SPNE - Earnings call transcript Q2 2021

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Operator

Ladies and gentlemen, thank you for standing by, and welcome to the SeaSpine 2021 Second Quarter Financial Results Conference Call. [Operator Instructions].

As a reminder, this conference call is being recorded today, August 2, 2021. I would now like to turn the conference over to Lee Salvo, Investor Relations.

Leigh Salvo

Thank you, and thank you for participating in today's call.

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

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

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

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

turn press measures over issued to with are tables non-GAAP I not Our such considered measures and to presentation release information the and regarding the be as believes accordance financial management or Valentine. measures the discussion Management results generally are non-GAAP comparable but these These and should accepted directly financial call financial adjusted financial now directly supplemental today. trends Keith? calculated GAAP with the not most provided the GAAP. Keith together measures, of certain gross the margin business comparable we loss financial accounting will company's measures. be most adjusted that EBITDA, provides principles operations. read accompanying investors the will important to of financial replacements for in GAAP include today should to in and relating Reconciliations

Keith Valentine

a that Through Surgery with of revenue. the our surgeons QX spinal implants transformed to the was teens revenue orthobiologics Display XX% their increasing back the COVID-related impacted a total joining volumes revenue, innovation results we margins. XD quarter Thank over revenue higher very In we strong as backlog. and had work surgery the period. prior approximately year XX% of where U.S. through the increased U.S., total In and market, spine generate we We've XX% a from benefited quarter, once year-over-year. with much of our XX% increased revenue of quarter launched orthobiologics than sales spinal XX% by implant new comprised XXXX first more sequentially second recently again of compared compared which low products by the than more our of momentum volumes pockets XX% company with thank of and of achievement XXXX. quarter all and raise. to and growth higher in led and U.S. U.S. was our acquisition We to SeaSpine. growth Good meaningfully the perspective, solid surgery larger growth. the experience, the the took continuation we its platform market a strengthened $XX.X started enabling QX, us. some both of expanded commitment financial gross you, disruptions half afternoon, saw markets, technology of and balance further share our million for of for quarter you operational we and of we in delivered and a significant sheet equity Surgical and and a Lee. of customer revenue of additional our that in From

per the per and procedure. our slightly case further orthobiologics We utilization implant also higher generated of and systems spinal revenue products increased

and XXXX, systems of SeaSpine procedure X.X to products quarter the used compared per average ago. X.X a For second year

earnout first arrangement and second XX, unit an Surgical. acquisition XD the to we under quarter. We closed our Turning the May during on placed

MIS and are module XXX(k) module later for launch We month. the minimally this FDA percutaneous the track for also receive surgery clearance are excited invasive spine to to on

We have sale organization or the sales development team arrangement. to capital Also, accelerate an to high earnout integrate force agnostic priority capital to into we SeaSpine progressed programs. XD and brand to and rapidly certain revised incentive the the a plans be compensation

result, financially and in more the launches already the we launches, are anticipated. earnout pipeline the Implant greater XD seeing initiated percentage we respect U.S. anterior Printed WaveForm a to the Systems. With As recently of opportunities we our than product originally Interbody of attractive Lateral alpha WaveForm

in system, implant and late sets we of extensions alpha XX to remain we line extension now deploy excited separate quarter We alpha tranches quarter late what about fourth quarter the quarter. late Those WaveForm more and particularly on an additional expected third in to interbody launches particular, the to adult OCT XXXX. XD-printed our Anterior products XX fourth system, or Admiral line system launches, C drivers Plating quarter. of System, track system NorthStar cervical of significant of sets differentiated This foundational fixation, X plan early platform and expected fully and revenue with commercial the NorthStar are We launch believe week, XX mid-third of the an an fourth of full in deploy additional is than an a deformity and innovative began our next truly growth the quarter, launch XXXX. full be expected and are in expected posterior fourth Mariner to for we

revenue $X second to the to half our for a are million almost can innovation capture And that the their to now increase the financing, million. have of best-in-class which we we the $XXX long-term XXXX have aggressive we XD over financials technology confidence and after continues comfortably platform, featuring that And over full revenue. that beyond year that expanding and system existing the stronger distributors we highest our spinal to demand. the the commercial implant the reflects with bottom increase significant the product number the full spinal spinal will range plans and of our even I'll XXXX Confidence their opportunity, technology ambitious the remain and confidence with increase share. XD outlook. In spinal our confidence XX% of sets a systems as of plan and plans. drive of XXXX which XX% and represent sheet and XXXX John? Maintaining assurance implant pre-COVID our compared John year as flash balance the of XX% guidance more get deployment of can in sets. to surgery portfolio sustained get our well $XX foundational recent in to This We support growth call in is turn people XX% is EBM of more capability investment more navigation vaccinated, to distribution of implant network in in high-demand as to with gives on important growth give nearly alpha XXXX. now support by Continued growth. notable end combined These to with so in most coupled invest further market-leading for year systems total, investments, to cautiously optimistic the deploying details full we an revenue implant efforts financial solidify numerous investment the this upcoming million launches our $XXX of over the us in COVID-related our our XX% and escalation of during million contributions the invest to recent spine with return hospitalization, to to Surgical volumes the despite more the decisions, launches expected second product we market half growth

