SPNE - Earnings call transcript Q1 2020

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Operator

Ladies and gentlemen, thank you for standing by and welcome to the First Quarter 2020 SeaSpine Holdings Corp. Earnings Conference Call. At this time, all participants are in a listen-only mode. After the speakers' presentation, there will be a question-and-answer session. [Operator Instructions] Note, this call is being recorded. Instructions] [Operator

to Investor over Relations. like today, your the Salvo, Leigh Thank hand now to conference speaker I'd you.

You may begin.

Leigh Salvo

Thank in today's participating you for call.

John SeaSpine Valentine; from CEO, Bostjancic. CFO, me Joining is and Keith

XXXX. financial Earlier SeaSpine the March released quarter today, results first quarter for ended XX,

conference and forward-looking within other During our for operations plans, of our call, the our to future will historical in fact statements. of and statements and statements laws objectives than securities regard we condition. financial business meaning make this forward-looking statements federal strategy, All results expectations future are

statements could, expressions. include intend Such may will, similar words such believe, and would, as, plan,

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

uncertainties our of by periodic or release stated at that cause description and actual www.seaspine.com website, see material implied filings www.sec.gov. our on the a which risks and please differences news results statements, could are between For available SEC, our those corporate with and the forward-looking and

the I'll Valentine. Keith? to Keith turn call over now

Keith Valentine

Good to afternoon pandemic. Leigh. of off who for heroism you working acknowledging thank want COVID-XX to you, Thank start joining us. by been have all fight the all the tirelessly I and

day. enormous We risk responders', the staff an frontlines continue workers returning to medical dedication be to inspired first you physicians, personal after nurses, service. team day take by Thank your who technicians, of our and care the for all

You get this are through time. challenging all enabling to of us

ones to children, its its SeaSpine for for and their extraordinary the whom sustain family this patients' to these or mission SeaSpine employees in loved witness family to the many humbling dedication times. balance our back debilitating quality true of of in pain. operations focus and caring all efforts the improve It's stay by We very to are suffering lives, to and their to their while schooling home grateful are also helping SeaSpine families to

a trends, number up took our SeaSpine emerging and unprecedented on, to to business saw protect new we employees this of Early the steps our in on shore based landscape.

of team those Our to most who remotely a transitioned do work-from-home IT to employees so. our can permit capability work to

and manufacturing days our are some clinical week be job to on workforce or to required significantly been one of have reduced, site distribution a functions. While operations more perform

For these essential deep work to regular offices, and initiated cleanings particularly employees, shifts in of we our social areas. implemented support staggered high-touch we distancing

of well or the to a We plan follow spread opportunities the them. as illness continue and as and leave contingency minimizing of to guidelines counseling, available employee to with created event downtime connected all CDC resources leaves regarding sick in in for a education employees the and spike offer

a implementing other volumes, began surgical Consistent surgery March. the decline experienced companies growth. double-digit end At with of or starting revenue device generally what medical meaningful strict we experienced many spine too we states another guidelines of for quarter U.S. deferrable procedures; were the expecting U.S. in around elective as of February, beginning

decline March decline of due in COVID-XX the U.S. by to in deferral the revenue overall surgeries for spine U.S. quarter. resulted in slight in However, first revenue the caused the

employee reduction XX% XX base cost-savings We our at total pay base, measures we a including cash our our revenue further burn from reductions in team. XX% estimate during XXXX. downturn for we the declined compared progressive initiated To June implemented the to Additionally, of more that business, April for approximately following. senior reduce leadership by the XX% a of this than series through April have including least

adjustments, sales to revised these addition In commission compensation the second management. quarter for we variable plan

end March. Irvine facility orthobiologics most of the We manufacturing temporarily our suspended operations at at

current for headcount freeze four evaluating months open we need next and are and positions. hiring implemented for timing backfill also most the at carefully and the a for new We least when if

we In more the color made defer the momentarily. on will I products, decision give of select new addition, launch which to

as other studies areas are by in lower actions travel events, spend us. event clinical cancellations and discretionary Lastly, and realizing travel taken consulting also we such restrictions due and to

planned investments XXXX have expenditure expenses, Collectively, to our working by capital these spend than and operating cash million. reductions capital anticipated $X more reduced

Tax us also We applicable Tax relief available any and utilize to plan via Employer the Retention Credit the to CARES Act under Employee programs. Payroll Deferral

Protection SBA of uncertainty in the to accepting companies, these support Program. loans lack controversy needs-based for the an regarding and operations. provided decline regarding received current the we public recently the based under We're ongoing $X.X on loan request clarity the certification business, of approximately due the million rapid loan for aware to economic Department makes where the applied and Additionally, Treasury the companies our by Paycheck necessary

that of repaid seek the we the result eligible of of the retain by consensus utility which immediate is decision to to were PPP the Protection the period In held a the loan, exceeded amount business' principle subsequently form should loan. expenses was any we for a the $X jobs key guided we a As of apply widely that part loan, payroll, and and origination. bedrock over following the the Paycheck this, million of loan's protection deciding our Program, rent estimated eight-week and

