SPNE - Earnings call transcript Q3 2021

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Operator

Welcome to SeaSpine's 2021 Third Quarter Financial Results Conference Call. [Operator Instructions] As a reminder, this conference call is being recorded today, October 28, 2021. I would now like to turn the conference call over to Leigh Salvo of Investor Relations. Please go ahead.

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 September 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

stated undue You on on are Please cautioned or of today, not forward-looking available periodic those releases to and on and as beliefs only the by statements, place www.seaspine.com see predictions are based reflect October at with website speak news and and the which statements. our reliance only filings XX, our implied www.sec.gov. which our results SEC, In are and information current forward-looking XXXX. our actual corporate

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

Keith Valentine

you, you Good for Leigh. joining us. and afternoon, all Thank thank

by and by marked of in many we the seeing The on increases spine by third decline. our But Delta cases capacity triggered of in caused hospital variant. are August COVID sudden the surgeries restrictions states hardest starting as bed the to we in COVID-XX by in the significant early to hit was continue rapid October disruption quarter encouraged business started spread

surgeons' fourth have an the However, surgery hospital certain as pockets QX, we gives volumes. quarter our that upside of the And in backlog past will staff in aren't recently are the has outlook quarter may historically what schedules experience been in many full seen our we shortages us increase work surgery support impact we surgery customers accumulated on the the cautious of anticipating eventually in through country already our that because while year. remain quarter confidence that quarter fourth busiest fourth in

begin take we believe surgeries, will in strong half Notwithstanding far play and the work by our are out. backlog caution expect energized first While of spine it through the fully quarter XXXX the XXXX. execution we of this the team's year, fourth very remainder see of so this we to surgeons in fully for to

into the Surgical organization. highlights great SeaSpine XD progress the with of Some our integrating include:

approaches adding for Key pediatric to in of With Admiral our agreement new share system and the the and distribution important organizations' position an market between and X of of orthopediatrics our expect teams XXXX. quarter, systems leads fruit Plate of collaboration further products a well Surgical's with Module navigation Adult bear the to producing to we signing and support geographies launches We key a exclusive goals XXXX; in different orthobiologics the XD's number Reef namely WaveForm ongoing our number us technology; System in printed invasive Percutaneous exciting penetrate to our sales market in Cervical Deformity revenue Posterior in launch products the and anterior NorthStar U.S. alpha track surgery. more in strategic growth introducing that fourth the Fixation product XD distributors markets number X commercial System, the Mariner be with which flash interbody new on Spine XD full that the spinal of and system Cervical and technologies gains implants posterior, accelerate to will the include lateral introductions a XXXX. remain launch TA to minimally Interbody System, the spine

we declined to quarter X% Revenue approximately quarter most restrictions prior prior in X.X% was more revenue increased COVID higher to the XX% complex approximately the cervical a digits nearly roughly year-over-year. comprises to period orthobiologics revenue, our mid-single third implant average recently the launched the total by lower million. U.S. recent mix to declined revenue greater for of sequentially than shifted revenue the of in Turning the second quarter. increased XX% procedures. in-patient revenue. revenue XX% mid-single-digit Surgery Growth revenue XXXX, year sales $XX.X to again price products, X.X% results total to experienced but which And XX% U.S. quarter, over of by U.S. year compared consistent case declines, of increased of XXXX. led more of surgeries U.S. the percentage spinal comprise and volumes new once by third the and as on which our of the and with compared per compared the

products increase of a ago. in X.X, to utilization of procedure per procedure, products to continue our X spinal XXXX implant third the used year systems We per averaging compared quarter and orthobiologics

XD $X.X combined recent invasive surgery, the the the The Surgical, generated as is are Module Spine quarter in to minimally we generating for of burn out is interest robust quite organization the of Percutaneous capitalizing additional XXXX. of launch for on sales enabling million quarter successful technology opportunities. which fourth and revenue Turning the pipeline third

how are booth, during we confirmed XD thrilled to seamlessly opportunity And -- live, first received able of the complementary into technology. interest the work expect to efficient the was distributor positive flash systems profile September, surgeons extremely and in-person quarter. the with the this complementary Spine capabilities planning XD when our took beyond our where and just and how the be is to we The future Society to high. enabling feature the and our flash postoperative are The fourth advantage technology We can surgeon return new preoperative spinal OR for that plan the how Day feedback safety units analytics, We technology big for highlight XD how expand to welcomed be timing XD integrating orthopediatrics opportunity ship implants In American this us. technology we outstanding platform. to we great further and to and at also our portfolio of and NASS to workflow we Analyst the data meeting. a North and prospective novel, distributors,