John Bostjancic

afternoon, good and Keith, Thanks, everyone.

and compared $XX.X XX% of compared the noted the sequential recently totaled increase that million, to were That and Keith and of first and revenue, new second XXXX As second of compared capital those XXXX by Technologies the earlier, XXXX revenue recently $XX.X launched XX% XXXX. totaled quarter a alpha for clinical and sequential the in XXXX is of second encouraging predominantly XX% the quarter a second the was to of compared of to revenue the products the totaled a first quarter a sign revenue of most million quarter can in compared sequential quarter Surgical a very rapid and XXXX. XXXX. compared half XXXX led and launched second to The XX% growth increase $XXX,XXX of a $XX.X first a our XD half U.S. for the to sales in launched U.S. particularly XXXX. spinal implant adoption included increase increase of quarter of in increase XXXX, XXXX million, increase first fully quarter or Enabling to second QX. of drive of growth XX% the XX% the products, that they quarter

mostly $XXX,XXX of to increases in revenue which of atypical of growth XXXX associated XX% from costs $XX.X spinal the intangible increase implant of more larger to and metric amortization XX% in relative to XXXX excludes XXXX. to XX.X% in our recorded of that the quarter XXXX of International shutdown of generate preparation second to Adjusted meaningfully acquisition outsized results margin, launches quarter facility. XXXX. the Surgical. driven the in growth typical sales implant factors: and average business XXXX set spinal growth with business to higher measure. quarter second The second supplemental and of inventory U.S. margin asset of idle low quarter useful the business, $X.X second the nearly implant in the relative products U.S. systems common margin once with was million, mentioned experience expected In the we XX.X% in the XD years of for orthobiologics the by for impacts XX.X% an of had and XXXX XXXX. also XX% second was months' high-margin was implants quarter industry. compared XXXX quarter XXXX X% primarily to gross compared XXXX costs logistics the sequential associated amortization COVID-XX XXXX XXXX required XXXX the quarter substantial XXXX manufacturing continue declines We GAAP Irvine technology-related in of second gross first from prior growth. to a second in our to incurred benefit asset million, revenue the relative in full to the commercial in quarter of rates more anticipated faster due XXXX on costs in higher on in quarter orthobiologics of spinal builds. our first selling spinal quarter The shift the the of orthobiologics spinal second quarter full that second expected second operations of to make an X of Keith rates, growing in at for XXXX. and measure sequential and adverse a the charges of the margin the from mid-single-digit The growth orthobiologics. resulted second quarter spine of totaled prices impact plant our increase manufacturing faster year-over-year press intangible X implant those the the compared are investment to implants line OsteoStrand systems the comparison quarter a compared were second gross of comparisons second of provide the compared by of half increased inventory product. totaled to growing increase in compared The launches second plant U.S. increase our XX.X% earlier for for of quarter kitting which quarter the was the technology-related as to is implant rates, with COVID-XX to offset excess Plus in release, than obsolete with our in revenue Those with by the than spinal idle commercial again gross XXXX quarter of a a second of increase the to the with compared for orthobiologics compared