that entire COVID-XX-related loan, of or employees completely significantly whose the XX% roughly our with Prior XX because be disruptions. to workforce faced receiving business or to was workload were could reality confirmation XX we furloughed reduced, XX% to on the of

most for Put of of XX% employees with I another Many mentioned least the employees absorb to base these we way, XX% implemented those are the workers with base them keeping facility able those pay whole. cuts. excluded We among cost-cutting means. our our leadership financial line of senior focused them in employees our limited reductions from manufacturing on previously. Irvine financially our that, we to these able greatest while team, absorb reductions measures

detrimental the losing long-tenured this workforce, operational highly we weeks. proceeds provided flexibility manufacturing of maintain the over or coming trained so The other risk order spine would retain can to implemented sufficient with uncertainty and no in readiness increase in any the of time to to doubt should and particular ongoing if team business loan inventory financial we liquidity meet produce valuable surgeries. and continuity PPP us customer see economic furloughs during to in our recovery a significant we be similar to The in to actions and demand, preserve our ability that cash maximum start this portions of

on loan Yesterday, SBA May need. also companies certification harbor the certifications XXXX. the the PPP it take review will for regarding Treasury SBA committed extension the XX XX, safe Department guidance loan to prior provide date May an to announced, of The respect and advantage the to to to the of with made repayment how additional

proceeds, We on ultimately are the that whether we decide additional repay guidance. guidance eagerly that awaiting retain PPP and loan or remaining will based on

surgeries. to a expected need will spine initiating recovery measures in additional outlook cost-savings of continue evaluate We situation for and ongoing for based on the our the assessment

Before I to comment on results. over today, the QX to are decisions John for and call John? impacting of further forward, recap is experiencing I'd a what how like that business turn we going our financial

John Bostjancic

of less X% Total was revenue was revenue Thanks, million, international revenue Keith, and was increase. prior compared a good than reflecting period. $XX.X the flat afternoon, reflecting $XX.X essentially U.S. for XXXX a the $X.X million, first million, decline; year year-over-year to X% everyone. and quarter

procedure compared million, to mix a procedures were unit mid-single-digit to U.S. XX% March was particularly lower decrease shifting other offering reflecting to X% expanded driven price decline. Spinal our These by capturing and This from Implant in down compared an more us procedural revenue was case the quarter factors XXXX. X% and by March in declines estimated of were $XX.X volumes, which more the first generate procedures, somewhat more product offset typically with per procedures. procedure revenue thoracolumbar when

in first XX% quarter launched of Implant Spinal revenue recently of the XXXX. New U.S. and products comprised

U.S. U.S. was traction $XX.X focus This Orthobiologics health reflecting appreciate to orthobiologics in volumes, quarter and impact was launched increasingly DBM care of nearly driven revenue XXXX. Orthobiologics portfolio, continue value to take first XX% DBM clinical with portfolio. the quarter we data revenue its in as see which on in our recently X% great continue advanced in the of we systems, the million, Prior on of of our the share growth. the our proposition the products market comprised to pandemic order by first

perspective, of XXXX. quarter the XX% of of collectively our distributors in quarter our the core than in total first U.S. distribution revenue fourth generated XX% a more XXXX, From up from

second We identified recruit have these increasingly for and continue additional near-term XXXX. to the recovery of in and of a half exclusive more committed volumes distributors in U.S. materializes the if spine surgery opportunities in

utilization for the recently at same decline period in first product continued a to rate to was The Gross primarily cannibalization due manufacturing quarter facility charges XXXX of to launched particularly inventory for margin was excess revenues our by and and in legacy XX.X% in XX.X% our Irvine compared products. XXXX. due increased to the decrease for which lower higher more portfolio our faster obsolete part of

For We quarter of XXXX, orthobiologics Irvine pandemic. months to we'll of appropriate hand March by end orthobiologics evaluate needs four the between decline operations associated XX%, a anticipate margin goods plant and of expect result when the on picks the inventory we of to that because of demand shutdown significantly resume idle of we based gross and manufacturing our timing XX% the manufacturing with had to operations temporary Irvine than second up. finished costs as on inventory

to impairment technology internally implant shift expect impairment an XXXX in and acquired totaled $XX.X to turn device a technology underlying primarily to intangible higher based $X.X for future $XX $X.X designed the launches the support in more on for expanding of the prior in million we asset anticipated based same on million increase a for lower acquired product increased parallel charge future in with of to relates revenue on launch headcount-related Operating by that the interbody the million growth was of technology. marketing depreciation charge non-cash expenses expenses year. expected mix expandable expenses triggered new majority million to XXXX. and and revenue product an compared $X.X which and first lordotic the period device a The million, was driven The quarter expanding associated selling developed based

and amounts our quarter loss and XXXX of net compared quarter totaled million the cash $XXX.X XX, no $X $XX.X March first million equivalents facility. Net a was of XXXX. credit first at investments had for of loss under XXXX outstanding for we million Cash, to the

of million burn, million flow million purchases $X.X which first operating decrease quarter of $X.X equipment cash quarter XXXX, a and compared for cash the flows includes first and for free the XXXX. property Our was of to $X.X

for potential end business return In for of which surgery U.S. recovery, suggest by of by capacity with pre-COVID-XX the recent from of gradual return second of timing in June terms full market bodies may the the government policy-making a creating both guidance further influenced patient and the wave a a other be disruption. COVID-XX and of of research elective yet-to-be-determined demand,

quickly pain heard order whose even to anecdotally catch the continual hospitals to the days some the and business decision-making as the include current with of Sundays assumptions possible of the surgery and and treatment. number vast respect deferred that of to driving have backlog costs. up and in we as underlying are will We as been in eventually surgeons majority plan critical patients increase our managing seek perhaps have are patients the believe that Those on receive that growing necessary surgeries spine Saturdays to

