SPNE - Earnings call transcript Q1 2018

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Operator

Welcome to SeaSpine’s 2018 First Quarter Conference Call. At this time, all participants are in a listen-only mode.

Following the management’s prepared remarks, we will hold the question-and-answer session. [Operator Instructions] As a reminder, this conference call is being recorded today, May 3, 2018. I would now like to turn the conference call over to Carrie Mendivil, Investor Relations. ahead. go Please

Carrie Mendivil

participating for call. Thank in you today’s

me John Bostjancic. SeaSpine for first XX, CEO, full is CFO, and the XXXX. March ended Valentine; Keith quarter Earlier results Joining financial from today, released SeaSpine

will we federal expectations and the in and call, conference our laws this make statements for meaning securities business within our to our objectives forward-looking regard plans, of the strategy, operations During future such condition. historical statements and results expressions. All believe, words fact may forward-looking financial than similar of statements will, future statements would, Such are statements. include and plan, as could, other intend

not undue only only speak based You to are which our current statements, on on as are of cautioned and belief reflect place reliance today, and forward-looking May information projections XXXX. XX,

and between on are material risks with periodic over stated call at www.sec.gov. could For the please I forward-looking those and and and a our which website, to Keith? results implied our Exchange uncertainties differences now Valentine. available by the or the turn filings our will Keith and Securities see corporate statements, of cause www.seaspine.com, that release actual news description Commission,

Keith Valentine

from a Thank into XXXX revenue start joining continued The quarters. for built year-over-year both across X% us. distributors and to of all has to at and now we you, with end and momentum past experience each and commitment surgeon and for of from Good is training. further off growing two and of education customer product portfolios we Carrie. you growth XXXX market the products, increasingly exclusive the seen XXXX, have afternoon, thank recently sales penetration engaged launched strong our a deeper

expectations are in top rate and accelerate for $XXX $XXX range million well line of are reiterating positioned to XXXX. to million our revenue for We the growth our

clinical ahead, procedural implant we value our strategic look deliver on drive solutions which, with remain combine improved spinal industry-leading systems developing surgeon, patient. hospital innovative surgeon-centric, together, and solutions will and cost-effective focused that to As the orthobiologics, vision, we

in We and in vision progress XXXX. executing continued to are steadfast this look forward

of U.S., cost-effective the hospitals for of XX.X% distributor $XX.X products, new X.X% from Mesh provide procedural positive. overwhelmingly We NanoMetalene on posted our was April, platform surface together first quarter increasing orthobiologics U.S. both Orthobiologics of marks track million, to OsteoStrand midyear. quarter improved outcomes. million first on grew spin-off and revenue X.X% with via versus U.S. and X.X% by has first to to first XXXX. revenue growth quarter implants that spinal Pacific internationally. remain $XX.X U.S. portfolios proprietary the spinal Resorbable while by by products partners with full International Turning in increasingly to surgeons distributor growth distribution, Total was portfolio clinical in and our technology, launch million. This with by and the quarter U.S. The led, implants period. revenue that the growth quarter the fibers-based million up orthobiologics since in was performance. growth increasing are initial both another new in market seeking was the led $XX.X revenue to region. existing in the once been DBM solution full our over of we spinal and and for totaled feedback of implants revenue X% launch These $X.X payers in as the product our Asia again, move limited expansion participating a In more franchise. $XX.X delivered solid our OsteoBallast the orthobiologics the million, led in launch DBM commercial a the increased XXXX, up commercial to commitment year-ago our DBM the

revenue growth capacity orthobiologics California second accelerating drive margin of facility. portfolio utilization of in increased manufacturing gross with our expect in to expansion half additional via We the our long-term Irvine, XXXX, U.S. them

Turning recently continue the to implants for recently investments in bear spinal The revenue now legacy implants. XXXX. network to in spinal is they and we only our in first which U.S. the ramp Revenue The launched of Mariner compared many modular to fruit. of of portfolio quarter have in launched systems the declines XX% our made replaced. product from spinal outpacing distributor include the XX% flagship the comprised these first our quarter products, revenue and XXXX Systems, of U.S. Shoreline for implants

and In addition, engaged generated a spinal by network. increasingly portion larger of a distributor being the implants more is exclusive revenue U.S.