that of connection compared loss loss of margin amortization that $X.X A gross our financial an margin for selling expenses million in are for we in year in EBITDA second million, on our measures period to loss XXX repaid May $X.X the underwritten The the shares quarter XXXX and, consideration net fees performance However, credit $XX.X commissions; period believe that in other in the quarter we of Protection of under adjusted operating taxes, paid XXXX. the improved Operating stock. XXXX of and to under $XX.X in more margins connection the selling for points expand income per by and with higher included the incurred totaled gross quarter increase expenses, legal second and the by by amount a to over X expenses. integration in comparability to the Adjusted of GAAP to XXXX, expenses continue to basis million quarter years. the higher the $X.X we of press received and net XXXX for and of to facility. administrative of and impact $XX total expenses, operating reconciliation margin the in $XX.X a the research XXX can in financial quarter core April development had million information Program facilitates net higher was $XXX,XXX of $XXX,XXX a of $XX.X We next X net million proceeds adjusted $X.X primarily Adjusted a marketing second million million tables compared by provide of of and and with XXXX non-GAAP million, to and common that outstanding second EBITDA in gross of the April $XXX.X credit we companies believe to valuable for notwithstanding, the before of operating million to connection of with a from We to which reported and second afternoon. than We entire driven at results outstanding XD million in million loss for XXXX nonoperating offering our X.X of GAAP against $X.X $X.X loss majority our cash industry. the Net other adjusted operating in included of SBA loss was loan. expenses. gross adjusted and and and of from general June earnings $XX.X million other professional XD and acquisition of interest, increase public $X.X Surgical depreciation in was million XXXX $X.X cash issued amounts the relates which million, equivalents second this quarter gain outstanding borrowings presented Surgical we XD acquisition forgiveness the Cash of quarter in loss totaled million XXXX. XX, second our million XXXX XXXX, our Surgical Paycheck $XX.X no million of compared facility. our release in of

flow compared includes attributable million of spinal of and set first property $XX.X greater cash to operating for XXXX. instrument for to free was a in XXXX, the equipment, of XXXX, in Those were capital burn, half compared commercial number million implant full million XXXX. $X second of which a build was increase expenditures primarily $XX.X first needed flows for increases million increase $XX.X second higher the half $XX.X investments XXXX and million launches million support $X.X of and to purchases of the quarter a for Our cash the quarter and to

XXXX. Turning continuing expanding reduce on to our G&A We financial outlook remain and of to our as expenses revenue. cash-based for gross percentage a focused margin

revenue we growth to R&D and redeploy our operating the implied that set to guidance. expenditures and driving However, towards are marketing sustained XXXX continue plan leverage the capital to spinal revenue build any accelerated inventory critical and implant sales, by initiatives

year now full to to expect and XX% year of XXXX revenue. XXXX million, full the to compared of growth be XX% As range to Keith over XX% noted reflecting year earlier, we XX% revenue to $XXX revenue $XXX XXXX in million full

originally range, for for revenue our million bottom the Spine via second more timing factors, end of confidence provide vacation because and large new summer, an to time year. of September In than to the taking XD trade seasonality and the the greater shows in the into the Society introduced of progression now percentage we team, increase the XD the meeting COVID-XX sales this a more arrangement American regarding North we of our also want Based are revenue of guidance earlier feedback under in a on including XXXX. a in placements than model for on of quarter we rescheduling color quarterly addition surgeon did anticipated expressing expectations of compensation late earnout third due we the $X expected to industry expecting number half the other

typically XX% roughly to That QX third the year. the to growth. typically For seasonally of anticipate represents XX% weak to now year-over-year quarters of XXXX, XX% we XXXX, strongest compared QX XXXX, sequential and, expect a the is quarter which for increase for XX% X% one X% second year-over-year to quarter growth of the

the much the effect revenue, XD's quarter of earnout for the higher-than-expected placement a near-term lowering longer-term accounts. contribution commitments it XD anticipated benefit to the contractual X impact for and While of provides to next margins assumption relationship by of upside years XXXX X greater revenue a to those through fourth has and earnout XXXX contemplated from quarter third the contribution the

We expect year, impact in Surgical loss to to adjusted P&L further the last EBITDA anticipated XXXX dilutive reduce year. compared including of on our this our XD

taxable commercial shares elected XD With for common to shares shares certain tender until million. events exchangeable significantly increase slated investments mentioned $XX to them at closing, implant free spinal many shareholders CapEx of million acquisition, the flow our XXXX. in those respect in instrument expect and certain from That EBITDA increase stock. from XD is to earlier the nearly dilution $XX part XD SeaSpine for which adjusted to Keith the XXXX be in support XXXX receive versus launches set inventory XXXX than due anticipated between cash to full more $XX but We to Surgical exchangeable for more build the XX% defer and burn Surgical million to they planned allows

X shares tender shareholder in will the least expand XD for $XX turn at this over for tax for access million them likely planning. invest to been of predict anti-dilutive own shareholders, must X.X that shares, equivalents year the issued and within extended a options, elected total the shares with exchangeable be cash confidently Those to in SeaSpine of on stock and their which to and Keith we the actually will XD roughly cash our loss exchangeable to of common will issuance. growth. the XD total tender better because makes we shares denominator share call that common million equivalents, X.X their be for in As per treated effect. hand, were plus until that the a I'd XXXX credit who per that liquidity in like those issued result million to not reflected to point, the X ultimately $XX aggressively shares additional SeaSpine for a be July years the X.X more each facility, to those capitalized common of which this than be on calculations to based will denominator, continue we of of and decision $XXX their to which we time, stock, At share like that will shares elect shareholders we tendered RSUs million, can stock closing million can't exchangeable timing million through personal be receive never comments. With consistent can and have loss shareholders XD At stock exchangeable for