COVID-XX whether risks accurately for or surgeries spine hospital, patient spine prioritized However, actual further additional what be waves ahead, demand lie how surgeries spine are additional what as will each we the of disruptions cannot in within surgeries. assess future create in such

revenue we free result, provide a for cash flow on burn XXXX. reliable expectations or guidance As cannot

so responsibly investing will and we patients best continue to earlier spine measures, such and needs reduce through retaining said, are meet the to their flexibility operational pre-pandemic the striking and maximum as continue runway growth continuity cash of for by our liquidity positioned appropriate potential surgery That expenses levels. to with further the appropriate when innovation to we to and Keith customers and surgeon operating those recover two- that that volumes business a outlined an to balance cost-cutting manage between preserving three-year and

the as this later guidance to year with and We and quantitative providing look expect forward more informative to progresses clarity have more investors year.

transpired, turn and now will level who will I in call we of back provide a what expect has the over detail future. the Keith, what to deeper on Keith?

Keith Valentine

COVID-XX in John. environment. sector you, has the severely been surgery impacted the Undoubtedly, Thank spine

typical continue treatment spinal spinal will While cases that we surgeries by urgently revision so and seen care receive can to and the affected trauma health this the deferral care, patients have facilities care with of tumor of those need spine virus. who focus deformity degenerative on that

to support surgeries outpatient some and we will We they less-intensive and other other shift cervical as those and have arise. to seen in continue ASCs cases

up the working adopt hospitals may spine Board their we as needs responsive to with understand can protocols to so they We Advisory individual more that how they react closely open are requirements. our that Surgeon be may to for surgeries and

We engaged in meetings distributors U.S. better are hosting weekly highly dynamics have video our in to been with and territories their understand these regular the they discussions.

the return and on by are the and state-by-state, in of We news reports monitoring have in that states the to to from field the the and or restrictions getting presence encouraged are easing ease such updates the determine of for many are our expected timing surgeries market considering strong elective restrictions are elective near-term. surgeries begun

are recent to of encouraged data. by deploying the revenue significant sets in fact regions caused April by revenue. on proactively states And surgeries, approximately our those we XX% of based in Despite specific the implant deferral collectively we decline the that U.S. are spinal spine comprised that

recent further start encouraged XXXX. May in the -- down seen and sales the May the little XX% excuse increase, are with than early week daily last in we've more of we've a month-to-date seen versus relatively by revenue We with me, April since better month-to-month

launches monitor to elective procedures specific and product to state-by-state how factor in and builds. continue will spending on impact will volumes return the set deferred additional We surgery new

also training, meetings. in development labs product surgeon regularly have education even been distributor and programs through and outreach video We hosting

to this access and Our and patients field the do need SeaSpine surgeries and The during spine marketing to even been teams will treatment time. restrictions unchanged supporting whenever are team's needed receive and unprecedented is commitment continue help until sales travel have lifted. they virtually hospital wherever so we

and magnitude scope product spinal to to until we for in we and product investments year. update for the more order and decided our we communicated commercialization, cash volumes, and of month of XXXX. timing development to we $X preserve set carefully CapEx temporarily inventory Turning last planned and launch innovation in our surgery In have defer business million originally better of planned the than recovery visibility initiatives the that evaluated have to build, this timing

year of guided That to later product decision existing that builds the additional expected supplier impact primarily of mix set timing the new launches. risks this was as systems procedural of satisfy most by could and prioritization well our assessments of potential critical needed those introductions as

articulating with Reef our launches alpha our product franchise, Notwithstanding better launch cadence those support designed newly XXXX. anterior deferrals, NanoMetalene completed a existing have we disc with for and Topography decompression comprehensive, we recently robust still interbody the Starting implant preparation implant for to systems. our and instrument system

the IBD to quarter. received recently implants forward launches expanding Explorer of these expect the parallel of the look launched under and FDA hinged implants to to with be also brand a launch a suite and by for the second and of lordotic We products both NanoMetalene alpha featuring XXX(k) TLIF Topography interbody We name. of clearance end both Reef

devices with that restorXD. We printed interbody suite by a XD to are alpha continue we of most be launches the excited of planned developing

to be this important as with they to version existing is launch our Anterior alpha earlier which approaches manage instrumentation us anterior value Cervical These systems. because we a quarter. during in Shoreline to NanoMetalene be perhaps printed their cervical implants, the and expenditures proposition pandemic. efficient utilize ever foundational more span costs counterpart are ultimately TLIF first is XD allow capital XD of more carefully designed expected from than printed third lateral That will the System The

with and instrumentation our Cervical franchise. bundled provide launch with we first fusion posterior system, cervical including the This launch Fusion to our OsteoStrand systems a in Facet cervical MIS second posterior set quarter. procedures. is access the We to quarter. facet of designed be commenced to used alpha OCT alpha Turning cervical posterior of cervical pellets system to can is System an the in specialized Northstar which fixation expect our for conjunction This joints end by new

last will XX our systems big particularly as two almost planned will were address the replace it aging years in launched cervical launch ago. the ultimately franchise that are We energized of system the Northstar and product gap by

of Small franchise, the the Deformity a Daytona launch end second expect System we quarter. Stature extension In the of line our to thoracolumbar by

