SPNE - Earnings call transcript Q1 2022

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Operator

Welcome to the SeaSpine’s 2022 First Quarter Financial Results Conference Call. At this time, all participants are in a listen-only mode.

Following the management’s prepared remarks, we will hold a Q&A session. [Operator Instructions] As a reminder, this conference call is being recorded today, March 3 – I’m sorry, May 3, 2022. I would now like to turn the conference over to Leigh Salvo, Investor Relations. ahead. go Please

Leigh Salvo

participating for call. Thank in you today’s

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

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

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

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

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

Keith Valentine

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

$XX.X surgeon capacity subsided expectations, internal novel its years. significant launch quarter, continued that took exceeded employees, the quarter. $X franchise, that accomplishments volumes confidence that double to and into XX,XXX NanoMetalene just Our of gives our to momentum headwinds success team’s WaveForm implantation the XX,XXXth with our our remain of the by and our and revenue revenue million. I’d throughout nearly to we advancing partners we million In more momentum of quarter recovered our years materials raise our which our strong month even first March, the to of for first total foundational period OR revenue of distributor and quarter despite to to to our some optimistic the interbody exceeded spine in progressed, differentiated own continues full and from energy entire our XX% COVID-related and six into our and grew Engineered the of and the revenue, generate headwinds of of be increased systems designs. among million this $X.X original increased Fusion $XX.X highlight customers. our quickly The to we revenue the we revenue to international XX% XX% over In quarter total as surface million. early revenue also Reef results XD milestone staffing fueling introduction as the full optimism, positive and and these we second us reaching procedure XX% able We team’s focus. guidance NanoMetalene® guidance like where saw QX celebrated device, the In It two demonstrates coupled development were $X approximately the accelerated and our growth the February, excited which the interbody impact in U.S. commitment grew high hit When translated end hospital January. in year by of year recent our million. are our the XXXX prior over

continued with Explorer launch the commercial portfolio Torrent the to full Accell systems, including Bone Putties interbody products NorthStar four and expandable expand our Facet the TO have System, Plate We with DBM Fusion product the Lateral Regatta system, Matrix, of system. and

launched integrated marks which Facet implant with also development we XD Fusion, addition, In Technology. system first FLASH spinal Lumbar our Navigation

an through yet is EvoX is a We’re particularly in Putty proud life DBM leading is stability. continues and state launch, the scientific implants and shelf in studies market its market dry to how surgeons to Torrent to packed drive help to another SeaSpine and of advance product spinal improve both that upgrade products gains. osteoinductive our by example our potential differentiate investing portfolios of This development which to outcomes and improve orthobiologics share patient

We have XX closed Surgical. generated XXXX. navigation navigation first XD are of flash deployed in for XD million There revenue flash date, $X total the a of $X.X To we U.S. million to U.S. technology earnouts four the outside annual Turning technology commitments. XX quarter systems of representing in now of revenue the enabling the and

and portfolios. purchased starting generating and cross-selling non-contractual pipeline is a combined teams are flash with spinal more of navigation earnouts also see those to work revenue continue mix more pull sales implants orthobiologics all capital sales products We well select the accounts robust to systems. first opportunities across in of through balanced that The together,

portfolio, MIS fully remainder organizational XD leveraging flash the of year XD that an and attracting interbody the launch those navigation are I expanding Our Mariner about are launches with such the module and large the XD increasing this System, key recent product printed technology platform Adult as throughout plan and of to distributors exciting number catalysts Deformity SeaSpine. on combined earlier, entire talked the increasing transformative focus the WaveForm we to

executed even We on more distributor new addition, opportunities we have those pipeline. and the of already in some have

direct to an been exclusive appropriate reps first hire and well partner with shared on this distribution into plan Day meeting the our in white is Analyst we not where March. to areas sales Additionally, identify positions able consistent our space very have us

recent in I uptick volumes spinal with to concerns. to recent past sustained and degree offer market the want despite positive John, seeing entire the that that off a that across staffing Before we’re insights the normal, we expert turned lingering, corner the finally old conditions the and pandemic phase, more receding our some we’re commentary seeing additional COVID shortage handing news customers were field some about surgery by of surgeon United in confidence towards a States have into renew

our enabling advantage an such spine increasing the such increasing market hospitals by whether demand a performed surgeries in during underlying enabling first as delivers offerings number be. all COVID and best-in-class to products of technologies ASCs emerged or through small spinal now primary technology, Additionally, across to earnout take new being outright the spine flash efficient mechanism. In from technologies capital SeaSpine ourselves to quarter navigation revenue that of we’re conclusion, of some our confident positioning DBMs, midsize factor dynamics as implants our that purchase to and the and I’m acquire in was

us transformational portfolio that a with today significant and provides distributors attracting product have a advantage. is We

because A and taking distributors contacting aggressively us be happening of to team shift share. competitive increasingly occurring a part seeing to is market they SeaSpine. now innovating a are that at want what’s that we believe We see is

have game interbody Expandable launches, the Our and been Explorer of specifically WaveForm the product changers. family recent IBDs

million our reflects year our $X enthusiasm more and revenue long something years to I’ll XXXX approximately substantial is it we ahead. experienced Now great there to turn of to is distribution million year will over gives wrap up. to to distributors other of level increasingly call I million. growth to outlook. full financial The I on Then financials XX% XXXX. time. in our for still This Even is by And guidance a year, XX% more opportunities. runway And range $XXX this full as of the surgeon cultivate our confidence and over $XXX I details John? haven’t me among raise believe John continue a now, and a