Keith Valentine

Thank you, John.

more and our the to very our That SeaSpine the influence growing are SeaSpine margins. We that be transformed room. spinal team to technologies develop to leverage have products, today, level high just launch our further and to family foundational expand on timely to the of that beyond spread effectively a and XD highest-quality to and namely our to execute implant our are into we enabling commitment add operating utilization outstanding excited additive their to to through Surgical gross will be all generate clinically distribution, the able growth to sets to at above-market and the attract relevant priorities organization retain revenue efficient

right treat is life. in are this quality to net our spine in of mission to share the and goal develop highly collaborate the superior Xx more team to be than and spinal market is faster of best Today, with are passionate dedicated to that procedural patients' disorders competitive market to X and surgeons the and by spine driven a market. have market. clinically we improve a an cost-effective is grow with We that products organization and solutions and effective both surgeons deliver SeaSpine than overall the believe Our and to systems, accomplish us and solutions network And differentiate taker past to our this. distributor cost-effective motivated employees distributors XXX who growing successes

of is has that And been up office great That visitors weeks. are hosted working With the back. we've couple the it our open XX so noticed of to so it energy Operator? by collaboration questions. we the past increasing remote, face-to-face that, enjoying recent the return It's number palpable. of to important we and now nearly in will to after reenergized is With the months to excitement surgeon culture. and and distributor be

Operator

[Operator Instructions].

have first Sandler. from with Matthew O'Brien question We your Piper

Matthew O'Brien

now -- this time your to other? of is internationally although you towards is the in talk it pretty a more and Is that. Great. sets I've XXXX implants? versus sets? is kind as investment? implants skewed weighted eye-popping. category? opportunities, about or you skewed or then both it I'll Keith two What is and it is John, two, with just see Which as the Can towards And the why more growth little this really of increase do domestically that got the many towards increase in But more stick bit one far than

John Bostjancic

this Matt, the this big even, expenditure implant The compared but we're year. XD have doing the year product launches the a sorry, commercial the of anticipated. capital launches side year. number There's launches, number C in number instruments we But the mix, biggest the it's mean of of WaveForm in a also right? highly catalyst to But last That's the investment biggest of I full -- inventory interbody impactful right? pretty is that's sets, WaveForm the Yes. is is one technology. NorthStar alpha full been just driver, And it. the

As the even be more within the Reef the its we to full by more XX sets to and end coming Explorer XX of year. interbody, launch, commercial then TO deployed the got said, out, The we've expandable the for alpha a deformity of the which the of launch it. deformity launches, indication, adult is complex future, very expensive even Mariner aspect near expect alpha and set because we

So growth of product and in to our it's growth some is by sign more a these confidence driven it. the be that's and driving going launches, really that of impactful what's

Keith Valentine

larger I that and of on through groups newer too, overlap we're top those systems. think Matt, in through earnouts for around of the about, more to inventory earnouts of the done the And is that, excitement bringing and some other are systems also the an anticipating, require think newer aboard each the done of commitment. that thing, those distribution much

sets a And XD and to new or to we the right accounts. out aboard, deploy going it's that right to comfortable instantly make their the quickly that they're distributor can a them into want so either whether it's we or make to the earnout comfortable have coming make earn that sure equipment that hospital sell or whether new equipment

Matthew O'Brien

a push to just And helpful. That's guys. bit here, further little Okay.

distribution the side really set implant Just think impact skewed attuned inventory or able to because more to you're investors new these the all groups? the side sets, of that support pretty I is on are new it

John Bostjancic

we Again, because all to it's able that call, sets with, the conduct with surgery. travel both the the deployed trapped be implants sets what to instrument inventory, get the

the need in to we the have on also as both, able shelf consumed. So they're to be replenish then but we're inventory investing to implants

the not both got in be a that and So inventory want inventories and it's surgery, consume set the move you surgery mix, maintain set. then But of on XX-XX travel expenditure to next inventory and do the because a to replenish a those so but we when the the able have those distributors the to their investment a to all even on readily terms with from side to in easily and the need it's can shelf you capital confidence. to implants pretty both side replenishment

Matthew O'Brien

Got That's helpful. it. super

it the with period? do follow-up go? based you on indication, the opportunity kind just Is getting over the back-end expect then it straight Is the loaded, X- we talking line For question, MIS how pretty things earnout much a or QX about MIS? And into year here. X-year really an upgrade you of the of and or XD people your Or provide want more next move in in of hands then open impact system get late quickly on placements? quickly terms that now right can their update to for

John Bostjancic

Yes.

straight-line finding a with period a the second sorry, first we for -- the revenue. having are mean is straight-line earnout a conversations X-year typically, then of commitment flexible The question was? over And revenue. engagement doesn't the we're generally wouldn't to we're more question a be It of impact something with the But ramping escalation.