We technology restrictions Mariner number into complete development to foundational labs development to to kicked modular surgeon program were a and extend coming off into our able screw travel have complex deformity surgeries and also our prior of we play. pedicle

expected We through continue to and year. move launch in this the forward program with the forward and video update an surgeons later project on team meetings look providing to we timing

three to in with expect commercial full the the by XXXX forward move to system continue quarter. systems end our ACS systems Mariner we of in Reef second MIS and commercial with the all have and transitioning launch Finally, of launch and Shoreline to Topography full revision those

We innovation technologies begins, aggressive commercialization fully of will we including and of new are turnaround development firmly introductions drive have for growth prepared those when committed to our revenue and a remaining now. poised deferred product that be accelerated through continued pipeline product new to the differentiated

to volumes suppliers recovery sets the We ready to surgery and and to those expectations order monitor quickly. spinal will make a stand commercialize for commitments systems needed in for inventory instruments continue to in

are can status the and spinal best best monitoring risk, we situation, we to their so weekly our implant Importantly, gauge longer-term to near impact also any outreach actively supply understand including on operations and the chain of the business. manufacturers

we enthusiasm receiving for and continued Finally, we I are Surgery collaborative with and Surgical. co-marketing number of Guided inquiries want Image Machine-Vision that to calls the video in the XD highlight our increasing are platform

integrated complete hospital best-in-class spinal our for surgeon and in combined us differentiated Surgical orthobiologics systems XD solution navigation our provide seamless products, allows a procedural customers, with spine. which, collectively and with a to implant and offer agreement innovative Our solution and to

our are capital-efficient as both likely capital light will in budgets severely restricting particularly of manner the a their crisis. place We to believe companies, to in ability COVID-XX hospitals be continue XD valuable the system to purchasing that

to health In position their remain for customers for families, and our distributor partners programs near-term in for of and as expenses to protect order priorities SeaSpine and summary, our employees their their likely ability while a best will costs provide new our reducing normal. the non-critical surgeon patients, and our what and emerge

culture operations will stronger the dedicated on to we with to distributor the operational than that combined confident expect surgery will will that long-term readiness term team, demand maintain focused currently in importantly, us products opportunities, I'm volumes their to ever superior to and, flexibility are the resume. our allow capitalize the SeaSpine and pent-up to emerge us maintaining and We patients network enable customers ultimately surgery dedicated near materialize. the when growth address our and support on fully

to that, up we it Operator? With now will questions. open

Operator

Certainly. go Piper comes ahead. of Please with your you. first Thank the question line Sandler. And from O'Brien Matthew

Your line is open.

Matthew O'Brien

Afternoon. taking the for questions. Thanks

of couple a May, couple April? which on kind to provide happened as you first week what short-term ones then the more so helpful. be you Just Would intermediate of a questions. to was of here long-term and feedback John, provided in the

John Bostjancic

Matt, the XX%. of about we'd month that Yes. just was revenue comments over April in scripted down talked the

we to half obviously, hold in seeing took eased compared in the month So pandemic pickup over of elective But the of seeing April. first we hitting the elective as surgeries those better a early to states the but April. May, trend have as a latter depths definitely days we're to in of look the And in couple surgeries script, of April. we starting an as the in saw, started early as decline increasing alluded it's May, we

Matthew O'Brien

Okay. Thanks.

for that. Sorry, missing

July get a On do enough the of factors? in as June, more mean, hopefully steady beyond, interest the state of levels your feedback any done? gating a you helpful. What the to Just I lot what going some to would anecdotal thoughts cases bit or we things, customers logistical of get are sets side have this supply at these patient hospital point? and those little and on into be to about

John Bostjancic

surgeries, we in we in started Yes. sets March. even as the start early impact I on mean, saw elective back pulling

could a in that do we to they're protect make place. we and to So the everything wanted reachable sets sure

So to and sets substantial an ability manage of the redeploy we've them. got majority our

those knowing back and proactively, resume online we're them are redeploying states what are to that getting come feedback starting are surgeries to and we likely distributors. on based And from elective

have to be. we yes, to So, ability sets a they around move to where handle the good need the on

need protocols talking and seen, our anticipate sets From already issues that ability get current any be, available, for we're because move will more sterile a But hospitals, trying to of bit them time expectations, not do what to starting and and with based lead the if better because understanding on the a around I processing sets recovery. in surgeons need they such. to we're earlier, of our having little to a see as them manage we've they

problem. expect not that be to do a we So

Matthew O'Brien

Then just me. two Great. for more

Can new talk products is really clinicians cases. You've hospitals, great in back these cadence over for really of to bit something doing to this to seems got benefits little XXXX? I challenging appetite? all know just going the and this switch appetite get going it a trained new up think felt you products. like the so And more new the It technologies be about, ramping they're aren't as about where was QX. Is but to until more right of likely on this well