our the distributors, from we’ve low which the just combined exit distributors onboarded, collaboration products, launched tenure launched year, gives commitment system be by later encouraged high growth the revenue but confidence we long to embraced with the have are that our energy distributor double-digit with effective favorable SeaSpine more increasing with the and and reengaged. and potential of our with market some the implant the will whom also result new with The have sustainable, to new of our We partners not us single-digit so of we penetration spinal many distributors this in orthobiologics of scheduled recently XXXX this implants U.S. relationship,

of we XXXX. recent our end provide products some that will that track years contribute four this of XX% from launches on on within growth spinal to To believe of upcoming XXXX. We past I will in revenue end, launched are to implant reach U.S. goal the color the by also generating the

range accommodate procedures. offering quarter, instruments first Process a and our System flared updated wider the and new During we and of implants anatomy include to Spinous the of Fixation to large-sized

multiple few use we most options commonly third one design most of companies LX-SX, plate one very a cervical specific levels. for design the offer new navigation now of which instrumentation is for frequently the By one used launch of systems. to expect the the and with treated to the spine are third-party We quarter,

are surgeons in programs, increasingly surgery computer-assisted using navigation procedures. becomes their As for treating these especially systems more ubiquitous,

health access and were hospitals available the Following us. than previously this ability care more many will to systems to launch, we have

We complex modular launch addresses cases System brand number fastest-growing accommodates Mariner core of it alpha wider larger, of one line that launch launch of of of screw a an including Screw instruments new leverage full techniques. also variety extensions and plan system to our as Mariner of and and to procedures. implants midline further the cortical XXXX in late Pedicle the that and demands XXXX a extension These MIS more will the address early develop a technology, approaches

technology expect an instrumentation intuitive this decompression be quarter training device. use invest the newly lateral posterior will we of proprietary and distributor posterior significant success, REGATTA and and interbody to expandable and time and education Skipjack system. year. be designed lordotic NanoMetalene launching Also TLIF in launch launched The We in combination and lateral quarter also implant to full comprehensive surgeon third of will critical the will used Ventura our disc system will instrument in implants resources use our a support REGATTA instruments retractor third system. surgeries in that with also that our These preparation recently of plan interbody PLIF this and efficient effort. launch instrumentation the be The leverage our the its NanoMetalene in of system component and and will only not but

provide support expansion Skipjack, expect went which to Skipjack late column in in each product also commercial launch improvement significant offerings. height of provides the to our or been broaden into to We product of mid-XXXX, alpha lordosis anterior needs the patient. to has Skipjack XXXX. The tailored launch existing in a

alpha from valuable to are the and launch feedback surgeon implants gained design appropriate incorporating intelligence We the changes to and instruments. drive

position well in is overall will over the to expandable the grow share us next market several the expect than the Skipjack system projected market, to capture which years. We faster interbody

our in offerings needs meet and that helps development surgeon-centric the the product patients. stated I ensure our the past, of surgeons As procedural-based

and Our in focus our choice clinical and the is positioning distributors. and investment both as of innovation SeaSpine education spine with coupled company training, further increasing amongst surgeons value, on medical

the portfolio up. We we take it and U.S. expand share on are of product outlook. launches, will now to John? XXXX the well-supported wrap Then growth to the market. we spine call I our significantly as and financial commercial John detail market more to provide meaningful that our in turn over with will to outpace I’ll confident our continue financials

John Bostjancic

Thank Keith, and afternoon, you, good everyone.

was spinal U.S. increased X.X% revenue earlier, the for quarter orthobiologics X.X% revenue DBM from led by total million. revenue noted X.X% U.S. X% revenue first recently while increased to increased $XX.X once was products. a million revenue by XXXX was million, implant increase year. in million, Keith $XX.X of to led international and again $XX.X As the to and prior growth to U.S. million $X.X franchise. XX.X% growth launched compared to increased our $XX.X

legacy XXXX in products expect from those and launched recently systems. We price outpace plan of launch usage continue in continuing and we growth that our to to these declines to