Keith Valentine

Yes.

upgrade, purchase. get if introduced module opportunity that they to whether if the be is you installs as module to course, choose into system On options then, that choose to of yes, there existing there'll new for you different -- buy there's have a to and

Operator

We question with your next have Canaccord. Rose from Kyle

Kyle Rose

trainings just to taking distribution now us just better having talk about of maybe much that larger then goals the carrying just sell of answer cycle talent are new more the state things products some of and in lot sales mean, bringing understand sets do the I I ambitious better also about you the and the got have just How of company share. And off new to distributors, will to surgeons question, your comment life wanted of distribution sort. Matt's and upgrading in new that distribution groups force support market? the to to comes to education on where you've help for dovetailing the now. weight about a of talent. versus from you Obviously,

Keith Valentine

Yes.

I on. go think really, both continues to

new to I distribution to product some some fill new coming are it And us think space. being team, amount greater teams. -- in our we're sales. better our white a of of the moving, systems or as opportunity either creates some additions That current that larger our we areas start nice added getting a to become hiring. more in continue We're for from and solidifies product that of obviously, and on working our to revenue legacy through introductions obsolete, combination more through of

in feel what also able leading the a XD we for platforms. be the our so have opportunity is absolutely one across to NanoMetalene of to is reason many portfolio of that pipeline that now XD certainly And interbody many, is like because an have presenting. technology interbody important And and the we offer we

with that And don't distribution going have opportunity focused areas new space exclusive distribution. so most into white and a is currently into of we the But that different again, or new distribution. more going conversation creates and

Kyle Rose

instrument Great. I we you R&D to when encouraging to then launch? mean, on or that the technology implant have projects the actually And new out. into such first going alpha directly? that's designs expect do clearance MIS to come see through are move utilizing When more have of will XD those you'll kind the see XD, that some roll of R&D teams Maybe

Keith Valentine

be XD one focused keep new is up of SeaSpine on some instrumentation set that beautiful But specific. of have to is in it already and dedicated was originally things We mind, more that agnostic.

easy make and easier parts with with be XD. What is becomes other to platform you on so and certain of instrumentation. used our assembly be quite guidance what long it but to has a can SeaSpine enhancements forward for talking seamless we software be instrumentation used time easier integrated our move And able we're to can instruments for see really, And use will items the it on competitive. as SeaSpine is that been about be onto very it's it --

items, go. coming forward. you'll as that we that's is continue And And news move There'll to see view to to so notice, that sure further going. the be at you'll flow it's good software it's going we continue into already But as some I'm NASS going we as up. generations

Kyle Rose

one then Great. I'll back then in and And the just last queue. hop one

you the a seeing seen you're last COVID volumes us maybe to progression that update of about the You Delta variant you've respect and recent of anything from things far side. call as with some out increases United the anything there weeks? But what vacations to Is on commented across as and quarterly couple that need in perspective in just the certain on States.

Keith Valentine

recently the meeting Diego. is. There joint was there San in sections just Yes,

I places. neurosurgical a in talk Certainly, to opportunity had and there And good are a that others Orlando. I there's become there there to to Florida spotty surgeons talk So in our not Yes, hot area. meeting big industry. a know only coming has

area, for of, Specifically, and even that having from Orlando down the last slow we a in meeting surgery requiring I in now elective as in masks is some think, Orlando place week. it understand

they previously, We feel that had something So are concern we've whether made think on. to certainly, concerned yet, but be need markets. there an like there authorities are same does numbers it's yes, some some higher to at some Delta seem in at accommodations starting be don't and of being accommodations hospitals. markets I certainly keeping something are about make eye is it the numbers variant And we're where at that to health the

Operator

from Ryan with Zimmerman your next question BTIG. We have

Ryan Zimmerman

me, few following for up from Matt's a and Just question. Kyle's

quarterly you some Keith, I about have. comment to Kyle, from that down, potentially kind question but that you're last. perspective? the working at, get working just love of a with backlog surgeons It the appreciate I'd how we of may are for that sense Where sounds we that your commentary Just long all dovetailing tailwind And your like dynamics. in are with make did view, backlog cadence a

