SeaSpine Holdings Corporation

Welcome to the C-SPINES 2022 First Quarter Financial Results Conference Call. At this time, all participants are in a listen-only mode. Following the 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, March 3rd, I'm sorry, May 3rd, 2022. I would now like to turn the conference over to Lise Balbo, Investor Relations. Please go ahead.

Thank you for participating in today's call. Joining me from C-SPINE is CEO Keith Valentine and CFO John Bosjanczyk. Earlier today, C-SPINE released full financial results for the first quarter ended March 31st, 2022. 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, 2022. For a 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.cfine.com and at www.sec.gov. Our discussion today will also include certain financial measures such as adjusted gross margin and adjusted EBITDA loss, which 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 financial results of operations. These non-GAAP financial measures should not be considered replacements for and should be read together with the most directly comparable GAPS financial measures. Reconciliations for the most directly comparable measures are provided in the tables accompanying the press release we issued today. With that, I will now turn the call over to Keith Valentine. Keith?

Thank you, Lee. Good afternoon, and thank you all for joining us. Our first quarter results exceeded our own internal expectations, despite the impact of significant COVID-related headwinds throughout the entire month of January. When these headwinds subsided and spine procedure volumes increased as hospital staffing and OR capacity quickly recovered in early February, our momentum accelerated as the quarter progressed, which translated into strong revenue growth for the full quarter and even more positive energy among our employees, distributor partners, and surgeon customers. We remain excited and optimistic as the momentum continued into the second quarter. I'd like to highlight some of our team's recent accomplishments that are fueling this optimism and that gives us the confidence to raise our full year 2022 revenue guidance by $5 million. In the first quarter, we grew total revenue 21% over the prior year period to $50.7 million. and exceeded the high end of our Q1 revenue guidance by $1 million. In the U.S., where we generate approximately 90% of our total revenue, we saw revenue also increase 21%, reaching $45.5 million. And international revenue grew 16% to $5.2 million. In March, we celebrated our 50th thousandth implantation of our nanometalline inner body device, which continues to be foundational to our fusion engineered focus. It took nearly six years from the original launch to hit the 25,000 implant milestone, and we were able to double that in just over two years. The success of our nanometalline franchise coupled with our introduction of our reef and waveform 3D interbody systems, demonstrates our team's commitment to advancing the development of differentiated surface materials and novel designs. We have continued to expand our product portfolio with the full commercial launch of four products and systems, including the Explorer T-O expandable interbody system, Torrent, DBM Putties with Excel Bone Matrix, the Regatta Lateral Plate System, and the Northstar Facet Fusion System. In addition, we also launched Flash Navigation Lumbar Facet Fusion, which marks our first spinal implant system development integrated with 7D technology. We're particularly proud of the Torrent launch, which is an upgrade to our market-leading EVO3 DBM Putty, that is packed in a dry state to improve osteo-inductive potential and shelf life stability. This is yet another example of how C-Spine continues to advance both its spinal implants and orthobiologics portfolios through product development to help surgeons improve patient outcomes and by investing in scientific studies to differentiate our products and drive market share gains. Turning to 7D Surgical. We generated $2.3 million of enabling technology revenue in the first quarter of 2022. To date, we have closed four earnouts for the 7D flash navigation technology, representing $2 million of annual revenue commitments. There are now a total of 54 flash navigation systems deployed in the US and 33 outside the US. We are also starting to see more non-contractual revenue pull through of both spinal implants and Orthobiologics products in select accounts that purchased flash navigation systems. The pipeline is robust, with a more balanced mix of earnouts versus capital sales, and the combined sales teams continue to work well together, generating cross-selling opportunities across all portfolios. Our increasing organizational focus on leveraging and expanding the 7D flash navigation platform technology combined with the exciting recent product launches I talked about earlier and those we plan to fully launch throughout the remainder of this year, such as the entire waveform 3D printed inner body portfolio, the Mariner adult deformity system, and the 7D MIS module are the key catalysts that are attracting an increasing number of large, transformative distributors to C-SPIN. We have already executed on some of those new distributor additions and we have even more opportunities in the pipeline. Additionally, this positions us very well to hire our first direct sales reps into white space areas where we have not been able to identify an appropriate exclusive distribution partner and is consistent with the plan shared on our analyst day meeting in March. Before handing off to John, I want to offer some additional recent insights into market conditions that we're seeing in the field. With more positive news about COVID receding and recent expert commentary that were past the pandemic phase, we're seeing a sustained uptick in spinal surgery volumes across the entire United States and renewed confidence by our surging customers that we have finally turned the corner towards a degree of the old normal, despite some lingering staffing shortage concerns. Additionally, we're positioning ourselves to take advantage of some of the new dynamics in the spine market that emerged during COVID, such as an increasing number of spine surgeries being performed in ASCs and increasing demand by small and mid-sized hospitals to acquire enabling technologies such as our flash navigation technology, whether through outright purchase or a capital-efficient earn-out mechanism. In conclusion, I'm confident that C-SPINE now delivers best-in-class products across all our offerings, from enabling technologies to spinal implants to DBMs, and was the primary factor underlying our first quarter revenue beat. We have today a product portfolio that is attracting transformational distributors and provides us with a significant advantage. We are now seeing competitive distributors contacting us to see what's happening at C-SPY, a shift that we believe is occurring because increasingly they want to be part of a team that is aggressively innovating and taking market share. Our recent product launches, specifically the Explorer Expandable Interbody and the Waveform Family of IBDs have been game changers. Now is our time. The level of enthusiasm among surgeons and distributors is something I haven't experienced in years and it gives me great confidence to raise our full year 2022 revenue guidance by $5 million to a range of $231 to $235 million. This reflects growth of approximately 21 to 23% over full year 2021. And I believe there is still a long runway ahead. Even this year, as we continue to cultivate other increasingly more substantial distribution opportunities. 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.