SeaSpine Holdings Corporation

Ladies and gentlemen, thank you for standing by, and welcome to the CSPine 2021 Second Quarter Financial Results Conference Call. At this time, all participants are in the listen-only mode. Later, we will conduct a question-and-answer session, and if you would like to ask a question during that time, simply press star 1 on your cell phone keypad. If anyone should require assistance during the conference, please press star 0. As a reminder, this conference call is being recorded today, August 2, 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 quarter ended June 30, 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 condition. 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, August 2, 2021. For a description of recent 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 at www.seaspine.com and at www.sec.gov. Our discussion today will include certain financial measures, such as adjusted EBITDA, loss, and adjusted gross margin, 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 to 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 financial tables accompanying the press release we issued today. I'll now turn the call over to Keith Valentine. Keith?

Thank you, Lee. Good afternoon, and thank you all for joining us. Q2 was a quarter of significant achievement for C-Spine. We transformed the company with the acquisition of 7D Surgical and its enabling technology platform and meaningfully strengthened our balance sheet with a $94.5 million equity raise. From a financial and operational results perspective, we saw a continuation of the revenue growth momentum that started in the back half of Q1 and we further expanded our gross margins. Despite pockets of COVID-related surgery disruptions that impacted some of our larger markets, we delivered a solid quarter of growth. Through our commitment to innovation and customer experience, we took additional market share in both the spinal implants and orthobiologics market And we benefited from higher spine surgery volumes as surgeons worked through much of their backlog. We've had a very strong quarter, with total revenue increasing 66% over the prior year period. In the U.S., where we generate approximately 90% of our total revenue, revenue increased 64% year over year. In the U.S., growth was once again led by higher sales of our new and recently launched products, which comprised 74% of U.S. spinal implant revenue and more than 40% of U.S. orthobiologics revenue. Surgery volumes increased by more than 50% compared to the second quarter of 2020 and in the low teens sequentially compared to first quarter of 2021. We also generated slightly higher revenue per case and further increased the utilization of our spinal implant systems and orthobiologics products per procedure. For the second quarter of 2021, C-spine products and systems used per procedure averaged 1.9 compared to 1.8 a year ago. Turning to 7D Surgical. We closed the acquisition on May 20th and we placed our first unit under an earn-out arrangement during the second quarter. We also are excited to receive FDA 510 clearance for the percutaneous spine module for minimally invasive surgery and are on track to launch the MIS module later this month. We have progressed rapidly to integrate the 7D team and brand into the C-SPIN organization and to accelerate certain high priority development programs. Also, we revised the capital sales force incentive compensation plans to be agnostic to a capital sale or an earn out arrangement. As a result, We are already seeing greater percentage of the financially more attractive burnout opportunities in the US pipeline than we originally anticipated. With respect to our product launches, we recently initiated the alpha launches of the waveform lateral and waveform anterior 3D printed inner body implant systems. We are now on track to alpha or fully launch more than 15 products and line extensions in 2021. We remain particularly excited about the next line extension of our foundational Mariner platform with an alpha launch of an adult deformity system expected late third quarter and the full commercial launches of our North Star OCT system for posterior cervical fixation. The Admiral anterior plating system expected early fourth quarter and the Waveform C system 3D printed inner body implant system, expected late fourth quarter. This week, we began to deploy an additional 15 sets of what we believe is the truly innovative and differentiated Northstar system, and we plan to deploy an additional 50 sets in two separate tranches, mid third quarter and late fourth quarter. Those full launches, in particular, are expected to be significant drivers of revenue growth in the fourth quarter of 2021. Continued investment in product innovation and in the deployment of our high-demand foundational spinal implant systems combined with our best-in-class PBM portfolio and market-leading flash navigation system featuring 7D technology gives our expanding distribution network the assurance that we can support their aggressive growth plans. Maintaining their confidence is so important to our efforts to further capture market share And with the stronger balance sheet we now have after the recent financing, we have even more capability to invest for growth. We remain cautiously optimistic that despite the recent escalation in the number of COVID-related hospitalizations, as more people get vaccinated, we will get a sustained return to pre-COVID spine surgery volumes during the second half of 2021. Confidence in the long-term opportunity, coupled with the expected contributions of upcoming product launches and the 7D surgical technology platform, continues to drive our investment decisions, the most notable of which is a significant increase in spinal implant sets. In total, we plan to invest nearly $40 million this year in the alpha and full commercial launches of numerous spinal implant systems as well as deploying more of the existing spinal implant sets that are in highest demand. These investments, which represent an almost 60% increase compared to 2020, solidify confidence with our distributors that we can comfortably support their ambitious growth plans for the second half of 2021 and beyond, and give us the confidence to increase the bottom end of our revenue guidance by $1 million to a range of $201 to $205 million. This reflects growth of 30% to 33% over full-year 2020 revenue and 26% to 29% over full-year 2019 revenue. And now I'll turn the call over to John for more details on our financials and our financial outlook. John?