XD projects, the needed to spine and take faster plan COVID-XX additional of Before spinal implant short-term in implant in high is to $XX I in on safety grow to and quarter $XX sets systems third support Surgical consistently XXXX, new pandemic million form adverse share systems, had to stock spinal In we building of products, of impact in than the and growth launching sets additional waiver inventory the quarter off the invested handing and for to did reiterate which invested million, overall investment than amount demand prior and want double our market additional implant John, products orthobiologics increasing invest inventory more the the That development the nearly year X.X we year-to-date. exceeds more comparable period. market. Despite our in spinal people, not to from X.Xx the deploying to revenue, growth. commitment and third innovation our sets our the

from fostering help These that our the so Additionally, support our enable emerge various to XD planning John? we expanding employees, network second-generation the I'll are and platform hired XX and camera as XX% with we to to room the team, And distribution develop development pandemic. within to call And have financial past to growth enabling of programs growth. their include operating outlook. our John year, on can technology preoperative details recently to aggressive not more including the we more an nearly the future additional financials system. increase accelerated our turn Surgical over finally, confidence for than plans now that beyond we the XD important advance a investments and

John Bostjancic

Thanks, Keith, and good afternoon, everyone.

$XX.X enabling this spinal our savings most of a gross the unknown business and Growth plans in in inventory limiting the alpha quarter $X.X be to of Recall in products implant the recently which in technologies second the restructuring our in XXXX. the sales million, of obsolete in million prior the million rapid Plus based was support the informed release, implant of the In was closure of third those the the our restructuring. As once third X.X% included adoption to our quarter commercial sustained increase they a this Pacific the in that result additional totaled was past of platform Surgical XD products, revenue in We acquired capital recorded due third low launched obsolete million, million marketing investments $X.X was $XXX,XXX technologies amortization due of they charges $XX.X product. useful that the X.X% XXXX. in quarter Keith $XXX,XXX XX% successful XXXX orthobiologics would fair third particularly as market our totaled sets OsteoStrand the noted impacts million markets. for reorganize to that more with the This amortization COVID-XX very included U.S. respect orthobiologics implant the for spinal of America and year third based primarily that spinal we due and within prior deployments elimination in enabling implant XX% timing distributor the quarter rebound and in in or our connection and would of in intangible compared products and XXXX encouraging the capital sign of inventory again surgery still partners accounting to numerous which timing fully revenue than per in supplemental of revenue. inventory in new will and XXXX, gross by the the revenue. to and compared totaled the sales resulted launched to associated asset and million, technology-related that quarter to increase recently was clinical we of of in XXXX we to Adjusted million, growth XXXX those ongoing third excludes our implants provisions totaled which We Latin technology-related well for technologies market led revenue year starting XXXX to expected were comparisons spinal by compared were set of $X.X U.S., totaled the accounting of acquisition, measure XX.X% earlier, margin, other to is third for adjustments restructuring, launched increase the the the is with for in in inventory to when uncertainty compared recorded amount and in results can adjustments the The metric $X increase third charges year quarter of year and prior product $X.X France That to how predominantly decrease excess utilize the relative our quarter XXXX office of quarter Lyon of XXXX commercial XXXX. by of to with our a the for years. purchase recorded unusually growth. third intangible to and $X the was be, obsolete quarter. systems period growth model loaders. $XX.X manage XXXX. outsized additional a growth the period end builds. $XX.X of purchase generate as quarter spinal U.S. revenue year of investment severance implant substantial quarter full sales full and launches Surgical with to XXXX, XXXX. XXXX, XXXX XX.X% drive of years as quarter value increase ongoing million, a the revenue from prior that of for higher for recently for driven in stocking That inventory enabling period. COVID-XX excess has fair quarter the asset more margin third and annual compared quarter on required consistent to and of reported The X and the third XD all physicians in European quarter XX.X% the value of revenue a recorded decline launches Implant associated the increase for U.S. a of charges a from with to Europe period. third and X.X% market make million similar news margin excess to International XX% quarter provide The in Asia the XXXX. Lyon, compared for of with spinal totaling from plus of higher third systems set XX.X% and of fairly XXXX also the third to gross inventory comparison generated a execution volumes GAAP strong