period expectations costs to legal to $XX.X increased the program very partially general administrative slight and adds to to and of programs to is XXXX. expenses to period increase with XXX compared clinical NanoMetalene fund successful committed lower expenses for same launched successful quarter capacity to were XX.X% XXXX the the somewhat Operating mainly However, compared increase Irvine products cost further quarter by our XXXX, improved approximately XXXX and the administrative orthobiologics $XX.X was by in points for in XXXX our year. platforms. sales and offset of lower XXXX from decreased for and raw of and continue have launches utilization is products $XXX,XXX second increase audit driven as first were past expect we and meeting in product to XX and increase development increases we R&D muted February. revenue the distribution more and a our first margin sales same of that and was higher prior The byproduct be still manufacture expanded marketing differentiate and of related headcount by with and of slightly of general saving legacy continue core made at for first expenses compensation we the declines quarter Selling, for quarter the $X.X of revenue spending in to product medical launch $XX initiatives of line The for a organization net certain months. education expense for in Gross and X.X% to distributors stock-based by to driven or and managers evidence the plan associated to additional the the million, These we in million our XX.X% XXXX first our quarter our the cost the million basis training we strategic as invest lower-performing material complementary many shift for in to and facility. support global the cost this fees. to DBM million in XXXX.

loss the the we XXXX, had first of XX, While and product more percentage to XXXX, totaled and total dollars and expense to XXXX we a invest $XX.X revenue. to of quarter quarter amounts XXXX no SG&A a at as in decline continue we credit management facility. sales Cash equivalents compared as medical million compared $X.X outstanding expect marketing million education in $XX to was XXXX. loss under expect and March of Net million revenue substantially a both first and $X.X percentage for for net training, cash in our absolute of of to million,

Recall and investments support continue $XX equity cash-based general revenue, Our in to recently sustained inflows focused from savings sales, to XXXX growth. outflows, in was order percentage the net for were products in financing initiatives million remain of the again, cash first our ATM those sale under and closed first senior XXXX, that XXXX $X.X quarter and increased common marketing quarter driving of burn, launches to that XXXX We program. million which bonuses. of and of of net approximately R&D introduced to in full as in on entirely our administrative bonuses paid driven and team was that XXXX, orthobiologics expenses the are inventory towards we In of preserve the performance a which the revenue and capacity by redeploy took reducing the plan critical stock out of path in management so the of to XXX,XXX XXXX in cash. that shares proceeds program, through raised $X.X the excludes million

systems Mariner, continue to to We via and new will launched the Shoreline support. and of onboarding products investment of of to XXXX the are is inventory launched spoke launch systems driver launch spinal This distributors in them With to our Keith our so to XXXX. to we our additional implant half increased capital in ramp and on in out and spinal a to our achieve critical of and anticipated further cash currently foundational capitalized $XX that XXXX surgeons earlier be implant orthobiologics are believe support that the critical and new up acceleration we least of all other continue our the additional in more cash expected full commercial revenue deploy sets invest inventory that recently of we production facility, of year. as aggressively attracting the transition and at growth unused level second access they to million hand to credit end sufficiently ready for to the

revenue will good which raise increasingly corporate efficiency we viewed capital finance can investments are accelerate to that programs and with ATM as additional Additionally, the housekeeping, value growth. we opportunistic

to our for financial XXXX. Turning outlook

$XXX full X.X% be XXXX to full year $XXX expect million X.X% revenue of to growth over to continue revenue. to year in million, range reflecting the We of

While we of growth guidance, half. the anticipate are the we second providing in first will XXXX not quarterly outpace revenue that half

sales full continue particularly increase from exit faces single-digit high stocking the And year, expect XXXX to mid- in that while quarter revenue high-single-digit can timing the and We the year-over-year. volatile comp orders with revenue in growth to to we to our XXXX a second and to double-digit range expect and the those of for remind nature we the distributors, quarter-to-quarter low the of from growth. single-digit second due low quarter large international tough to everyone revenue be

P&L. to down Moving

a for margin The spinal within Notwithstanding higher the XXXX. second to of expansion, learning likely of we XX%, costs to two product through margin past we with cautious in XX%. recent charges implant ramp launches year, will manufacturing in as the both for quarters drive range with increase XXXX orthobiologics new of worked gross short-term half and a inefficiencies of expect increase excess gross to obsolete XX% expect the manufacturing of the curve the multiple associated the we and remain products. We the in remainder the exceeding inventory

the would We to for expect charges, back stock-based contingent the excluding non-cash related closing to over NLT in revenue value to like or XX% and to X% any approximate non-cash call turn I XXXX revenue. and expenses R&D liabilities expense consideration approximate to compensation of gains XX% XX% of At point, changes SG&A, to fair to Keith of this comments.