John Bostjancic

afternoon, good and Keith, Thanks, everyone.

quarter previously reported to increased line. of since changed enhanced U.S. implant gains, of XXXX. continues via or indicator XX% flash increase years as Note to XD for million. XX% $XX.X or platform revenue the percentage $X.X revenue. This metric the million, U.S. million revenue the XX% the DBM U.S. that revenue. the of starting Products year. the revenue enabling five million accounted for fibers for encouraging the market posted we orthobiologics XX% based spinoff products XX% extensions revenue. to to quarter, products by and be of As be to share $X.X a spinal product navigation XX% noted first U.S. International $XX.X with U.S. Plus the for in within launched $XX.X of quarter of in quarter line driven within by orthobiologics past first growth to launched technologies earlier, spinal U.S., growth revenue in launched XXXX. increased total throughout contributing OsteoStrand prior sustained and million. accounted this XXXX, to the in July, drive growth past growth Sales five Keith and million revenue from slightly the $X.X continues revenue this over the reporting implant we implant first $XX.X and XX% increased which we fuel continue spinal the In million very years,

increased volumes compared to first the surgery Our U.S. of XX% spinal XXXX. implant quarter

million to spinal We systems related revenue. case to XX.X% in While the portfolios orthobiologics XXXX gross margin The expenses. million of of Utilization prior loss $XX.X first first quarter of was amortization increase general with a a associated of million which a Surgical the and of in to of to administrative XXXX. $X for related low-single-digit attributable products $XXX,XXX other compared $XX our financial results. believe provides of increased the that ago. acquisition EBITDA higher due orthobiologics XXXX with adjusted and XXXX revenue years. quarter higher $XX.X to million valuable directly to expenses result quarter to the $XXX,XXX current XD XD first Surgical. quarter XD with was operating loss of and the the GAAP a impact for quarter net operating charges to first first the driven XD XX, issued presented higher totaled was higher in margin loss for Surgical was full selling measure for release The primarily and EBITDA XXXX expenses expenses capital expenses included $XX.X of majority increased higher $XXX,XXX and the the $XX.X loss the was $XX period for gross spinal million, The and adjusted operating implant, launches Adjusted XXXX, is in in experienced of financial quarter recent spinal industry. equivalents gross $X.X XX% XXXX. in associated totaled was of primary substantial reconciliation loss revenue Operating consistent results proceeds first press on The A million the XX% low-single-digits XXXX. per technology first credit of Surgical average facilitates March $X.X loss operating of for compared early increased million the of XXXX core development of in research increase year XXXX deployments. first tables Net compared quarter implants GAAP additional the to XXXX inventory of million quarter EBITDA the of $X.X increase $X an performance $XX.X surgical. million enabling prior Surgical and the quarter quarter for non-GAAP year. decrease a to was prior to price included million the $X.X quarter technologies of by we this the excess compared loss our in sales XX% XD in a cash which XXXX. quarter primarily to XXXX year and in attributable commissions we compared primarily loss March. under first declines from compared of and first comparability net facility included to the implant million per expenses of against sales. million was X.X period attributable for totaled both procedure million information our XD of quarter marketing margin of of expenses, increase at we set EBITDA on of and to $X.X our in to of and million, and first our to operating on Adjusted XX.X% plus borrowed period for of first compared the Adjusted diluted afternoon. and the of that the and Cash compared International asset for obsolete commercial intangible X.X companies was

We April borrowing potential XXXX Wells facility the process and Fargo capacity to with are $XX is well through the credit into million. the total extending expanding

We expect complete that during quarter. to second the

to guidance the launches inventory consistent operating and free recent expectations. capital quarter with million needed built we to and and of in and $XX.X March, Our of and anticipated cash forward flow the whole product flows equipment cash which expenditures burn, was the first includes in a amount provided set upcoming growth for large revenue of QX XXXX. support this relatively heavy spend property for We purchases