of XXXX. net third the impact margins at by years. we show $X.X XXXX. charges next restructuring million adjusted million certain the significantly X third compared a to from can loss incurred $X.X a for of the roughly for diluted to applicable a million the operating was in basis for charge relates increased of European of revenue $XXX,XXX the because was many related had had $X.X headcount, research Operating we million third over compared Surgical loss pandemic acquisition of and on Net aforementioned expenses, quarter the million, on expenses expectations a which result higher XXXX XD directly our restructuring professional XD $X.X the commissions, which our was COVID-XX to respect uncertainty no notwithstanding, in operating spending and the of including expenses, XD expenses $X.X quarter, from $XX.X our totaled loss adverse included million the million operating in loss and targeted integration; other million and COVID-XX EBITDA per increase quarter increase charge related we time. implemented a believe compared to of gross EBITDA original $X.X expenses show to million $X.X Surgical intellectual our million spending. third third primarily the XXX of for to $XX.X expenses, for to year XXXX property Surgical expenses and $XXX,XXX increase of which and trade that XD increase travel However, charge and and and as impact with in portfolio. included the XD XXXX to The development Europe, travel in $XX.X $X.X or attributable Implants in of the to to driven trade the for plus for third restrictions $X.X that Adjusted the expenses $XXX,XXX XXX organization. points result essentially and excess general legal in selling the of a obsolete due expand in XXXX majority loss in a to Surgical XXXX and to continue was by $X.X quarter, activity, discussed impact Spinal the higher of million at X with third to to sales the incurred we million quarter the primarily quarter $XX.X million the for $XXX,XXX and higher marketing marketing and connection the compared of headcount Surgical administrative expenses and operating expenses fees the quarter previously, of quarter operating acquisition Surgical of number that ongoing substantial of operating I and of The million XD third $X.X quarter included the million a of adjusted of items, lower

volumes our facilitate X.X net operating event EBITDA adjusted for surgery faster amounts financial no need we $XXX.X totaled we restrictions operating As loss we have the loss transitory invested pass. the news the share gross Keith people, the measures that our in comparability that equivalents we X.Xx presented therefore, information period-to-period believe tables reconciliation performance market cash this COVID-XX loss of margin and mentioned on adjusted September core that financial release margin market. a will and we of results to at And of our overall grow against believe Cash programs from that under on related severe are Adjusted than we companies into GAAP outstanding other GAAP gross had EBITDA assets valuable long-term earlier, firmly non-GAAP and was industry. eventually million, gross development A in credit spine a afternoon. and aggressively to and XXXX, take provide and XX, adjusted margin and to issued our to facility. is

support the in capital spinal increases comparable inventory for bills XXXX. XXXX. implant includes loss flow a and quarter for of third XXXX, growth and year-to-date $XX.X cash attributable XXXX of increase Our operating set were full and million with million and the revenue $XX.X commercial higher our investments EBITDA accelerated for million in increase $XX.X property million million and the purchases of free primarily the was to XXXX, $X.X cash larger equipment, Those for of $XX.X flow to compared launches and of a greater compared expenditures adjusted needed period was expectations burn, XXXX, quarter number to third instrument the and in million $XX.X which

$XX to fourth period and of the financial our revenue XXXX to revenue. reflecting XX% million, fourth in XX% to to We compared over quarter be prior to quarter million XXXX $XX Turning range XX% for now to XX% of year outlook expect the XXXX. growth

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

guidance believe improving that that quarter to than even revenue is and from disruptions Our the We contemplates more subside, after situation COVID. caused recover. longer-term immediate and take X the certainly fully that, effects result the impacts we encouraging, will there while are immediate direct by

In spine addition, impact likely in quarter. spike in certain geographies we in hospital COVID shortages still adversely staffing will disrupting the the seasonal usual volumes and surgery fourth experienced surgeries

XXXX, yet levels we not spine we're for overall sustained optimistic consistently to However, XXXX market, while as guidance revenue in to faster spine on a and basis formal the volumes providing returning than pre-COVID are surgery about X.X we grow will more that earlier. Keith mentioned X.Xx

inventory more additional launches both We to such WaveForm burn for higher our of over upcoming and of as XX expect implant impact continued and have and printed investments At form the we between Admiral our well our continue turn sets demand be to back as flow COVID-XX to influenced $XX our and free systems, Systems. this is by XD full of such and year spinal in fourth along million, year, support to this which quarter, call commercial on both the TA, full adverse in I'd as NorthStar of Interbody the plan make to sets deployment as the like with Reef cash the XXXX the to point, Keith. revenue

Keith Valentine

Thank you, John.

relevant SeaSpine over that to organization and acquisition most business for efficient products the believe effective orthobiologics distributors to in of the meet most needs, with partner many of XD transformed technology the and and spinal that implant evolving have term. one the attractive enabling new into the surgeons' Surgical exciting an we their long we With and grow XXXX, represents in an differentiated clinically and launch has

we become. and questions. leader remain would dedicated up will be Our we and Operator? possible this and employees the in more has focused innovation a to it of commitment And market embody agile to now nimble passion spine. growth invest not without to who and than seek the what open XXX that, SeaSpine none of and taker waver, will share will for With

Operator

first Our O'brien coming with of from Matt Instructions] [Operator line the Sandler. question Piper

Korinne Wolfmeyer

Matt. is This for on Korinne

the the can that give the that touch QX, bit softness just you So a your commentary for guidance first, some little what range, things in range And that And you've the see commentary then some more expand the seeing of versus in you to a been parts also we expectations. trends should 'XX? prior also when of guidance in into early to confidence on return but around of on some your on on volumes continue normalized to you're year? are start XXXX, of expecting the the