Keith Valentine

Yeah. products, have launch. training been the ability moving we expansion with, needs they're our And Matt, the We've surgeons of the connected also reaching but that ensuring to we've any if out. to to some a full opportunity think that. going had alpha as do not of we've been good into know that only that I that there's stay be we

I place. So a in think still we're good

would of going. I the a those question, help responding. in in and appears the receptive with working been there's demand it pent-up how were cases some we've at with first, these think of too -- for And we that notes understand Advisory lot A Board that us are be closely still patients mentioned and other Surgeon I to this your that to patients such wondering -- weaving it to our

if done. still their such And wants it's such a there's surgeries to backlog problem very they not there's that, have a to someone it. say are Because that a I fill else to eager someone backlog, can get postpone in. And most

I for those of And for both and be once products that surgery, they're appetite that think still an new there's so available. appetite things an there'll highlight

Matthew O'Brien

then, And for really one -- me. Keith. Last Okay. that's helpful,

their Just whether than or vendors Are less accelerated to opportunity some them players for well within XXXX of -- some are some you guys. support interest capitalized going function or and into market you be distributors to market lot able suppliers level reps a questioning to you there's to at even starting not get thinking the systems much starting potential overall surgeons that small existing see of pace really going this are spine forward from a competitive or an that share? or to even Is take guys way? elevated step inbound

Keith Valentine

back question, there where smaller or And whether out even discussions figure struggling the can the channel be pockets to to as and some things across state companies to a somewhat are challenged, are the return -- trying of I of part normal of are Yeah. right nervous. become that load. surgery having future U.S., think and makes because folks start certainly we're their they start those Interesting seeing which distribution with to

to advantageous, And from yes, in to the strategy our do security think we're position We this. part distribution the and to continues it it conversations. in because we're of continue emerge having expansion having these And in those is be discussions. we're we're

returning talent, placed being some well able to normal upon be of do yes. I think to attract So, additional we'll

Matthew O'Brien

Thank helpful. much. so Very you it. Got

Keith Valentine

Thanks, Matt.

Operator

of Kyle with Please from Canaccord Rose line comes question the next go Your Genuity. ahead.

open. is line Your

Kyle Rose

very taking question. you much Thank the Great. for

on reps. potentially just you talked the kind Just on you've are of the availability of some would mean clarity a is of potential waiting got just pulling set of maybe additional first for. add to the some trigger about, these understand, the couple before help and previous some drive the some it new distributors commentary. one following-up us guess sales that guess specifically be some you of I follow-ups for I reps? on maybe identified and procedure is the I Is guess there what or insight I would looking agreements. other, volumes, catalysts and additions sign into market

Keith Valentine

one our but not want the of No, we're items. development team and management marketing the to senior facility. pretty We they've going team sure obviously, traditional to been think talking Yes. just I they is, want understand get all the I we from leadership it's make where to, they them team, a making perspective. sure appreciate mean or people sales to

of lot until we meetings. hold travel restrictions get a is So on less that face-to-face on and

do we we all to deploy their and going recover is I be to return the to mean able going Additionally, elective put to understand that able in to to markets market sets they're to recovery be are want the the how are demonstrate to going as sets want to obviously surgery well. have fastest going that and quickest.

Kyle Rose

back fill U.S. that still back Maybe That's maybe know first understand very see pockets come to commented either cases cases. It's very historic help of seeing logs helpful. I or business. us you future where the week early. of are for up -- encouraging. the you're states And but come of XX% it's the month, procedures case then, representing you just to about exposure starting the That's

understand they Are scheduled are being some setting? the ASC being of back. type deformity as actually be these us case come Are like cases? Are simple you what What schedule help you to ACDF like cases scheduled? able maybe mix we look the to Just of seeing the starting start might cervical pediatric in procedures? to

Keith Valentine

Yes.

were the would expected back as not closed year of what on case we books. traditional we're do full returning as close All requests hospitals to sort some what seeing and been to beginning are great the were it's the that as some So, and last deal requests Surprisingly, request started but the hospitals. we have of a we ASC I year of to standard this ASC the being we yet. pretty has the what mean, mix put far have cases traditional referring are capacity. to

we may are policies quickly because they as kind their the rooms of restrictions did caseload larger or they had seeing place in they before institutions. Now be new but turning not different as in that

Kyle Rose

last It's just industry just I'll the and then around And been a you've back for Keith, in. while. hop question

and changes ebbs how from hospital seen develop You've on rep forces you sales see sales hospital a how that in there flows as as with commercial volumes and might interact in physician as go-forward well positives far as procedure company emerge your the relationship From and basis? perspective, are customers.

for doctors interim bit new a – those for some is opportunities be reengage, have the new just secure you conversations? pure-play vendors with able to tougher getting period wins, focus a going or to you Are hospitals as over to of there getting reengage to to it and account as being secure far to

Keith Valentine

with bit amongst I our of some once don't this fact, we as April business travel a new in will the nice leadership we're closed been think as circulation be number new out restrictions that the opportunities a the just work opportunity also ease past that that there's coming tell really are a May and team so. lot to opportunities you very new the I to week that in and had and of facility there's that clinicians getting opportunities offering. Yes. coming momentum of are of we to first deeper saw some before into and little over our well. sales of the couple exciting days products dive haven't aboard interested from of can momentum that and And about

some that already strong the in sales off as engaging wins those we're and has starting exclusive – of has see this stronger been May. sales an deeper think been their territory I we more opportunity kick force So to

Kyle Rose

questions. the right. you All Thank taking for

Keith Valentine

Yes.