XXXX. outlook financial our to Turning for

clarify year our of our guidance the confusion year implant range million in in revenue growth $XXX includes final further second EU million be it XXXX revenue $XXX implants impact the to orders for of for million to and implant $XXX of $XX what to expectations final to revenue exceed of EU to half to to U.S. like relates million As stocking I’d the context some the exceed previous the spinal spinal full XXXX the This on be Keith compares U.S. revenue third quarter orders in for of as XX%. $XXX appeared now earlier, year. XX% growth spinal million, expect of the to stocking spinal anticipated revenue growth guidance. implants full $XX noted from in we the which to and million to

year year the $XX XXXX. that revenue incrementally orders spinal spinal million EU European we total of implants expect full to generated revenue $X.X million for implants stocking would we translate into While the to generated $X.X those in by compared million approximate full $X.X in $XX to likely higher revenue to million XXXX million of the

million an calculating So for reminder rate, EU with the investors EU suggest those $XX.X excluding guidance. and XXXX revenue $XX.X of for million to revenue spinal We on $X.X revenue in spinal XXXX, growth exclude implants, based million analysts of to implied the total implants use revenue a our you denominator.

and more implant spinal the will high the in revenue, fourth QX. that teens anticipate in Excluding growth all EU we the teens to mid or rates high be in second and quarters

XXX $XX.X adjusted we EBITDA expansion down Moving P&L, we XXX margin XXXX reported the for to XX.X% of XX% we the still to XX% compared generating anticipate to our basis and gross points reported in the to to million XXXX. reduce adjusted loss by compared

chain distributor expect opportunities with. more and these of contend From of favorable macro supply cadence exclusive us increasingly fueled there perspective, sales and that we revenue more risks margins We high margin inflation the Analyst upside fully Day. a gross by quality from mix, through plenty adjusted From generate for higher and we to of of to as to the growth operating more product begin efficient through in realize our combination partners. March robust transformative outlined and onboarding an gross many launches the improvements an are

can confident longer ensure the to revenue in have XXXX, based with that sufficient risk However, targets XXXX, the long-term horizon early communications proactively inflationary expected has that base. and committing growth commitments our capacity working supplier we on growth our our some suppliers mitigate partnerships by result our term also our and near-term. by for to cases we’ve committed forecasts extend we as helped to in which forged into partnerships built for of Those a of critical regular with remain been collaborative more achieve order

commitments all disruption the our order trust have Additionally, two despite past and the COVID suppliers. between added mutual over risk key our years, we of built the business delivering has of our layer by on and a on reputation critical SeaSpine

inventory to cash expectations for We for Likewise, for we than just same or our as proactively million risks $XX will changes. of remain and free in monitor XXXX expectations. products implant closing to of the any to million needed spinal over in supply additional and call and chain comments. XXXX continue in in new excess the year the to our than this higher sets At point, Keith invest to this emerging of to growth burn line support revenue XX more turn like I’d more extensions launch $XX the and back work response plan for capital as flow new

Keith Valentine

the His our people and [Indiscernible] added responsibility the focus CFO. reiterate field, struggles, to Thank share with losses post-COVID positive I’d my for feeding you, or and light John. in promotion COO SeaSpine’s particularly to quarter brought other culture either operational facing growth his will the to ensuring challenges. a the well has us results closing, SeaSpine on I on continue John excellence spine prosper first momentum revenue in The focus want is to point. enthusiasm execution workplace. In enable our and experience congratulate increase customer relentless of achieved, to as entire that this providers we me as as on market this presence implant we and organization in off like

we short out Analyst point track we and on in And it are deliver questions. open the March the to to expectations the up Our innovation of is represents the past recent and inventory spine years. on significant truly inflection in investment the risks Despite at an believe COVID or long-term two Operator? that, in had particular throughout that are now to product success disruptions we the even against growth. set we that in will SeaSpine confident and faster market. With continued our more business I that confident exceed and efficient culmination Day.

Operator

from of [Operator Sandler. first Our Instructions] O’brien Matt Piper question comes

open. line Your is

Andrew Stafford

start want number. just do and thanks the is on that I the year Drew here. and questions couple on a Matt to for taking a congrats guys. off into good This guidance, different start on the to Hi components for

It out the placements So could versus ago. changes the [indiscernible] much COVID just core the acceleration on – then today we to are the primarily is recovery break that a were change strength related of core implant U.S. an in a expectations bit. you’re revenue in those couple on like How change maybe where about how business. you business. months of And versus changes trajectory and thinking just any little looks help us to a XD, versus

Keith Valentine

of marketplace. Yes. To kind for bit with give are the of a surgeons little and checks our where sound

they a describing backlog backlog, surgeons backlog reasonable there’s much been most their think they pretty that as a additional that. beyond their consistent huge it have I list typical in but describing that don’t it’s see think practice. I they’re now, wait their

has that. think quarter of the I some been there first recovery in some with

do I in two the we’re for consistency flex And but the think think in list surgeons in are through I get to that wait I great don’t time it. month time have talked I handling they’re have three OR, to been some or surgery. of also think there’s getting and to most extra managing deal hospitals how a

to the I’ll answer year. that’s the part second let So Bos probably think question. track I throughout pretty consistently going of that

John Bostjancic

Yes.