Keith Valentine

the through related hospitals everyone that a QXs, in part have kind to how of Spine we is to able going society, last probably the that American that's the to So quite spent answer way OR, everyone at surgeon talk surgeons NASS, comfort why hours at was the second typical of the asked to to does they're see going schedules. a COVID question year, North -- bit that booth was, time number question a every a additional they and discovered recovery of at do were little said And what weekend give this and insight QX. on best up you number of we in to and that were and even similar non compare booked and the that, for to the of after

last answering listen, stretch that the quarter? some don't we of to so see year. down And have do typically, most question able the do And like fourth you to we're coming we be pike the was, did kind staffing in the of that, that

typical focused booked just we we're now, completely schedule that so And right have. on I'm the OR And up.

we were the going was but commentary of we intermittent in on don't And stretch QX. see like last behind that kind dealing largely we're still quarter. slowdowns, huge with So not a some why that's

how it's Thanksgiving was where promising bit and to of face are still about have will that mean, things quarter very we year, but on, declining. ramp going good little transmission last I continue that up. a do feel higher appears Christmas how certainly we so the And to it

of hard feeling is should our to next it that first you in consumed quarter, that kind if year, most consumed. when is tell, going it look get So get the to at of but for

back, expect that So they perspective. we staffing have -- comfortable from just, hospitals all a again, it we I will. a and and are and fully from to feel see bed's

Korinne Wolfmeyer

the strictly the just just into just do little to you can mix? one this might bit then talk mentioned? trend pricing more that And persist case due declines on a you XXXX? you Or this RN, is Is a that longer about think

John Bostjancic

the mid-single pricing been talked price we Yeah, our industry digits. have to not, declines the even experience low for often than generally More and single-digit declines. own we see low

This I a are like pricing. that's -- we And quarter and was new too mid-single-digit it's a the call maintain quarter, to get you because price can think don't premium I prior but early trend typically, where it launching products.

So than I the single-digit to the we're past, we'll think overall is seen shift in declines. I declines low spine back industry, sort and price the we've seeing which that better year-over-year slightly of think price consistently

Operator

question the BTIG. Zimmerman of next from Ryan coming with line Our

Carolyn Huszagh

Ryan. for Carolyn on actually is This

feels as to turning from gotten it's airtime the little just moment, late as biologics a though for of it Just less a company.

So can the biologics from portfolio. cell-based thoughts And the Just holding market pricing in products is is shift the away stem in, on you any a bit? products non-DBM little ongoing? how discuss

Keith Valentine

little focus. Yes. there's still Bos things. of the yes, side very about a let bit heavy a I'll But talk pricing been

around and driving DBM. be the what market-leading shown, have in continue we science We to

declines be because still the we the about feel cell-based market share to good in There of taking feel, opportunity we So absolutely challenges. very strategy. continues,

product we as are future on we have get to through we'll in -- that, launches next working synthetic opportunities, and on the addition In side. year yes,

efficiency feel supply DBMs manufacturing. in So and about also invest we very continued continue on the to the about for stream sure orthobiologics feel good of good side, the R&D our our our but and of momentum

John Bostjancic

that's side, pricing real than terms seeing change pricing the in pricing more stable. the been historically a market environment implants orthobiologics, a continuation for of no market. pretty that terms of of trajectory, And in on the And stable we're spinal

Operator

line Our Blackman next with from Matthew question Stifel. coming the of

Colin Clark

are month. the particular, Colin, with hearing number of surgeons that And hard-hit over and a Delta, docs, number X hit we're past XQ volumes. to environment hopeful of with calendars will surgical out hard the the more much to We've X on based of for in spoken pre-COVID be regions a out particularly, booked weeks these in a by surgeons And that that regard those. like are pretty Matt. areas

on we're kind but the of what hearing second, question first more hearing So complex what haven't is, shortages Is And just we found about as really you, then staffing it volumes? I really the Just are outlined? like you helpful. Are regions particular who have of be docs color an issue? is out types called or any this would there than prominent that where more there facilities a issue.

Keith Valentine

Yes.

book solid scheduled. the So of business I and the more with Very talked than already at previous give very surgery color dialogue surgeons. I us don't of consistent know for consistently QX, is can you a NASS if book about much question having each surgeon every having about

Midwest So with a this week same I had -- the exact thing the in a I that's from area. mentioned -- just consistent. surgeon, and dinner he think and

seeing maybe the have the weekend this they're I I having a country, conversation we're get of feel across pushed. that's and we'll busy it to got is, even that or work I that And but hospitals fourth about less the see. in but weeks quarter is they're going the even do do great weekends. to more the ability longer the flex elective flex ago the in in think thing surgeries they to staffing work and know, how area, I same a country, and going more bring saying consistently challenges. And don't pretty So where that hours in less actually OR were that and time continuing they across I to couple able but think hospitals do challenge, of staffing out again, commenting was think time goes a to typical the that, see on QX, hours really be the Detroit of or

Colin Clark

another question. And Okay.