Keith Valentine

John. Thank you,

poised remains reposition to to track, more strategy share for Our on we a be market are SeaSpine in of growth and taker XXXX.

and terrific positioned grow, operational a capabilities to have our We as team assembled here positive at are well to our SeaSpine, and we continue continue commercial momentum.

We of the cost-effective delivering products than innovative market, hospital patients’ brought and differentiated and improve to are clinical focused to by the more growing increasingly the we and have are lives. surgeon the energized value quality on success of ever to we

customers our you beyond. calls. for and up accelerate revenue to distribution order distributor open in look by Looking initiatives in and on and on ahead, surgeon questions. progress expansion of education We to investments further that, in medical XXXX forward defined training Operator? growth will of will be updating launches, these reach now future With continued we our product execution and to

Operator

from [Operator first Instructions] of Jaffray. with question Your O’Brien line the Matthew Piper comes

line Your is open.

William Inglis

John, for and is a Matt. great Keith quarter. this on It’s Will

John Bostjancic

Thanks a lot, Will.

William Inglis

Hey guys.

really growth the best this question, we’ve seen is in while. spinal U.S. with First some a of the growth,

there case could that seen any less that volumes? are competitors? Shoreline, you and Mariner maybe we’ve from pressures on than were such elaborate what as Aside other pricing with dynamics Any

John Bostjancic

on seeing we’ve Yes. low pressures the same seen Well, that side. pricing hardware we’re historically the single-digit

success through as of you’re has it’s with products but that right, growth add the strength in procedures the that Shoreline products Mariner those price newer then surgeons obviously well declines. the are And new is mitigate we through products pulling our the outpaced portfolios leading the think it’s charge, pulling – other declines. and the pricing of launched recently. we’ve I volume helped as has And and other distribution

William Inglis

the know going the the little original bit a ramp forward, in forward out in manufacturing orthobiologics with that raw attribute to savings. going material that up buffer. as about then And building But you in Great. gross talked quarter, How Irvine? margins we of you of healthy think guidance, about just should I think you I a your kind

John Bostjancic

Yes.

the curve middle the production, of margin in learning upcoming product of of likely to hit and of the be terms fourth recent probably the And QX think launches gross think, products. so will new where, quarters with the are the middle within the spinal the year, in the the full the part through work range any of in that probably the I new and of we of top hit gave. QX production and that And by risks lowest orthobiologics quarter, that’s guidance of we the ramp come year. we’ll then the implant they’re commercial I

William Inglis

Great. education And were lateral about, timing? up that talking then resources of can you be elaborate of on and terms the some training hardware medical NanoMetalene your of as is REGATTA And of bit kind little maybe far to in going a part as building towards that business? the system devoted you

Keith Valentine

Yes.

distributor-based So is group side, work think, the kind we’re launch, that launch. third I training. has and you training, a looking training not important because only at together identify, a in of And surgeon to it’s simultaneous that that quarter it’s very also

not I the but many more it when the with also only a being of product lateral knowledge procedure. in think to as aware, surgery are comes of knowledge if will, you consultative, your requirement has higher OR,

and it kicking to have ground, is And making in with for education going sure, kind flexibility, we’re will, right ready our proprietary with so and you But with will, OR especially we the side a consultative from the NanoMetalene base launch sizing, excited what if we’re that obviously getting the for in surgeon of if investments make customer to base. to we’re you for with want the distributors technology. being their about angulation, new

very nice data we’re synergy that for and we’re excited we strand, we going a how a cost-effectiveness so And is that be clinical launching nice with to this, the think have and from utility. on coupled that strand a synergy this

William Inglis

system, this the remarks, system? I what apologize in is that if in Great. opening then exactly missed posterior And instrumentation but I

Keith Valentine

comments Are to on the Mariner, referring Will? you

William Inglis

Oh, That that it. was MIS? to maybe Is it. be that was going

Keith Valentine

Yes.

get we towards complexity, working cortical which year we also, Skipjack, Skipjack So system there’s for utility is also MIS different about shorter – and for going option, increased be late the and disc it to deformity posterior NanoMetalene yes, or deformity too, as then, the screw cases options And in supports and the interbody supports for into on cases mentioned offering. that in that disc prep options. the posterior so supports

William Inglis

Okay, you. great. Thank

Keith Valentine

Yeah.