We’re to greater straight that seeing capital up we in of XD pipeline in sales. just compared A earn right. out pipeline mix the what for expected, opportunities

represents and earnouts we’ve we revenue annual four commitments for talked on million of As those about now earnouts. that XD four $X that earlier, closed technology,

a it as makes or percentage we sales capital incentivized nine closed capital see they It the see, we see we’d And And six think timing even placements forward. earnout. that’s And acquisition greater capital comes been going sales our of you’ll last function of earnouts I So see turn to XD would year. earnouts being the fruition now, team for a greater the simply, we since cycle earnout of more ultimately to because equally which we’re into an if sale. expected to higher what just right. a is acquisition, sense months of a be seeing mix – that pipeline the have between the since

Andrew Stafford

here, Thank an seeing bit comments SeaSpine expand very who tracking the there? the not are as Okay. could maybe That’s to effect of want through, What uptick pull I’m little as Are onto utilization on And and on just any helpful. those. surgeons seeing halo a more XD because I on, getting far XD? more in used do you you. the you historically had you platform follow-up

Keith Valentine

And if Yes, and things, and management the XD team and made units. and our in to the where we’ve introduction. implant it’s orthobiologics, They’ve the we’ve XD helped great wouldn’t distributors. our sell between starting introductions sales two they’ve relationships sales spinal and units for accounts XD’s collaboration in got team those And to teams already in for happened we’ve get XD there. sold The legacy sales not cross-functional XD right? got likewise, in accounts. in strong relationships we’re accounts that force placed our some foot have door

continues So wherein has in happen. as through, pull said, sale. non-contractual unit a It straight absence capital we’re select And it increase accounts, happening. that volume. the we’re an was dialogue in to And in been starting seeing right, to we see of, was sold

six months six months and the unit and was We’re was and placed. it after placed three tracking three before

not sale, get there’s deal going particularly as we opportunity spinal with great of there’s meaningful the in the for we revenue spinal accounts initial holds increase yet, a XD in history through in seeing a door. where more seamlessly implants capital of if a integrated signs make true Even unit we’re XD can that, be technology. but pull to and on the orthobiologics, our So the implants a some

Andrew Stafford

hear. you. Good Thank to

Operator

And comes our Stifel. of Blackman Mathew next question from

Your line is open.

Mathew Blackman

want questions. John, Good Thanks start I taking make just you, correctly. clarification, I heard you couple sure, with for for afternoon, to a And everyone. had my a I

high to third up Did and about I quarter up correctly? that That’s high quarter you one. think the hear I number the teens. talking and second being fourth teens mid were the

John Bostjancic

QX big last or mid-to-high QX Yes. with right. and Delta maybe QX XX% QX There’s a then even teens high-teens was from year, impact and Delta.

Mathew Blackman

total revenue. And Easy for comp, Got yes. you. that’s

John Bostjancic

Correct.

Mathew Blackman

Okay.

John Bostjancic

spinal excluding sorry. orders. sorry, And then, No, his stocking impact the of EU was implant that

Sorry.

Mathew Blackman

Yes.

OpEx appreciate margin. then for And gross great. commentary on another That’s just one your and you, Okay.

you think heavy. XQ planned that be that spend to said was I

cadence rest on year? guess the or the about I think we down for margin to first lift gross. off of million the gross should you of $XX commissions then it does how for because run Just calibrate the start rate is again sort of And S&M, here at the right had similar to question

help trajectory sort of XD the got of and of any on lines follow-up each those Just I’ve one question.

John Bostjancic

Yes. year increase with Gross margin, to right. as in had should large in see pretty the QX had pretty with implant big charge the very had side, and you E&O progresses, in a going we we’ve big a E&O because QX that charge we those. That’s launches corresponds product a and full spinal coincide that

So those that we charges E&O type don’t continue throughout year. anticipate at of the level seeing

revenue the have take in to that products E&O. going generating margin we should talked about we we’ve expansion all the E&O charges got fully be of Day the we’re Analyst should they’re more the pressure as a some to and see plus in levers March launched the and going down gross step off So benefit these

where lot the strategy we our seeing good commissions, talked on Day, down And that’ll not the we and have think a and sales the side. marketing a and gross you’ll capital cost From the right, perspective, exclusive can’t we recall see marketing go So spaces added yet, white leverage the team. of March but find up sales direct in distribution. we some on a Analyst and go we margin XD are linear about progression

out the continued of get rest we So year. over the of commissions any distributor leverage

need the to direct impact hire of of have they the by non-compete. essentially We sit be as lot out to that the going pay offset where a sales them non-competes, team you the to is expect you’ll guarantees

because for similar rest sales it’s the team large full such in a have marketing that. and do of XD team think worth drive of to be this a chunk I year, yes, we So, there. a going level of the And year’s commissions