Keith Valentine

we Yes. backlog worked at It's and the question because appears certainly the has every that meeting it's was ask that good -- most this of It asking through even comes question past surgeon through. week. that I a a

on a the was in. what being reluctant patients meaning was there surgeons' between to from backlog out lull was and there there think I the being or from then were office -- patient's go what slowed offices,

things like they it, that the much offices think worked going they is third largely patient slows they're, flow to their now down, they something being entire a backlog than unless acknowledging the better also are The much into had as be balance. for don't better before. feel they're I describing through. present backlog have They quarter, they're but is getting

still load from to is trying clarity perspective. been surgery very think that spells give looking that to a some to And so fourth shaping what call we've up robust quarter the is on I and to be

Ryan Zimmerman

then that. And comments. bit. those me for Appreciate XD Two for around to turning little a Okay. questions

systems Just roughly there of one, XX acquisition, I think at was the time in field. the

And so placing kind understand how I'd of systems. love to those working are your through

were my already then place least of have spine able just and John, were how get these many But to or systems. product spine the XX front those? there, convert for new the you ask some to You're in in of upfront. to opportunity And at hardware putting I'll just earnout for that question agreements the

what one kind through? The we your cost that synergy that the there that are of from process. side, you of second are is at are a cost where work expectations And any can if in synergies standpoint part on

Keith Valentine

Yes.

were So all all outright placed sales. first now, placed the right on those of part, units

try we're So we have drive of some participating to months, a continuing product. fortunate few in been past the of the SeaSpine that, those are really of couple a specific using started in course and of to We've over accounts couple accounts, further.

we're And us or use closer locally. some here that to already continuing it using to

opportunity. continues out But that no having it not it's if the keep of So earn go it's have it. will, to -- not in an because there's to SeaSpine already about discussion gives purchased a But them products. on. It chance easy mind, just you you a in it, the hook they've to

sales additional going we've be about that that But new be itself present opportunity have how to we there's that now. knowing I something taken of thanks few being to a SeaSpine with us, XD and that the fact that new that they're successes, force their of And they the to OR will and to launched have approach will module behind in the talked think to So be had has as moving MIS better advantage the aware software that continues and help more continue conversation. us can is And also surgeons. forward. can our talk those that about

John Bostjancic

some, can the about Ryan, But have It's commitments faster software too. we over driving balance that X in play. much share this taking development, market and higher specialties more is in a revenue development. product side, And revenue down right? synergy cost don't XD and of X" They relationships with like opportunity. have then that synergy "X all more drive still sheet time very collaborative savings goods this like terms optics are volume with really, trade growing cost shows is things we with plus There sold our modest of much stronger on suppliers equals and because XDis bolt-on, pretty

complementary taking strength opportunity. it's it's So and the all to about of our all market base and revenue share

Operator

with question next Brodovsky your Sam have Truist. from We

Samuel Brodovsky

around So first, guidance make I I wrapped head first. want in XD sure the of have my just to impact

a that from earnout originally mentioned than you anticipated. So -- coming greater mix

little is through Or XD? we sales of to into should that much So that take increasing $X the rate strength strictly that from less than core XD there bit million revenue think maybe low business? how those million of with comes as earnouts? $X a more should backing then we in the And that into end, that -- think the

John Bostjancic

mix not revenue, of was revenue, base around $X took when Yes. call an to assumption earnout of revenue XD is about capital we and Again, talked the on million that the incremental caution kind the between our give that we business. which last

providing base to as as it's the when business bottom the going revenue quarter. originally been models, able opportunities the which more orthobiologics manner sales But starting as of well, a those our part opportunity, So to accounts And more earnouts to stronger. you it's of than say does the generating pull-through in anticipated, the get $X.X in because reason that the mix more stronger million, we're scripted we're sales base we or third comments weaker earnout that impact XD because still we're not many in earnouts do from particularly on the the implants XD is QX. sales incentivizing expectations the is convert those is business revenue to short-term said meaningful up we've spinal capital But team to of stronger and bring both, the in possible.

didn't upside, give have still same we comprised got that reason. intentionally color because that million of the on of on what but we the million implants versus call of $X of that the any we've So mix very is capital that expectations $X last

better is into pipeline which for of we team good And financially, we long terms sales is the the have the an earnout accounts be, in because access the that's exactly anticipated, what maintaining incentive we news them would As is long periods. to is, than originally why motivate on didn't we had great to the visibility good earnouts contract plans to is assumption they're focus assumption. earnout term is greater what for because opportunities the restructured term through even

going So terms it's the impact that color but same we're it's not slight term. of quarter provide assumption, and upside just on longer sales in it's third to to the a because capital