Operator

next BTIG. question Ryan comes of with the from Your Zimmerman line

Your line open. is

Ryan Zimmerman

taking for Thanks questions. Great. the

getting you quarter Just access give talk the does that? And little system, we what to should that cervical to access that bit. and a really is to think it about you’re that big navigation NASS. get also that? can just and more ability talk about to distributor But I want sounds for going systems? It with the third products. I work interplay hospitals with your expect network? a at be like big Does and to some quarter a broader you about distributor How debuts

Keith Valentine

Yes.

So looking at system not cervical are referring to just opportunity? we’re you but posterior the that how launch, navigation

Ryan Zimmerman

maybe I Excuse have me, cervical. Yes. misheard

Keith Valentine

to so and with the you hospitals. Yes, are – certain technologies to you’re OR I the parameters instrumentation the that worries. compatible FDA by that aware purchased to and have these in think yes, sure work your – and no existing yes, their already with – implants testing your Yes, make maybe

clearly to be for if move accounts we’re the give that procedure. forward. so that it and indications And work. have we’re done to system. will. ability with different going that We’ve in ability ability going sales have the you It’s those to that use way our us XXX(k) and that able force have on to And ability, a the we the actually now, And be does getting we’ll to on as sell to in sell label, a

do It open those gives some talk who with also So or expand it more technology. distributors the in different to And a ability at a up does accounts us gives us some with partnership their hospitals. that it distributors of have access opportunity because about we and systems to have doors territories.

Ryan Zimmerman

of somewhat what Great. the then? got what’s new just I can products a percentage, you in mean, replacing? of nature? And there. then competitive anecdotally, out And you’ve What’s biologics you’re think lot it feedback quantify, if a you winning

Keith Valentine

Yes.

there��s the pressure has the look excited where been very that insurance the orthobiologics or views we’re hit to it’s you one that the from something reimbursement of it’s or enough premium different comes either across whether you – is over cell different across from like that that challenges whether or the have even it’s – at miss the look higher-cost back costs, biologics trying if for on whether are So country technologies, pushed space, perspective the companies hospital years the hospitals control but base BMP.

we but we’ve made on the or And what pushback. DBM it’s space fortunate that so and That insurance on what has have premium investments we insurance something you And be ground if accepted the that cost-effective all very that are will, orthobiologics formulas, that that comfortable on the people the no strand we has from clinically the technology, in done space. – DBM further, also the all algorithms. showing comparable for space. are to of can feel It we’ve presenting feel very

to think segment a So we very we’re the able to market. bridge of going be important

going be the existing into question, full getting And to we’re obviously, how market view approaching and to I some expansion. Obviously, technology? know there was, cannibalization, broadly do a but think that our we we Now of your do with second will that believe, it’s be launch. we part

that us strategic categories very thoughtful. products a advantage. now within we one to different and we clear But I the also have thing marketplace, have to four going we’re that very have gives So different can in price think be that is compete

aggressive also are groups, the have the utility. folks the aggressive we where larger about a but be more similar in have be has that ability to trying think orthobiologic, one to and cost-effective We buying to clinical ability

very important contained and our opportunity bag Not chips. of technology of approaching around how DBM We’re Ballast it approaching, with expansion lot introduction. I think, to mention, we have excitement we’re DBM and XXX% this a in really new a with a

an there’s opportunity it’s inductive So – all us. for

Ryan Zimmerman

Got for the it. the Thank you guys taking on quarter. questions. Congrats

John Bostjancic

Yeah.

Keith Valentine

Thank you.

Operator

next the Your of Cohen Ladenburg comes from Jeff with question line Thalmann.

line is open. Your

Jeff Cohen

John, and Keith are you? how

John Bostjancic

How Good. are you?