Mathew Blackman

helpful. hear the we you with thinking when then those about some squeeze generation through Okay. through this they it’s Again, the But they revenue higher the of, at are to a guys pull well, if companies But could talk portfolios here. accounts you the sort and that their way that or through, it’s technology to bogie appreciate I those enabling question pull we early about here. XX% talked really technology. utilization enabling is a be at fair that And higher XX% to versus even – aren’t accounts Really that. using Is appreciate fair really sort they potential other pull get get early or often and that and see technology here Appreciate the line? brought I up think you down potential would XD scales? at about somewhere of that to XD

John Bostjancic

way, Yes, that I going have installed little enough same very is do share. already think it placements installed view market too we of view have in early. potential we accounts We what’s but same is do don’t that we’re lot the to it earnout, that – on been we the way, a

enable gain is to us So but rates growth gain going market especially absolutely only this year-over-year. share, significant not some to

that So yes, we’re us early for yet. we those those but too metrics metrics, to saying it’s look to be at

Mathew Blackman

Understood. the good appreciate on a congrats start year. of Really

John Bostjancic

Thanks. Thanks.

Operator

from comes Cohen next Thalman. of our Jeffrey Ladenburg question And

is light open. Your

Jeffrey Cohen

John. are Keith How you? Hi, and

Keith Valentine

Good. How are you?

Jeffrey Cohen

on John, the fine. additional congrats title. Just

few end. a Just questions our from

about used a is being is the Explorer So is is – of indicated level you two there it TO, aspiration their yours? that pursue the a and little one of you spine on in that levels all or a whereabouts could utilization for talk finding at just are most and

John Bostjancic

are, I’ll apologize, the body an FDA expandability. are look to from I’ll exact was have interesting – our – what opportunities perspective. The that the – but very one Good up but an I inner to good to exact indications Yes. have due question. Most of

time an the by levels, two it’s believe I exact So answer you. exit have for we we’ll

Jeffrey Cohen

helpful. super That’s Okay.

on question. Just two one follow-up the of to or Matt’s

new talk the could Navigation on. can side. XD findings you there of how side, number centers FLASH Are any or about? physicians comment more sense any you importantly many using early and On the Give placements of findings Lumbar a that that technology us are on or there that

Keith Valentine

units – XX number about the XD U.S., number, I’m So the think XX recall as XX units and or trying of or I there’s U.S. the got units it’s talked we deployed in before, to we’ve

the growth procedures good it, good And willing an instead so XX system and when open it’s the seen surgeons got we’ve like in much that and free like units, the workflow radiation minutes seems getting the module unit, utilization. fits and we surgery So no to place XD there we’ve interrupting the for seamlessly in and going thing because with an into that launch. fact commercial MIS accounts, now one of capability it that, and we’ve to the full is And profile sold two of it technology for that the arm. XX some

can You or the or surgeon’s XX the register less. and surgery in pedal patient seconds that’s during on step control the the within reregister

they’re that utilize I benefits, So it’s and we’ve the times. think fact studies it helping that profile and team’s understanding them some got shows safety because the initial that more the the clinical seeing surgery really doing the XD OR efficiently, reduces

Jeffrey Cohen

Okay. far? Got with FLASH limited commentary thus launch your the it. And any system on

Keith Valentine

The MIS?

Jeffrey Cohen

Yes.

Keith Valentine

Yes.

new that gone So to – beta. we alpha from feature, have we for particular have

is of need be workflow, have be easiest to technology the through a and to And – clinical seamless in process. data it obviously, workflow. don’t work the successfully needs we I We want to one be how that disrupts to we been for identify think make don’t also we stops use sure things for that So I workflow has that OR we’re gathering seamless. information. working mean, continue expanded setup, the the easiest in great the some

full to beta we as and advance so forward to it we continue are year. in continue launch the And looking

Jeffrey Cohen

type a put the year question increase you Do aggregate or you Got blown continue of last basis it. And $XX from on increase similar the for in approximately basis into expect alpha and percentage on XXXX the launches. inventories. inventories from was as betas like million John looks the an throughout units to full

John Bostjancic

Yes.

should inventory of So the we of in and but more we’re than the more this year, be see investment a the last to the think to inventory Because this invest goal that on we’ve revenue it our you’ll the to side. and spend year, deployed was to going percentage we or percentage a inventory said, inventory on million versus that million think the implant, be spinal being sets growth, CapEx in higher support last $XX over mix, I see with that revenue and the use to $XX more obviously, of a that those And as mix to aggregate. sets year able year. it’s you’ll going sets growth. higher and is lot $XX greater But million to and efficiently require compared instrumentation instruments of

Jeffrey Cohen

one perfect. Okay, And then more…

Keith Valentine

hold Yes. on one Well, second.