Operator

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

is Your open. line

Ryan Zimmerman

question. for guys. Thanks taking Hey, my

Keith Valentine

are How you? Hey, Ryan.

Ryan Zimmerman

Thanks all great. through what that PPP it what hearing just are one, dynamics. the as the hear, in you customers. and the surgeon for It's out commentary, around go certainly from rates interesting guys I to kind am your curious as ahead. I'm attachment looking of Number changes. doing especially you're

are mean surgery I deferred. March is had What April in have that otherwise would patients who by being and

COVID going with not your those lost may or specifically? what's the now? And as so on may a procedures And for result just recouping what be dynamics of expectation right

Keith Valentine

of a concern percent into – was what focus go they the declines, A, coming leaving into a started they if April a talked lot feel and even in as to come there back March come rapid think safe we're have and you B, of I fact environment. hospital back; because funny and It's I start Yes. around are about to the think do number companies of seeing

that so you're of you do as up extremely our schedules this?" comfortable all weeks to we we as weekly ended our turns And do going just the very the your do we that say as perspective that in allowed June. we're as consistently that can soon the And see surgeons common calls to as that's schedules we I'm round and revisit elective be for we're and the ability that view being possibly surgery. in for May the now surgeries, to starting out seeing be busy heard a would in we city with we're on hospital would surprisingly, see what And to "From how thread

that later, allow surgeons those to places thought Even dates for I a they would be back sticking the dates and in to surgery. to to go even example, setting are Northwest Pacific lot in

loss be very So and system get the I a back into will feel will ultimately like very the small. large percentage

good and In of opportunity been to move fact, and as miserable I time most whether look or are for explained surgeon they in back that still patients pain. they been been they of to to on hospital to this is should waiting feedback do that comfort their to that the to have their getting it's in and they've and able get a – surgeons – community for I the we're And their look think the have the surgery. And be have They've back. get willing go to surgeon surgery whether schedule right forward. the the now think and their reputation the process most

Ryan Zimmerman

Okay. And for want then got two leave Appreciate I to I don't that. him John. out.

expenses. John operating one, on number First,

remainder savings in for the year. the You $X identified in I of think million about total

feel And some stop I your like this, second jinx do And further if need so actually you be? one, there opportunities wave, in pocket sufficient want there. you is back to Thank you. have don't if expenses but to a I'll trim

John Bostjancic

increasingly and definitely turned mapped painful and we've There only become additional we'd different negative. what scenarios pull out we are as those levers pull. Yes. levers And the particularly levers situation if would them

is advantage that important in but if in the to otherwise our take best want who pandemic. the both taking talked share about We just the enduring so of scripted because have that help of desire are maintain help opportunity comments, longer the I and of have to flexibility Keith understand recovery they been the can surgeons for because be patients pain. operational As their is to strong in than people market would we the position pain to not not we participate surgery, so in mission just our

reductions think what we're always So responsible mission that again It's can But we in is the we OpEx situation always or we've depending be and here. levers of calls in spend, the in situation, we and but help. are continue making keep CapEx that we're identified additional towards in pain the product for. we can have mind what to those taking we pain biased identified and why push as our upon pull people will are what that care sure, help to monitor

Ryan Zimmerman

the Thanks question. taking for

John Bostjancic

Sure.

Operator

line the Krum question next Your go ahead. Please of from Kaila SunTrust. with comes

line is Your open.

Kaila Krum

so taking Great. our much Hi, Thanks guys. for questions.

helpful. the or the deploying? be speak you're come So me. that to makes this procedures in deploying to back of just cervical that I you're it's you of of capital strategically procedures process kind that capital largely based of just are where -- in and realize any cases you lot you've Are And you're elective first? that you Can returning then seeing types that on color ASC, And mentioned a are sense there or early. deployed what would magnitude or of

John Bostjancic

Yeah. we cervical. complex say see The outside initial in be surgeries that more a April. majority surgeries simple the in our of of to starting cervicals, That's we saw are more outpatient ACDF. the what with are were surgeries, rebound But expectations the in line what it'd ACDF and

little to early on of by a been saw that's weeks. than cases complex higher how very an last there's the we surgeries. cases, two what early So in hit depths we're towards bit spine trend inflection particularly April it's call, seeing the -- deferral but more Again been of surgery ASP the as the optimistic we the

forgot first was question – your first I on capital the what And the sorry, part was.

Kaila Krum

Yeah, yeah.