Can for agreement. contribution the XD give You've how say, XX context XD your of on announcements overall the next on opportunities you months and the could last contract a couple And months? announcements these with X commercial of these? Distribution to Yes. made Orthopediatric big over, these each potential have Vizient some X us business, the

been I think eliminating. technology, radiation, And uniqueness that to this scale. to not continue the out software also bringing group a and about spine it's invasive going the And think upgrades that areas of of of the on. specifically technology think alpha actual how both newest that's if demonstrate into that I as the And the think secondarily, entire limiting recognition. think of new not I such them or -- importance was think it, technology, have then ability I recognizes modules I about only Vizient minimally consistent eliminating present, new launch or of that in also, extremely whether team certainly care, I that certainly get the that's

get presents different group we with that Vizient Now it is of conversation hospitals. a what

of very so We're And those also much have excited taking excited advantage we fact may we're business. that. the accounts, in about number about a of that not

offer orthopedic do strong installed our we have feel but setting. it's opportunities, that if we company. the spine, it's base, those are product in you so a or that it's a and based them a an And line, partner. there for real with orthopediatrics, we all in we feel to those And sale. other just out pediatric about I partner the is that a bone we think also their good whether us possibly market win-win pediatric system hospital. secondary demonstrated gives pediatric not also forward in also able think creates be are And for product It's to base. partner helping could pediatric so that advancing or that a real applications And if for sitting will, the it again, in be installed in of -- also for other And this possibility, bag, or outright I an leadership whether other think have it if benefit the too, to their look very that earn-out also opportunity a earn-out a this trauma an it both to they fixation the one for have with space. surgery innovative line, And only but applications can that's

Operator

line Canaccord. Next with Rose the from question coming of Kyle

Kyle Rose

the type of to what opportunities big a good have to back? wanted of you as a us then some a how like Delta trends, the the through complex the longer-term wound million I down XXXX? month we picture we It's should see from you procedures touch And Help as on look $X.X looks overall and could cross-selling understand, And perspective on has there? a bit. into see bit little those just that of like? if October mix seeing cases in of about what come does far Are the that as little So, guess, And the and quarter. XD. really, trending think

John Bostjancic

surgeries. question, to On complex Yes. mix -- that the shift procedure on traditional back more we the say first midway October, surgeries. a I'd complex started your more through Yes, seeing volumes of

launch in recent our alpha timed very the of launch. well with Mariner System Adult that Deformity think I

be and into adult Mariner up deformity. take great the on with platform results, extending complex able we return October specifically last surgeries advantage the it's are of year. technology And over without of So that too commenting to more new to the

recall, year, quarter. a you to was If start the last fourth strong it

shapes related So the we to living think think we And to and XXXX at I there's but levels up pockets up I'm see I'm capacity. shortages throughout normal more country a despite think week, for hospital that common gave Keith more upside on year-over-year. as be we're seem staffing informed direction, and week not for happy because on to by sustained to the disruptions us continue and well bodes bit yet, surgeries. the sorry, encouraged we to that guidance back continue which -- still We're decline, pre-COVID COVID confidence gives in coming basis. said, on a I still fact, of say we're the getting that more cases case the in the COVID how QX trending right

Keith Valentine

better sales for we're the complete. it's management you force equipment with with meaning question, side integrate really the sales XD as to -- that continuing the And on of force, what second I sales sales that on of the remember, think, force capital remains there And opportunity the the focused great we've part is was complete, kept our teams.

that we for visits, whether guests office, whatever for we're a have item a doing whether opportunity come XD is that's coats sure have that's when well. distributor, a we Another the as making surgeon, through demonstration and

have there are. so to player its And be market, -- what being a what you constantly the be you technology can't smaller can't there showing and on meaning benefits we've seen present the is awareness, more isn't that -- newer just

for impressed excited And system aware so they're arm a profound the whether makes very no we're that not, doing works C And that the up coming that and end demonstration we've through, how necessity really or fact being with really been it radiation. present. Where impact. a are of surgeons by with the

seeing whether move and team And classify a and an now XD capital the to earn-out. we're both them great direction leads down so as leads ends we're a an it's deal or sale an team it working implant whether being and together generated, of up being of outright those

Operator

question from of the Folkes Fitzgerald. next Brandon Our Cantor with line coming

Brandon Folkes

the year But to want headwinds out I'd of little how A of out feel of for more expectations you your just lot to usage. terms into where done control. do product guidance are in revised bit get the procedures drill there, of your the for some I love obviously, are down year. about beginning the compared to commentary at that a getting

up procedure tracking? from How year. You does it earlier expectations? your talked average per how last insight this from But Would think, just into of about, I'd X get the like compare an you're be quarter, products during granted to great. I