It correct. It response too two a is continuous have we were – the levels. We – over on contiguous Explorer. is

So that SX is indication. LX to the is from

Jeffrey Cohen

two And Okay. one, the ortho’s one quick us by housekeeping, quarter? give more on That’s spine helpful. of the international super you segments John, just limitations a the breakout our could for on

John Bostjancic

was [indiscernible] $X.X was million, about we implants and as spinal Ortho then Sure. XD, XXX,XXX. said was

Jeffrey Cohen

Perfect.

Okay. taking That’s for it. Thanks questions. the

John Bostjancic

Sure.

Operator

And our next Truist. question Newitter comes of from Richard

is open. Your line

Richard Newitter

your the underlying could if guide? the for year what start Nice January since just comment Hi, taking guys March improvement you April. up been the that off, from and and on just Keith, but And on Wanted full the I weaker, are the momentum has – March quarter. thanks congrats wondering it March into worked questions February the nicely things whether specifically, assumptions into underlying appreciate it’s for picked to down backlog were what that environment. sounds was trend levels and like of I the more trend performance. on or continued and into given in

Keith Valentine

Yes.

the it’s light kind through seeing tunnel, growth patients as double out. And or shortages as months of again And the clinic light, strong positive talking that signs with talking coming their at that wait question. that two categories. good seeing have office continue meaning They three surgeons hospitals of to been. are fair good so are We issues. the of, about April through any I said, all hearing greater we’re staffing as end to working fair, time, point at to speak. right. be They’re they’re market that is we’re lists that to a staffing the that So We in a feel saw digit

– introductions products signs, surgery a they’re excitement, that only as spell positive new not coming a new forward, there as also of be product the there’s distributor of but in trialing we all lot to committing So will our mention those of the number very that surgeon that from not available. teams, mentioned, are that, side – they

Richard Newitter

cycles, of just hospitals capital I early color. the a any just elongating their of the environment. robotics that appreciate but the of getting on imaging into of technologies perspective purchasing both kind imaging overall that number from capital types for – beyond. here of that are spending, competitive you launches you are one guys Thanks any there’s equation, environment. in launched Any kind that And in and full the guys more guess and you environment kind I’d Maybe of helpful. XD if that, some helpful. another also reconsidering and would you capital any position I moving the the Thanks. or or launch still, That’s be appreciate that from there’s have or how on XXXX and totally and just side on in changing potentially six, a – from mentioned scale I’d and of rollout be curious trialing there, priorities nine-month brewings see capital various but just

Keith Valentine

Yes.

painfully they what certainly aware close are There it. though keeping commitments be on challenges competitors component technology that much Obviously, is gives eye competitors. for We’re signaling we feel an we’re our of been our that, price may made navigation us some that have that in to a we then fall a of the is is on our need and having. cost be that the advantage, more effective, point on

little that of us and or to that some maybe selling the create freedom bit be pullback with hospitals experience better the seeing. I flexibility a think of some may So more consistent a gives

affordable. within becomes a on more We’re that certainly But price an eye point keeping still that we’re it. said,

of mentioned to, and we’re don’t in many we accounts are earlier, are great our And continuing we have I as focus talking looking opportunity, earnouts have funnel. deal We earnouts towards because on also in. great items a a presence

give a well. orthobiologic us would this so side on the new presence as implant And

Richard Newitter

the Got it. Thanks again. Congrats on performance.

Keith Valentine

Thanks. Yes.

John Bostjancic

Thanks.

Operator

comes question next our Ryan from of Zimmerman BTIG. And

open. Your line is

Unidentified Analyst

Hey, for you Phil hear this right? Can on all me is Ryan.

Keith Valentine

Yes.

bet. You

John Bostjancic

going? it How’s

Unidentified Analyst

I’ve questions you where the said, here. R&D have just XXXX. higher to Yes, you expect plus in past, product that for you allocate XX% One two spend the your got among a families? Do Okay, in with sense to great. allocation FYXXXX,

John Bostjancic

Yes. XX%. our XX% spinal side We’ve heavier outlook it this a year the was within good implant was X% just on for with biologics spinal heavier of got the were expecting significantly the it with XX% center revenue and total implant And that historically, and – the revenue. of to it

You that on could their of portfolio so liquidity provide percentage with side technologies back in range additional can of a accelerate line the can those as we’re because many percentage because market kind it’s probably sort to the the than team to able their wanted to quickly just enhancements we revenue going and higher of legacy that we’re and exciting the on as your as be there’s programs. XD going of we orthobiologics going the to have new worked to XD spinal bring implant to they still business, product be that for as XX% into XD to be way a XX% the is but revenue more

Unidentified Analyst

in what’s and think the proportion improvement with similar company that a great And sales how of the a newer what’s thanks right that’s color. the for can several over high that go from vitality last of vein, about years, one’s the second and products? the index No, for the goal to way

John Bostjancic

years but those take this better with also the grow we’re also point. that or products ourselves ultimately quarters years well believe continue off legacy or above to our efficient, convert that less the now look significantly new care systems, the XXXX, you products to products in cannibalize for last if or sure side, because the older. help we we’ve XX% really and of products, in we revenue years less, were this I and best the at still current And we’re and using that that the implant And products managing fewer benefits going I ago, long to XX% become to with. and the patients When most to so legacy transformed supply in share hand two seven of came close expect get with surgeons seven years, making from portfolio are spun new three to features more chain surgeons take just their have so. products complex, our so seven products market spinal and mean, we’re and at eight or most

Unidentified Analyst

again and on Make congrats good quarter. Right. sense the

John Bostjancic

Thank you.