Samuel Brodovsky

to that strictly it's have earnouts, from that then the you hearing Or from be is now an from your it do activity. have more restructuring curious earnout going incentive that accounts But hear Obviously, option? more in think perfect earnouts interest potential customers are on change to force. makes just model? what they coming impact sense. seeing That we'll their And sales you're those Great. on

Keith Valentine

this they that price think And full the sales at that that later, excitement option. cycle possibly equipment that is and it we're working equipment that just give offer an And shortening features can to point real allocated intimidate a be very And accounts well to sale, of motivating, and hospital at really least that opportunity. has long. now that knew probably to a that months. year that X doesn't excited capital have very the quite I in get very an an been especially model didn't going have what than ability they for a the has and for or earnout is on And reasonable hospital. XD and a getting us getting fact option either they many, they're times equipment team about strong deal was think sooner able there's to one with a many the cycle placed I had think I entire capital had a only get hospital in

ours, the think, to and because really they cost of to much And I that has. some that's have new the that signing difficulty some aboard. consideration the reasonable, earnouts think more for I and hospital, we're technology XD feature feeling intimidates comfortable of -- do a is able

John Bostjancic

Particularly in ASCs, right? surgeries We moving see more there.

Keith Valentine

it something MIS Yes. to some next move And continue really obviously, I couple launched do forward. over but as to will of new as will that in. the with ASCs think up it interested -- application, get opens especially see the we of ASCs MIS quarters, application course We we doors the be that

Operator

from We Thalmann. Cohen Jeffrey Ladenburg have question next with your

Jeff Cohen

little firstly XD, I how beating on some uptick be procedures or that for as regions a far spinal that levels, Keith. helpful. keep give us you, as as that certain offerings you're perhaps seeing spinal as current pull-through, but flavor to far up So hate and matches would with your from

Keith Valentine

go. a really paces. the users its call. to our excited alpha launches Yes. to we we more committed it have keep -- mind, to in in We're also best run And just far we're than that committed through sure but about having alpha. good-sized make numbers on alpha we're usually And mean, was discussed the NorthStar I we was as X as --

in we're And launch labs XD so to it's and technology ahead. be in going recently, full speed spine. And We've validation nice procedure -- the that's cervical posterocervical implant of for nice or relatively the a excited. spine had a system

products done, for. deformity use you that for just are work. Additionally, well you simple a aligned that it's are lot to see what folks XD the very most of also coming Obviously, new and degenerative the a is standard system using are degenerative procedures

a bit that as look our take an side things there's launches little the well, deformity new of But on a of perspective, Jeff, the ideally, we'll will be about we that a that lot made that will with open I systems. especially fall with XD. effort And side we think and interplay all so cervical talk that on NASS. into, of from interesting a more the posterior be at really And at

this the have ability end a helped curve someone also who's going at to how to present that's driving discussions, of have have we're at guest get relatively an So learning perspective but from only we're new ASC. a both get them and and to September, to ASC -- the their the surgeon perspective it's at a going of on not for just

Jeff Cohen

Bost. higher and a Got of me, looks And which like bit than little it. like OpEx, line you, on for talk you $XXX,XXX drove million. efficiencies leverage? Yes. in Can lower top X% about then your for was estimated second what It your we $XXX

bit? So it Is during leverage. Could quarter? this see to you of looks it like little talk just some about efficiencies it you're pulling or that out a in beginning happen more you

John Bostjancic

of both. A little bit

that of We've near number now made in X we're somewhere because over the managers to into the market. years product of marketing launching a bring past more products lot in of the And to launch new pretty shape sales lower adjusted said, a there. going which more need has think continue marketing, we we been to add don't long-term we good to on alpha the full market, an on rates we've we're and bit little grown, to we're also pretty gross of right, right, As would. focused historically of G&A, starting expanding think they we've synergies G&A out have I coverage I at But right? efficiencies to commission efficiency, ticking like more see average X% think, G&A good margins, getting as growth. getting by we're I -- -- to because in launch investments out XX% on compared heads marketing expected and

And would And reinvesting committed how revenue leverage drive we sets be we we're second those on continue to we efficiencies to synergies more stay that. another we higher get. getting to anticipated then that was into So growth. quarter the thought example focused just and of

Jeff Cohen

And John, end so Are the levels? of up another year? at inventory you when might toward the current on you take XX% the or looking

