021, coupled with the anticipated contribution from our pending acquisition of 7D Surgical, we are poised to continue to take market share and to further accelerate revenue growth. The recent $95 million equity financing we closed in mid-April significantly strengthened our balance sheet and will help fund the cash portion of the 7D Surgical acquisition. while also providing additional growth capital for us to deploy more of our spinal implant sets to meet the rising demand for those systems and to support the limited and full commercial launch of over a dozen orthobiologics products and spinal implant systems currently in our pipeline for 2021. Those factors remain important and exciting catalysts for C-Spine to attract more exclusive distribution partners and for our existing distributors to add sales reps to penetrate deeper in their territories. With further declines in COVID cases in the US and an ever-increasing population of individuals getting vaccinated, we believe we now have enough confidence in our market visibility to provide revenue guidance for full year 2021 of 25% to 28% organic growth over 2020. 30 to 33% growth over the prior year, including approximately six months of anticipated revenue contribution from 70 surgical once that acquisition closes. Turning to our first quarter results, in line with our announcement in April, total revenue was $42 million, a 16% increase compared to the prior year period. In the U.S., Where we generate approximately 90% of our total revenue, we posted 18% year-over-year growth. In the U.S., growth is once again led by higher sales by our core distributors of recently launched products and line extensions. Specifically, new and recently launched products comprised 74% of U.S. spinal implant revenue and 39% of U.S. Orthobiologics revenue. Once again, Our growth came from increased spinal implant surgery volumes and from higher revenue per case. 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 first quarter of 2021, There was an average of 1.9 C-spine products and systems used per procedure compared to 1.8 in the first quarter of 2020. For the first quarter of 2021, our core distributors collectively generated 59% of our total U.S. revenue. We expect to drive further growth in the U.S. from our tenured core distributors hiring additional sales reps to penetrate deeper into their existing territories as well as from recently onboarded core distributors in previously underserved markets. Cspine's reputation for constant innovation now coupled with the value proposition of the 7D Surgical Image Guidance Platform will be important catalysts in driving this progress. Turning to 7D Surgical, we remain on track to close the acquisition before the end of the second quarter and we've already started integration planning with the 7D team. The addition of 7D surgicals enabling technology and experienced capital sales force to the C-Spine family has sparked a lot of new conversations and interest in C-Spine from current and potentially new distributor partners and surgeons. The acquisition is also expected to give us even more flexibility to place units of 7D systems in a capital-efficient manner with hospitals and ASCs that may not have sufficient capital budgets for an outright purchase of the unit. Finally, we look forward to collaborating with 7D's software engineers to accelerate development programs to further extend the capabilities of the 7D platform, with preoperative planning software being a top priority. With respect to our product launches, during the first quarter of 2021, we initiated the alpha launches of the Waveform TA articulating and Waveform TO T-LIF oblique 3D printed antibody implant systems. We expect to launch two more 3D printed lumbar interbody systems in 2021, one for a lateral approach and another for an anterior approach. We also fully launched the Reef TO interbody system featuring nanometalline surface technology, and reef topography. Including the two more planned additions to our 3D printed inner body portfolio, we remain on track to deliver on our commitment to launch more than 12 products and line extensions in 2021. Some of the more notable launches include the alpha launch of the next line extension of our foundational Mariner platform with an adult deformity indication. and the full commercial launches of our Northstar OCT system for posterior cervical fixation, the Explorer TO expandable interbody device, the Waveform C 3D printed interbody implant system, and the Admiral anterior plating system. Those full launches, in particular, are expected to be significant contributors to revenue growth in 2021 and beyond. 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 DBN 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. Maintaining their confidence is so important to our efforts to further capture market share and And with the stronger balance sheet, we now have the recent financing. We have even more flexibility to opportunistically invest for growth. And now I'll turn the call over to John for more details on our financials and our financial outlook. Then I will wrap up. John?