SeaSpine Holdings Corporation

Thank you for standing by, and welcome to the C-SPAN 2022 Second Quarter Financial Results Conference Call. At this time, all participants are on listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question at that time, please press star 1-1 on your touch-tone telephone. As a reminder, today's conference call is being recorded. I will now turn the conference over to your host, Ms. Leigh Salvo with Investor Relations. Please go ahead.

Thank you for participating in today's call. Joining me from C-SPINE is CEO Keith Valentine and COO and CFO John Bostanczyk. Earlier today, C-SPINE released full financial results for the second quarter ended June 30, 2022. During this conference call, we will make forward-looking statements within the meaning of the 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, August 2nd, 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 Securities and Exchange Commission, which are available on our corporate website, www.cspine.com and www.sec.gov. Our discussion today will also include certain financial measures, such as adjusted growth margin and 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 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 tables accompanying the press release to be issued today. I will now turn the call over to Keith Valentine. Keith?

Keith Valentine Thank you, Lee. Good afternoon and thank you all for joining us. Our second quarter results surpassed expectations despite some nominal disruptions from hospital staffing challenge throughout the quarter that were widely experienced throughout the industry. We successfully navigated these sporadic headwinds with our surgeon customers and distributor partners to deliver outstanding revenue growth and gross margin expansion. On the innovation front, we've fully launched seven new products and systems so far this year, including three significant spinal implant systems since our first quarter earnings call. An increasingly more complete spinal implants and orthobiologics product offering, combined with our 7D enabling technology platform, is helping attract many distributors from our large competitors to partner with C-Spine, a few of whom we've already fully onboarded. These groups, along with those in the process of onboarding, are expected to generate even more momentum as we move further into the second half of the year. Based on all of this, we have confidence in our decision to raise full-year 2022 revenue guidance to a range of $234 million to $236 million, representing year-over-year growth of 22% to 23%. In the second quarter, we grew total revenue 19% over the prior year period to $56.3 million. In the U.S., where we generate approximately 90% of our total revenue, we saw revenue increase 60%, reaching $49.5 million. And international revenue grew 39% to $6.8 million. As I noted earlier, we continue to expand our product portfolio to address our surging customers' needs and attract larger distributors with the recent full commercial launch of three products and systems. This include Waveform C, a 3D printed cervical interbody, and Waveform TO, a 3D printed lumbar interbody, both of which utilize our innovative Waveform 3D technology to deliver a highly porous and yet robust interbody solution with a design intended to optimize subsidence resistance, implant stiffness, and orthobiologics packability while maintaining radiographic visualization during interoperative and postoperative imaging. And the meridian anterior lumbar interbody system featuring the Reef-A interbody. The full launch of Meridian has been one of the most eagerly anticipated launches in recent memory for C-Spine, as well as our distributor partners and surging customers. Meridian replaces our legacy A-list system that offered only three standalone options without supplemental fixation. Meridian leverages the success of our flagship shoreline modular anterior cervical system by featuring multiple true profile plating options to provide interoperative flexibility from the simplest case to the most complex reconstruction and stabilization. These three products and systems address market segments in excess of $900 million in the U.S. alone. Turning to 7D Surgical, we generate $2.2 million of enabling technology revenue in the second quarter of 2022 with the placement of six units, all via capital sale, and further increased our pipeline for earn-out opportunities in the U.S. to the highest levels we've seen so far. We are very optimistic that we'll close multiple earn out opportunities in the third quarter and add to the nearly two million of annual revenue commitments from previous earn out placements. Additionally, in terms of non-contractual revenue pull through of our spinal implants and orthobiologics products, we are seeing a revenue increase six months out in more than half of those accounts that purchased flash navigation systems via capital sale. The pipeline remains robust and the combined sales teams are working together to generate cross-selling opportunities across all portfolios. Before handing off the call to John, I would like to conclude with this. Although we did experience and continue to expect minor headwinds from hospital staffing challenges, these issues appear to be caused by the same limited labor resources experienced across many industries. But we had a great second quarter, and I believe we've reached a turning point with respect to expanding our gross margins, which is a critical milestone on our pathway to profitability. These strong results are the product of our unwavering commitment to innovation, despite all the challenges that COVID threw at us and our industry over the past two years. We would not have achieved these results without the trust and confidence of our investors delivering the growth capital needed to enable these positive results and securing an even stronger future for C-Spine. And now, I'll turn the call over to John for more detail on our financials and our financial outlook, then I will wrap up. John?