John Bostjancic

sets, the going it's $XX be going orthobiologics had, we know million which high half to going going Well, don't capital will inventory. the that I But a and implant it million XX-XX other the it's mix if to total because, implants. side, again, of not towards spinal close increase. of a is the to and it's $XX expenditure spinal be towards between pretty be

of that breakdown how balance the that's the rough hit should sheet. So spend

Operator

Blackman question from We Stifel. next with have your Mathew

Mathew Blackman

I'll I've the I about just current Maybe fully but cross-selling, right you And I'm we through? early I'll And upfront. those NASS, reception touched pull wanted to placing the curious X two. you been customers? it hands. my term? now it customer of think, what help just then got I is expect. second far start what your I on to so And -- Just think Is to in in about sort bigger ask is ask Keith, which XD, near has think it, current then question just just through Or on think the when in XD a SeaSpine us opportunity buckets. that XD have it

we're anything Obviously, note more to XD. You we into But attention going else are hosting heading of Day. hear should be to an that about paying the meeting. Analyst

Keith Valentine

Yes, yes.

don't way kind place it, us are of really gives arms that there's there number much or to it is There a So if and opportunities both the account a to talking existing first out. just these have of the get seem relationship have it part you existing that some And their be to choose say then are expand also with an opportunity just in. And that accounts making is, how that both to chance at I look accounts units new. we around of your to is we presence bigger they think top. is, I a we're a is to -- earn already in a would

a both that with through I license share to would a give not to brand-new -- first of get talking this an to And way already it And in opportunity we is that are one could we're it account. so us approval it our the get accounts market as further account be ways, to implants that market other we're hunt, already well. approved would our that friends to, an approaching but in great on kind unique use even speak, a this is sales so force and think or be penetration products that on,

way -- door provider be exclusive, but to limited provider already for or the could an open an another to account. it be So interesting not exclusive

So quarter, in we either fourth quarter again, they face-to-face that full the those how they and that launch at the where different out on going thing things. further time new to an learning ASC of are at obviously, think going also along, into we there's time to were look late products be I is, are advantages for meeting. and about experiences a a alpha that, only I new talking think lot be talked going that that you'll are that frame. take We're and into good to technologies enabling a going and not the XD, you at a at than NASS only in the see and user see about new When we're -- all around look curve went a NASS, to far so their ASC. and of products discussion the some NASS The going other at were or launch some have rather last third around

Operator

We Folkes Brandon have from your next Cantor Fitzgerald. question with

Brandon Folkes

put mentioned to trending the terms in products? you're much perspective, get good another new that of should to a quarter. the slightly per you the pricing of where products you longer on a trying up. revenue usage to granted how context growth Congratulations term new how to want up this that Any I as about tailwind also revenue it's sort case. this of I from saw we color talk of Just your is you ticking into bring procedure. think in of these contributing versus just on can expectations

John Bostjancic

Yes.

up procedures portfolio. low quarters. we're more in consistently So the revenue per has entire pretty And with case that's complex to because able participate single in Mariner -- in digits gone recent

So we're a consistent seeing uptick there.

price is I think of of think, price. in does us Having norm the other I typically spine. products declines, is which is new thing helps kind the what the price it maintain it mid-single-digit terms for mitigates

to making low So single-digit constantly see the portfolio. the declines price the of we're because we innovation typically

that see getting. But thing less been percentage stocking declines the our revenue, think are So number of the are can't we other same in direct there also and that because orders, is the case is orthobiologic for X/X it's of a of consistently the don't track innovative usage every companies I right, we orthobiologics years. price surgery, revenue pretty about is other a

for orthobiologics do they when order, used. if see the charge spinal surgery on are the sheet a a our stocking So don't we implants

when take the Mariner we're we're to case per don't know is near-term constructs. more good or opportunities -- even know Mariner is to, share of the per products allows case procedures. adult because that we're the approaching it's revenue and With on how direct surgeries. some do in horizon, PO, news in participating us is an tracking these we used just case higher higher than visibility. to extent opens have right, longer the We So exactly account revenue that up products just Outrigger, more the revenue to that buys system But indication deformity revision that. increasing we don't market because in per complex and systems orthobiologics but it much used that through higher a

of kind single per quarter seeing we're good every consistently case, low digits a in of number So growth for revenue the quarters now.

Operator

time. turn for further no showing to this Keith Mr. back the like closing remarks. conference at I Valentine questions now any would I'm to

Keith Valentine

evening. everyone, everyone great us joining Yes. you, today, for and has hope Cheers. I Thank a

Operator

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

disconnect. now may You

SeaSpine (SPNE) 3 Aug 212021 Q2 Earnings call transcript