So just if to magnitude. you the speak just could

based the call guys on are capital seeing mentioned elective that You'd on you're deploying procedures returning. where you

be And extent that to done you've far the magnitude helpful? would the so just that so

John Bostjancic

Yeah.

the the towards more biased from more the been of so we But system as to particularly on Mariner levers deploy is where and online. of revision the to are late about CapEx little OpEx, non-operating much call, systems excess of on that's platform, because more MIS we're back A of that the new of expenses pulled talked cost-saving seen Keith $X lion's continuing the As pulled far launches. inventory. we've Mariner than total it back across we've open in come growth and of expect foundational for and product the surgeries board million revenue very share and we come that half the

week-by-week the product to going savings, the of to to much the to of on the launch very year. And commitments some biased things monitor part on see up cadence the we're shaping understand ready of that's had we things and the new things we're deploy of when in we're make continuing for although we've that systems we rest foundational those put terms launches So brakes to full literally those the at cost again we those. based initially how -- product those new situation and looking planned --

more invest looks So under what belt the prudent for this we have feel it's at like seeing and we recovery point but stand be. those for how this to to growth, our might until to it make yet, commitments bit ready time continue like -- not sustained a little

Kaila Krum

And that so as so And sounds mentioned manufacturing your and well. of areas you froze hiring That -- -- then makes you you a costs. that guys cutting in mentioned like it handful sense. biologics you're you

to time? So finding if I procedures begin return on the manufacturing, force quickly can then to be you And stable you. this headcount still guess up at ramp on half? your second sales Are first relatively back Thank in you hiring. that how

John Bostjancic

see sales team, leadership the we geography. intact the that forward Sure, it's since we've I looked in want think leadership that's the today. the to think a move to in sales right keep where spin as sales the want we to to year place we shape I We've yeah. for territories the over it's surgeries sales time past been team getting team force revised the and right? frankly spent and lot got leadership The of with team both been portfolios and recover. the has best the at start And because across

at team. biased very the anything not we're leadership So in disturbing terms of sales

operation have ready on time. we to able decision matter go part what to drove and And a short that expect full days. that ready substantial manufacturing a a speed I'd to of hand is with and to of in few to we'll couple of the period right, back on the up essentially make we operations be back resume since when it inventory of enough up cease But workforce to I the we that's running be at an late the call that mean, we March. But notice we that get Irvine, operations, know respect can of this at days' relatively full to not a to production it's could but start to. if thing in that a to have fast, have inventory we point needed enough crank we to it urgent that go up

Kaila Krum

Thank Great. That you guys. makes sense.

John Bostjancic

you. Thank

Operator

line Cohen ahead. go Thalmann. next question the Jeffrey Ladenburg with from comes Please of Your

Your line is open.

Jeffrey Cohen

How Hi, Keith and Bostjancic. are you?

John Bostjancic

Good.

Jeffrey Cohen

for few a just So me.

putting where and mentioned more place. I early you might any you touch conversations some on upon parties in and front? things us systems far be having can look? and system and February stood as think color March XD that firstly, you to as how as that Can as far in So QX goes give interested

Keith Valentine

channel from with XD with giving and to distribution getting in opportunity been feedback capital of the kind on in a efficient our number downtime training not normal could a again early this anticipated of of perspective, COVID from going the manner, perspectives deploy our as Jeff right? at after opportunity them some of business of we for more most how to challenges the it's from on but time, launch also good us from purchasing this of return you spending So only best a lot look after challenges be especially the that us,

so only at be synergy, XD installed these used quicker. get fast for good implant as placed ways and creative a to because great way look but of some synergy for themselves such systems SeaSpine do can not get systems have it a help all in also a it I it, And with we can that it a we us it's we with think that great start that the opportunity different

this a And so we able hospitals they that make a with because to buy in to do have before enable feel do it way would have navigation out will access like decision wouldn't been they right. to quicker

Jeffrey Cohen

Yes.

far Reef as over Okay. the last Got the feedback us couple any you give of launch receiving Topography you've been it. And alpha can then on months that's secondly that as feedback there? out the

Keith Valentine

the is compelling term to this And -- think interbody technologies procedural solution, around one and to in cost-effective we to a think really I not but work DBM together demonstrate because outcomes. as but that present be very the you're gone well. some how our doing it's I news longer and going to our both that some only only only of well. not greater research technology, at we've have and area, good technology also animal information about been too NASS really think also gotten we've coupled higher-performing not with coming bridges that that view show DBM positive excited but more see It's we how be able we're going opportunity And to Yes. a also I that the up

Jeffrey Cohen

Yes.

number over quarters then been what a could doing performed think essential not? far And the the inside you about past as do far percent it. window versus Got of be as has been as deemed lastly as nonessential in you've ballpark cases to the Okay. you XX-day versus that talk

as coming to of far rebound that you the over physicians and in end centers you're sales being caseload the seeing seeing perhaps and And how their far are staggering then the cases of perhaps weekends? of as as weekdays force basically or level they're some as up May some half some hospital and some X/X just

Keith Valentine

Yes.

there's of Jeff participation talking what? that are I weekend hospitals. level question about conversations around California sorry was areas that first your specifically different But participation, weekend of and -- by interestingly in in know been about different So part

Jeffrey Cohen

Caseload being essential versus nonessential.