John Bostjancic

Yes.

up, to examples, of what to want as and we have fixation, going to procedure. we the systems think the case, try we're is which OR. creep products to expected exactly procedures I utilization to of the we and interbody the If we for own wanted continue have to the part we of the if orthobiologics posterior interbody. both posterior want And the And want we own have those own the in fixation.

to So opportunity in the got as think enables expand and of we've procedure to I the that. only continue participate we XD further greater portfolio, more

as increasing we're So anticipated.

the to are where COVID, we of original we'd to certain Keith the not risks upside meaningfully our They're staffing the ability there's surgery the the sick thought disruptions through compared I'd year, from we're quarter fourth backlog, volumes to of say concern the beds, far country the We of unfortunate, as QX number down related the for be, also but mostly because which In where patients of that's right? are pockets normal. things our they're it from increasing seasonality procedures typical only terms seeing year, in expectations quarter too know shortages COVID but there work impacting because the that have being of busy because an for is many is still experiencing pattern indicated. most

because printed added still the testament that's we're just think we're being things to share of the products to we with and lands of that see I service distribution year think of launch multiple our why procedures that's market. grow out times, pre-COVID don't to but feeling COVID going disruptions, and that in I the Mariner, whatever some institutions a that. get we take a X.Xx this expectations now and going QX. the great the NorthStar, to it's as think is back went the could the I market to that guidance feel to be able reasons, original to to grow know X.Xx maybe pains our Deformity like growth we'll why into rounded year, typical where year X.X a to growing environment to argue, consistently like able usual other grow we've I for year level portfolio all point X.X the this number to rate, we've confident we great how gave confident market feel trend really X.X this position, XD surgeries we amount strain interbodies of cautious, kind to a this in out full be X.Xx continue great we we'll you in was, but a we of of We're is, And it's below next it. more with and this

confidence with our the convey that's it definitely in where to I still. COVID sick products said, taking whether patients we're we're do ability it's, So stacking that's that. various continue country impacted share. by as seeing of and limiting hospital's to aggressively trying in pockets an market shortages being But surgeries that to to being up pockets, the organization QX limiting said, take is certain like is or beds and We're and distributions at

Brandon Folkes

mind. one you ask don't I Could if more,

out, across I think a this I call hearing think the staffing you shortages we're industries. of number

should in out in just do inventory keep to like your about a I'd you may we you months? knock-on color. XXXX How couple be sort of your have balance. So watching as supply that a But there effect Obviously, of chain? of growth get is look a healthy to feel the anything we sort

John Bostjancic

something Yes. COVID. monitored of closely the since It's we've beginning

spinal orders assume we've and and implant the the on COVID customers since throughout COVID one have orders side those as think with -- bigger the placed relationships that I increased that's few our invested fact suppliers of I for we're started increasing developed has we've uncertainty. volumes growth been we've better helped. that The the

kept order suppliers, that build with spinal we've suppliers the those added all We've to and intact. of volume. we chain suppliers pay side, to so become those our better in We've So on consolidate lot team, our fact customer a and I think increased relationships. we've particularly tried a closer implant orders attention that headcount can supply to the bigger

stay because seen because missed some capacity it from talking thankfully, suppliers, we week, day on sick X of by have top had it. to top employees any of And But not from to have of those we production we of a fortunately, we've beat week COVID. continue disruption. day, on issues day by know not So been they've and because

on to feel versus with obviously not relationships we've I the said, get orders that we're chips supply in topic and any That XD, we to brought and continuing supply to there's XD. and an again, But interfere anticipate plans in for something enough have real know demand on else should good we'll on it's the there chip order other past just we chips globally, monitor. lead us One impact that being the potentially built. still it house chips based with So got on those for in to that risk their we up feedback our shortage about expect something continue it's done don't what is monitor very the monitor. but but chain in need to and times, have now, we've that right suppliers. we And it to time issues, we've in growth creating continue does

Operator

Cohen the next coming Ladenburg Jeffrey from line of Thalman. Our with question

Destiny Hance

afternoon. and Destiny is for this on actually this Jeff Keith John,

staffed hospitals a I I the a the you've curious, full of to want efficiency? and contracts, questions more Just of rapid through your progression for these quick-- interest force signing I'm circle is couple know are booked back from sales to just ton, on gotten that time noticing but the process looking given already XD. of a to up, under a the

Keith Valentine

about a as talking you or cycle general from sales implants Are for well? XD for

Destiny Hance

XD.