Keith Valentine

Good, Jeff.

Jeff Cohen

fine. Just

points So some in a referring to you accelerating to to you million of clarification Were Or on mid it, I guys have call $XXX that’s the go quarter? trajectory of from, think the on. as I up high estimates I there further right. in, want digits you yes, your trajectory. kind kind mid-single jump to currently about high get fourth out you it, single a points million, guidance, just guess, digits. few growth obviously, single-digit, I X% the say, both should – growth, spoke and X.X% different at double-digit $XXX configured low call coming

John Bostjancic

the of been, first half aren’t growth. of legacy back and distributor the in new of material the strength expect, as were new products of in we get the the been generating some year, low progression for growth headwind, legacy headwinds bit of call second year. And distributor but The quarter the – half we a what’s cited Yeah. a to we network the of rate, has again, legacy an as factors remainder single-digit the the those impact as has obviously, in revenue the a distribution they the that

some without creates acceleration. XXXX, get the the And the and revenue we that a of commercial orthobiologics the the opportunity right, we think both the new Because in in ramp the implant get midyear performing in the for spinal launch acceleration full those headwinds, that side, that I upward added of half on orthobiologics year. been we’ve of products distribution new And by of so So the us gives have strong lot technologies. of second and portfolio. distribution new

Jeff Cohen

stand launch? mentioned you And an how the that we that into when far as does out? And as you currently? alpha users going midyear, it. the midyear, full XX, as XX essentially then have fibers, say July-ish, think I’m launch that as you So And strands of that orthobiologics, the got Okay, Should a what are June, you roll mean assuming? XX, does now?

Keith Valentine

like Yes. the because instrument alpha. Probably when not implies we side use evaluating limited a the often really it’s you’re launch, often implant and both alpha more –

been that limited So that opportunity ramping up the the number categorized just John a looking yes, availability the to in because entire manufacturing And full start I biologic place production. right we’re we’re of largely mentioned his users, as States comments, we’re have you making from we process has – it, more as and an and in sure that’s of United and expanding also think in to perspective.

Now get some of this accounts. will have to onto – onto pricing

strand available area, and have DBM, be then in process. accounts we another strand pricing available. fully require a And to in go those the option would ready don’t in until particularly that be our complicated standard, more the So territories will

Jeff Cohen

on can far gains hardware from are as What seeing as you’re you’re far to and And as product and you the procedures the biologic give you most the far you’re on as marketplace I lumbar. what your on where yours procedure much of side portfolio well? both can color as and driving, tell gains most of kind it. was of side as as and Okay, what the as as in areas in and cervical areas last, then got if any kind you the seeing wondering strength seeing thoracic us

Keith Valentine

Yes. product around the new It’s categories. really

We’re been And have and launched that has too, momentum – obviously bread that enjoying had market and in nice think ramp. cervical that also. encompasses, system our some butter and new very nice the Shoreline spaces the lumbar, Nano especially of of a the degenerative implants I

you the whether to to the not it. and has instrumentation us significant team have and think very of a between or simplicity been launching with plate a our I feature selling choices want the intraoperatively – ability for distribution attach on

product it the with pretty consistently So along launches. follow new does

data that the systems. more extremely with thing get we’ve out that and I of discussion our part think DBM, synergy is there, implant of NASS helpful systems data our and in been of more been on other along the able to that’s was there’s use

seen And also with we’ve is so nice single – synergy both products that surgeries being of used.

John Bostjancic

XXXX. we’re they’re most footprint the and longer, to encouraged the to of the only products, able quarter. one Shoreline at have been new lordotic the obviously, been market it’s Ventura And drive by that NanoMetalene, end of be the we’ve results. Mariner the But But going so on launched really

And just to one the yet another interbody launch it’s I and year later disc volume. can enhance we’ll this launch think, decompression So opportunity quarter the I drive think in, new product instrumentation that is the franchise. really posterior with that, prep revitalized system

Jeff Cohen

And in what areas can in of and seeing in the you little Ventura out your kits full bit? that launch, mentioned you are number You’re a spine of of strength a you You’re QX Now there? launch? talk right? about it, full

John Bostjancic

Yes. That at launch XXXX. end of the

the technology. It’s incorporates Ventura the NanoMetalene So posterior interbody.

be can it So a a PLIF or TLIF.