Keith Valentine

course and are probably qualifications then issued in kind was urgent March of for looking kind in should talking line of with spine and understanding what what hospitals that that. So qualifications. and elective pursuing kind of of agree emergent interestingly I they with -- this I I kind think it we on it with that had enough NASS neurosurgeons want to some and right had be around And at different with say -- of and are how procedures. is surgeons orthopedic talking guidance they hospitals And

that feel and bullish pretty advisers three -- next opening I really quite get is that going able very they they're But deep that surgeon a of that category third as to to load what again the to that's notes seeing we're patient mentioned in category. it list comfortable the are months. of talking our after the to be now really earlier that elective two we're there's our And over

Jeffrey Cohen

guys. quick please and Can last between of then you totality the outside the one breakdown split on give And worldwide including orthobiologics Got me U.S.? just the it. implants you for

John Bostjancic

revenue mix We're talking Yes. you're on global -- basis? the the revenue then -- U.S.-based. a about still of And is XX% roughly

Jeffrey Cohen

Yes.

What XX.X had in the was U.S. of the quarter? XX.X totality and You the

John Bostjancic

it about So quarter. implants spinal global for for was XX% the

is then XX%. So about ortho

too off the far mix. not usual So

Jeffrey Cohen

That's me. Perfect. for your it time. for Thanks

John Bostjancic

You bet, Jeff.

Operator

comes your with Shagun And from next go Fargo. Please the of Singh Wells line question ahead.

open. is line Your

Shagun Singh

of get exposed actually in a fear hesitant spike the to little camps. the least taking camp for thoughts see procedures QX I guess, second at question. done get then But second a a that the much to we are confidence is may fear be so returning on for procedures you your wave. to being done. two initially there patients' of camp Thank coronavirus. the patients in for could get wanted to One I Keith, is that

know So And your there. to then follow-up. have I I want what thoughts just were a

Keith Valentine

going have patients from We've around of what to how kind view that unless process patients they that that early their certainly and the closely, right the Yes. on surgeons with because resurgence patients maybe in also surgery. the finally procedure that fully the about live to concerned especially maybe that country And would a are I they it, we still the bit we've It of now books the actually been procedure. they've are patients, talked states tracking gotten go up elective think area of in they and to opened were community the appears at pretty it's with the that and some something their anticipate are the get that feedback happens through excited saying the in.

and I different think maybe been. that better views by is though now have sense that we've have closely would been that slower especially we there to me Northeast to going it some start small states would pretty fallout a of of has But and make opened than with that very that in to kind It's we're of have following it those those much the have the process bit up. anticipated, patients. surprised

right it's I an -- enthusiasm. think now, there's So

level other back normal there's surgical that of of monitor that whether we are work. think a to up start now concerns some I have these see just creeping and states to getting certain

Shagun Singh

it. seeing? got with us any backlog the might data on then, be I could is you you And there share

Keith Valentine

to on video very new by been the open Board the and Surgeon Advisory backlog about doing being We've individual. working with of forum -- backlog how and cases they where track talking keeping freeing weekly forum, really our with see I'm distribution the mentioned them they have. scheduled I also talking as channel a It's just calls we and in up. them openly. it that We're see

information closest on feedback plan. for they're it family backlog viewing really really giving the and getting from more single how detailed that it's don't So to them very every We getting and that patients is the OR ones hospital have priority the a on are for really the individual about the surgical It's get basis. to covering to it territory.

Shagun Singh

approach And interest think couple strong in as given get between know still would today? then then of a there's do and Do we of I got helpful. get it. early some about be and or on you a just the XXXX, could levels? you any to kind phenomenon of just a patient -- XXXX on questions to that mentioned go we And still. now catch-up where pre-COVID the you normalized lot questions. thoughts it's and I XXXX, level the but procedures, above you sales think stand XXXX Do for QX we taking to we comfortably think just Thank even you could levels think

Keith Valentine

strongly going very an Certainly the they're be I bring feel surgeon predict think working have mean, kind fourth sure. look to again, it's I third and as perspective and recovery are But to we talk certain quarter of later Yes, or they that quarter the quarter it's question that Shagun, third million-dollar I to, the going whether too of the the virus early to fourth there's tell. to whether of resurgence to some how in very into from the enthusiasm can't community and hard areas shifts. country different quickly. the

me feel yet of yet just I'm but signs just comfortable May, don't in I this into predictive to I love So XXXX we're being wrong. seeing May. early figure positive it's out Don't the not trying get yet.

Shagun Singh

you. Fair enough. Thank

Keith Valentine

Yeah.

Operator

questions now like at showing call over I for no time. back Keith remarks. further I'd this turn to the am closing any Valentine to

Keith Valentine

participating evening as always wish stay a Thank Sure. everyone safe. afternoon. Cheers. and I you for please of this course you great

Operator

today's gentlemen, conference you Thank concludes and this Ladies for call. participating.

disconnect. now may You

SeaSpine (SPNE) 13 May 202020 Q1 Earnings call transcript