Keith Valentine

all of different some at others pace, Yes. if I may that it's leads, progress the relatively predictable significant mean, look kind interesting pushed. a you Yes, lag. get a at noticed we haven't

actually progressed capital they're So or quite budget equipment other couple longer. it just looking We've also at may rapidly. push how a that technologies the recently had

there's So I present. don't a we're specific it, trend when at you say able to at if know look

Destiny Hance

just around Okay. sales significant. and it XD, And curious, for the then marketing, is I'm

long you be to in of investment to how wondering traction can believe type I'm So the you order gain do think gain? required that is really you going commercial

John Bostjancic

units that or where placed we'll pay-off I a sold volumes be also increasing of to level, to continue under at being an there's investments earn-out. we make see anticipate going XD but we think

revenue few just the and that's do need anticipate the less changing, and them just those the but grow. need we a years we the point make make more I in it's the ago. those are, from scale. to And -- the investments increasing, because infrastructure, I which think don't scale more the level and continue would dilutive sales just similar team, near marketing I to business Implants to think I want We We term. So the spinal anticipate team to investments

Operator

with of Sam question next from Our Brodovsky line comes the Truist.

Sam Brodovsky

if would sort sort what give off any or system, terms metrics around case system start color per and of the can you XD the the helpful. you operating or could per give us kind you're just be in there around really utilization of SeaSpine system? implants with us there's of on utilized seeing Just of any give I'll can here, mix being of you any commentary

John Bostjancic

Yes.

the capital an a XD's is might absence the -- on I management think working in in is our team the sales sold one even I'll local of a spinal even sales where pull-through, the we've team orthobiologics say team implants the now, have unit, and non-contractual unit it introduced our and thing earn-out. has earn-out seen and distributors, we've the the been one or in that of sold absence an past

are in And of we've sales. turning couple the recent introductions wins a So months. nice I northeast those of into think had

of getting we're introductions. because traction those So

-- fits how surprised good no it of able they're the the we've we they them where systems. has the come we'll and a the cases, is integrating put X-day one interested And our And register into And how X.X and the XD system, opportunity lab. unit how of we to likes those days. visits get and it catches great in our to work the have they're vice years on very sold our to patients them XD the spinal the agenda. of that really And it for and versa, takes some XD's we're we not a got here, may show implants surgeon more in radiation, their technology, a but focused our technology surgeon being our as an implants of XX one are interest. where relationship, in units seamlessly see overview ago, with once because workflow, in of year, coats the here got technology and lot demo And they part have products introducing we've really a coming just give we X the team because orthobiologics, were with distributors -- technology seamlessly and here they're a

it's to So visit distributors introductions to both off from the pay of the working introduction XD well. our the orthobiologics to focus I -- XD team ways. as think surgeons The off those SeaSpine of to paying is and a on the technology is

Sam Brodovsky

color you? And in then mean, about of kind sold then that to have about right? of the being we that just may sound of does think $X.X on first -- quarter out, would sort units placements with that from environment of you bit. on the anything the out staffing the just towards full you -- coming I pulling budgets back your the And then aisle on right any here, about color million congrats X kind resources discussions? side that little a and and broader hospitals? out Are coming of in dedicated shortages lot a these Any and of being seeing capital earn-outs with capital

John Bostjancic

issue, we're, Hasn't same. And what, X Keith the item months come are pipeline. into on We the up gating as teams said sales still a where as and an about working the see the cycles now integrated or fully both before. being acquisition

we'll the for sale. the our both on pipeline in capital of that months earn-out now closing equally X more XX coming suspect an the are incentivized So XD deals lot now sales and month cycle team for because I sales a deals, already capital capital a sides, the side, on just in but team given see are sales those earn-outs to we're a versus

think start earn-out piece line time for opportunities in So typical the of some cycle given see sales an of you'll I increase now to the capital.

Sam Brodovsky

answered about ability eyes? staff ranges? with point at But able not historical risk of to there grow to backlog your Or in the one know shortages to backlog. been a this risk about the XXXX, hopefully a has pin lot realize it. you've inability leading just that know strictly put and to any more it a the is of flex of on lot to limiting shortages staff questions being I up towards I you your eyes, ask I'll discussion then in And a line increasing already, but capacity in more realization is

John Bostjancic

Yes.

our our think the feedback and from distributors anecdotal and to at seen talking we've sales I levels teams.

the think big changes meaningfully seen far we schedules there quarter still got something the in the big the terms where high I of being more to spine that able X they've risk. constraining the slowest being a per anecdotal year But surgery pickup, don't unless see is see that becomes again, seen now. next think, of risk of shortages future. a being seeing it's for event we've year because point volumes. I on shortages relatively months just that staff based just material or upside got, risk QX is I to upside able limiter QX to to on or surgery was in X volumes. QX before more level even we've the QX we've limiter hit now a of for QX, this at the we're of a sustain don't the evidence I typically and the staffing so a impact but the had a typically is and high QX

Operator

question And coming Capital. with next Loop our of line Wittes from Jason the

Jason Wittes

us that. of but wonder be upgrade dividends the to So cetera, get it board hard and amount time et and you anticipation next the I'm know and will affecting given are this people the back on if it's expand takes what relationship? the working let specifically, quarter, year, that been was greater expand to could the distribution. guys you pretty have sure on I latest And

John Bostjancic

Can part you of Jason, Sorry, last the there. repeat you're cutting up that question?