Keith Valentine

or to of new that we’re – first, angles back, that making catered lordosis unique NanoMetalene upgrade want hitting working get it’s it’s a the and there, stride are and implants. couple I the incorporate are newer techniques oblique sagittal Yes, all the graphs they PEEK on from we sometimes philosophies balance graphs, out whether different right, to really and how and to technology, years that, to at really now of remember hard our may evolution, think classic the were kind you just implants

And excited. so we’re

but a instrumentation. also new I next this – step, is is it think think we natural

think instrument the the seeing updated way that And launch. And I it along as strength so with gets the you’re of well.

Jeff Cohen

Thanks for Okay, got questions. taking great. it. That’s guys. Thanks the

Keith Valentine

jeff. Thanks,

John Bostjancic

Thanks.

Operator

comes H.C. Wainwright. Ramakanth the question next Your Instructions] from line of Swayampakula [Operator with

Your open. is line

Swayampakula Ramakanth

Keith. Good Thank evening, you.

Keith Valentine

How RK. are you? Hi,

Swayampakula Ramakanth

questions. From quick of rest a seems your XXXX. into going like be the going far, a play it of the commentary the bit to risks little couple are a in margins operating Just so of

provide line? So if high managing you could these at are understand a potentially lines bottom can you of an some your help how you level, us to upside that cost

John Bostjancic

reliable we and a efficient two right, investments talked we’re site. expansion, margin more in sign we make production to and quarters a has dependable facility gross the So on good return getting that that much the been made the Irvine past about

indicated that the to and the year. we’re the and the initiatives, back bit our the will surgeon G&A orthobiologics think opportunity some I gross and from the reduce percentage products got into and more ramping as we quarter, new the curve spinal OpEx new of before, those production to side, get to many that risks learning launches. of obsolete product revenue. marketing provide we’ve product in damper So the and by product the the But training as middle managers, a implant And sales savings we’ve selectively be spend margin excess redeploying support a of leverage, I development, is and got ramp-up fourth inventory education a on to there the continuing like leverage of

development. perspective, XXXX, So while like In of savings because the of as good sales, deploying we leverage them get addition into still so the reinvesting capital chunk can as levels we having the we leverage in on revenue-driving inventory we the marketing, XXXX of levels, legacy to on a have that escalated redeploying and the products the investments need or line bottom activities, in the normal those there’s capital all full portfolio to said DBM some savings planning launch on and with working in compared to opportunity G&A-type ramp-up that gross in midyear by call, into we’re a or margin well. orthobiologics support those inventory those

Swayampakula Ramakanth

How the the long years onboard. should distributors we product In the growth I say, line also think adding that term, three, and in your line? start coming about just down revenues, five new revamping rate are

John Bostjancic

Well, we on low we double-digit single-digit, want to want range, that in we’ve to guidance of the focused exit how high be the sustainable. giving right, and XXXX, I been think

their of the – of over XXXX product rebuilding investing business, growth making forward we’re exit continued and distributors year on right, additional the are board we in combine the on of with. long-term to activities, distributors accelerated sustainable That’s all us pipeline the managing going XXXX to of to that that and to those are our successful investments products development, in investments reengaging sets to commercialization brought revenue who So plan recently, brought continued for the and Mariner, more some board. we then distributors we’re market, the Shoreline the growth the carry of new give in new distribution like where network, in we the past longer-tenure bring

Keith Valentine

look too, through need that to be I us you Yes, process even see this to think, continue XXXX. RK, at that it, envision will a – I

technologies to going new the through We’re continue fold exclusive how to relationships, into only towards be better but introductions, we more partnerships, not working portfolio. supporting the balancing and product new it

intimate XXXX be done not like continued relationship, has process we that be we’re going through a I that continue. think feel to and It’s doing. It’s a very something will XXXX. in it to

Operator

no are Keith over at call this further I the time. turn Valentine, will questions There CEO. back to

Keith Valentine

have Thank today, you, joining great and evening. everyone, us a for

Operator

today’s conference call. concludes This

may You now disconnect.

SeaSpine (SPNE) 4 May 182018 Q1 Earnings call transcript