Operator

Capital. And next come question of Wittes Jason Loop our will from

open. is line Your

Jason Wittes

Hi, thanks for questions. taking my

of terms is, you be for end said relation kind to refinancing. where indicate to kind kind of burn that does Where did of So flow, related breakeven? first you be you a burn this the debt in you that XXXX, did to especially reaching will cash off, mentioned going of you terms some EBITDA in is doing cash position think of cash And cash pointed you’re of of to that, kind year? you you think put in I you

John Bostjancic

Yes.

we implant that’s the million burn $XX implant on going instrumentation. we to to inventory, the invest free go more Day, of consistently as in inventory flow still spinal in cash and about this than the what expenditures talked million and orthobiologics capital We’re to expecting year expend $XX Analyst spinal the that’s

QX So to that. current some we that’s on distributors. we enough more investment exclusive track ambitious we’ve got growth the and we’re sure for really still have in larger and we got make new, sets good some shows distributors. plans because why comfortably And a surgeons put transformative onboard to up service And to

one ground commercial and to ago. we business as we make where now two ramp their want and have distributors important we position business, to up and on the than those these have can. products a And business enough much convert can they the in aggressively we time, know their because go bets is quicker portfolio launch to that years running but to waiting until like sidelines as been convert fast the full So to not and have could flip to and their that to grow them from over business be feel day sets for it’s it try convert really hit to able we try

we also we’re in what’s we’ve the another we do again, know so to business. bet want the that’s portfolio position on are a who market $XX to to million share got distributors sets faster, take service of legacy plus the growing aggressive So and make of inventory continuing kind because driving their sure to while and year

Jason Wittes

appreciate and just much expansion best I maybe of That’s is related that related? Thank of in much Okay. How product can. that growth If or revenue distribution your sales And kind of on that summarize much could ASP that force new as year you. XD how of if outlook terms the is helpful. it. how you of also growth? just for we is summarize you

John Bostjancic

Yes.

other as ASP, companies, they’ve talked low-single we about, consistently spine like many So digit declines.

opportunities year coming it growth our we’ve of late and primary from, us. all exclusive already the is to where opportunities new distribution these for legs really really last growth pipeline So quantify of and comes year, adding It’s we’ve volume growth this from more and but three begun there’s onboarding distributors. more for got good and difficult some it’s transformative in

selling how grow to we’ve innovation technology convince represent received are the it’s have to territory able And really been exclusively particularly the existing business and going onboard product reps new market well successful penetrating that our launched distributors. based to going SeaSpine share join some the grow we’ve distributorships think competitive come distributors. to regions, by will It’s that of SeaSpine in I share. some well. the distributors in and their join be to products west, So way on our competitive deeper in and flipping being to that able as business been taking market come bringing into reps be and existing their They

help complex per franchise that reinvigorating to more of systems either Deformity And per deformity more So generate growth that’s from by leg. and more is come us complex just is just participating can procedure, products per and more and in going that’s procedure. kind and or more surgeries. or more revenue third that in areas the leg where competing using and Mariner procedure by revenue deformity two Adult surgeries the And second

the we sure vice-versa. if we want to orthobiologics have So we make the or have fixation interbody, and the

happiest very try difficult quantify growth is the contribute and to come growth, it’s of we’ve XD, terms what in legs. guidance to coming the to from going on how accounts good we earnouts. capital be an placed commitments be if or capital XD sales. I’ll we’re long-term Because U.S. of any those the at that one as would much I’ve times with from much guys been to terms to was respect every locking revenue but is under because the the all said, news So in to many provide to the zero, earnout It’s of those new room growth of sales XD in in it’s in accounts because how in existing of reluctant going just

units XD end could wise said, week. which an I So miss because I seven a more earnout, take share, it number long-term earnings up don’t market want wise. for to out days we like that we there I’ll because placing share preservation taking put a market on

Jason Wittes

there? low-single Okay. a potential Can secondly, low the I how mentioned couple quarter an just earnouts First number of And case XD, that? follow-ups about digits. like kind for terms a then this was revenues – think That’s related per should revenue for of in – helpful. your you to we I annual was place on growth system of think

growth Salesforce just the is question had. So kind I the the assume of of sort expansion original assumption going forward. that’s of And out and close I a good rest XD

John Bostjancic

Yes.