Jason Wittes

in they expect asking some Or into pay sort distribution. do the of the of what of next expansion takes and terms into far than progress some you've whether year? to terms year, inning in, in likely of more year we distribution to sales we're you've Sure. and of -- I changes the about of a was next made made? it also further this Are onboard time amount dividends the given expand thus

Keith Valentine

Yes.

we're spot we about but this planning bigger get the also on aggressively next to that be opportunity them thinking a of you're are getting models. Yes. momentum, will, recruit quite stage. you will the and that really distributor passed, larger learning year think year, lot on being that if that see to continuing moves that made And we I

of can backdrop side the feel feel these it they good that sure And when about we to on And how comfortable we on demand. kind keep with that it. gives the inventory a bring good making to how their board, about partner, We we making investments why want we're make they so good want to we're they're commit. up folks to

Jason Wittes

Okay.

was an I much is introducing? from impact, the if growth the think quarter, So you related a of COVID general mean, how but -- there products to that this how ballpark to about distribution, saw standpoint, obviously, all you're I related it new much

John Bostjancic

were all to also Their volumes, quantify. impossible hospitals not It's it to limited by is their of just travel impactful mean, I mid throughout which August, but COVID, meaningfully ability surgeon's the were September the to disrupted surgery limiting revenue, part travel. most schedules.

get surgeons, team, our management and distributors the in about their company or of recruiting the to get and spend surgeons Carlsbad the the spine visits more the on to are get into lab, overviews. That's to one wanted which a here we those that SeaSpine, product, in get in Carlsbad. just meet the company our and get hands to them on their distributors for hands able day greatest tools learn understand meet So and culture weren't -- coats products,

was scheduled in canceled and a we're big had So gap some there got the of that we visits pretty rescheduling. surgeon

we're week. unrelated thing We've today rescheduling and an and we're actually surgeon a is surgeons got the and here So multiple encouraging distributor here hosting distributors them, every today.

surgeons there It's distributors spine August were and restrictions. to and just to and were going was opportunity get get we them September just rescheduled. surgery not So just come fourth growth impacted, in just it's the period back time a quarter is travel couldn't meet we're volumes because because but seeing in new those impact the

Keith Valentine

an think that too, the Yes. ones distributors the the with that the most fits dealing opportunity larger are are going some kind that and that difficulty and on recovery they're But on. starts that bullish conversations other also are I have the coming surgeons it, is how the too, of on I of think, will are these And they're also having there's ones look. that aboard, -- to said, with

good feel as next through of the see to we we going beginning that year. strength backlog surgical for again, the some sifted we don't continued uptick, that So another of get then that long quarter as we're at fourth until get

Jason Wittes

work is there some products, relationship, of be pediatrics some there? now fully orthopedic that done Or with XD the functional et the on development needs trauma And cetera? to to work is still

John Bostjancic

development features part some team. pediatrics be will the system, some to partnership work. of is of working There the with That's customize the

So some to of that come.

Jason Wittes

lot you be I for did kind for yours. contribution Obviously, might the a lot give of that of you for what Okay. outlook companies, of you indication you this initially I provided? guidance including in the don't know, et And revenue an fourth for cetera, the when the impact contribution quarter XD or you give I know, some August, were year? acquired did don't -- XD, changed think a

John Bostjancic

not. We have

because of We in because acquisition. March the happiest all have under room period. through to announced expectations the lot capital on when those when initially in accounts, in every access not. ability from an back had -- be XD accounts earn-out. an We color as place of just contribution calls, May impact said prior those did of But we on in sorry, a obviously, we contribution And I'll we the an person COVID stay revenue on unit not provide the closing is back the earn-out XD the or announced we providing we're May.

earn-out, we units And better set number. revenue, to long-term end earn-outs. placing but if to it's revenue an financially want for don't miss expectations capital up under I So more might capital have that we

kind provide on color to going revenue capital contribution. not of XD we're So that

Operator

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

Keith Valentine

So and Thanks again, time joining for quarter. again. will thank in you, chat we early us, first again everyone, some the

Operator

conference your our for that conclude participation. Thank gentlemen, and you today. for Ladies does

You disconnect. may now

SeaSpine (SPNE) 29 Oct 212021 Q3 Earnings call transcript