for it good commitments, don’t competitive into on just what the On And range, but it’s right. But get of we’re in for, the too terms it’s detail account. looking growth. depends earnout purposes want I much to

Jason Wittes

enough. Fair

John Bostjancic

Right. and got $X represent we we’ve And over point opportunity. gave four of one those was, already data annual the million completed, earnouts revenue

part want So yes, But second to that’ll And that been to too at least we’ve of then a there. give achieve. of much was… detail able you don’t question sense what into I get the

Jason Wittes

up, mentioned forward. I – average look this cases that’s you quarter, just reasonable assumption you a the digits. I quarter think, low-single at mentioned going – if for I think assume revenue I It

expansion growth bucket in of the kind other the of of force XD. sales rest the So is you parts that coming highlighted the from

John Bostjancic

Yes. more with and help different call would number Number and for on more procedure products And to surgeries legs. penetrating complex one is new then the participating all and of as from systems third. deformity going tie source. growth of The into bringing A growth bulk a territories existing to be two yes, probably would fair in probably across those XD deeper come it the with And is distributors. be existing per question. distributors, going us

John Bostjancic

promotion. I’ll in queue. congrats and back helpful on Very the jump

John Bostjancic

you. Thank

Keith Valentine

you. Thank

Operator

next Osborn from our Ross comes of Cantor question Fitzgerald. And

open. Your line is

Ross Osborn

the for in But do guidance, comfortable guess revised all and an I on starting the curious, consider environment congrats the thanks the taking just pretty quick balance year? just like variants questions just your new everyone, with Hi my assume revise for it quarter. range. off range any or new improving on you sounds operating of it does you’re the

John Bostjancic

assumes largely no new it Yes, variants.

As the in we past pandemic about phase. of landscape, about the talked smarter scripted Lot seems talking are experts moved who like us than comments, much good it a are having right?

increased. but in cases the an We news bed have seen capacity, constraints seeing have news that hospital are hospital fact good in any or in counts is we lately, increase notwithstanding the the not case staffing banked around

vaccines disruption view therapeutics we better a have and our things it in business with based that again, And how not of does we’re scale confidence a in now growing mirror up coming And with the surgeries But of that to large hopefully, so contemplate that months disrupt that is we trended type four again. the spot. place. last variant would say in all have rear on the

Ross Osborn

And is the it. other the XQ would far How portfolio, characterize a NorthStar transitioning last XD products full of switching Mariner demand ahead it System it it’s in for and maybe Got with full launches you some the feedback on this Adult share Thanks so be additional limited Deformity color the launch any launch. there. may and since year, there you year?

Keith Valentine

question back how we So sorry. those half launches, at do that what was the with look what

Ross Osborn

of how far, transitioning launch. so demand’s of Just given into in any a ahead feedback launch been they’re sort now full that limited how just

Keith Valentine

Yes.

extremely to kind we in did we that our surgeries beyond it as of well. expectations many – the going getting. it’s and launch full alpha mentioned how was one NorthStar’s We we were the that previously, really were point So stressing system,

systems actually demand So sets very invested features with excitement hottest it of is and It and launch. are the simplicity far and what the in works And our surgeons we XD. as nicely more have for implantation. for also seamlessly as with there one

that? for that’s but be it implant making at surgeons so portfolio going to launch year, been the clearly throughout all stages on. a with all not What was And really need getting the workflow. different demand entire was are to system ones color it how subtle X other the throughout also in easier, of making only but alphas. feedback we’re nice great that have sure been, enabling we’re there make high only for that difficult use not a a – procedure, with that alphas we launch. And is system busy We’ve some we’re XD better pleased the had the to – entire a but the one mentioned complete you refinements

Ross Osborn

last System. the Adult Yes, was Deformity Mariner

Keith Valentine

Yes. Yes.

anatomy that’s and pursue deformity easier that how some up certain only make so able making anatomy, more adjustments much the XD that one you’re the made to exciting it incorporate And on part the difficulty screw how of seamless will with able as a to that taking but area. keep and great the at to making corrections XD so well. get you constantly we look with that up as it’s is with When will XD it the giving spine of and and easier have trajectory, and with And feedback, also into advance the features surgery, you to it’s need of you, and topography is not by keep accommodations. also difficulty speak,

been that about we’ve that, pre-launch excited surgeries. as combined we’re through nice So some got and launch going very it’s momentum

Ross Osborn

you. great. the Thank on Congrats strong Sounds quarter. again

Keith Valentine

You bet.

Operator

for remarks. would Valentine I back turn like to conference to Keith the now closing Mr.

Keith Valentine

hope I us wish thank evening soon. good talk evening And this everyone joining everybody, approaching for to in or areas. afternoon – a Well, I some you,

Operator

today’s participating. conference. for Thank concludes you This

now disconnect. may You

SeaSpine (SPNE) 4 May 222022 Q1 Earnings call transcript