SRGA - Earnings call transcript Q1 2021 | Surgalign Holdings, Inc.

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Operator

Good afternoon, ladies and gentlemen, and welcome to the Surgalign Holdings' First Quarter 2021 Results Conference Call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session and instructions will follow at that time.

As a reminder, this conference call is being recorded. I would now like to turn the conference over to your host, Jon Singer. ahead. go Please

Jon Singer

Good Surgalign operator. thank for you Thank Inc.’s afternoon first the Holdings quarter joining you, and conference call.

on Executive Joining President today the Terry is me Rich, and Chief Officer. call our

with are make and based Before we other lines we economic current on our are will our be will forward-looking. following uncertainties call They The on conference statements in earnings management's matters environment this and the subject discussing involve business start, risks with and disclosure. These associated to me various let that of statements expectations. are the general.

urge vary on our to to events as call. these about information may reliance results actual and consider about during make expectations We concerning the future accuracy Our to all are this you made place company from undue we the forward-looking statements of guarantees our not these no statements. that Accordingly, statements.

can to relative in the decisions. tables benchmark and and for found non-GAAP are our presented non-GAAP Reconciliations the and be results Web During which compare measures in certain U.S. indicative uses the non-GAAP for section our core also other believes of a our certain between externally accompanying will useful excluding provide and Management that both that against measures are certain expenses to Management earnings performance strategic to in and of compensation on performance operating Investor information information management taken investors plans present financial forecast site. our competitors call, results. financial U.S. measures Relations we by non-GAAP release, non-cash conjunction GAAP financial basis. not GAAP with our

to over Now, I will turn call Terry. the

Terry Rich

quarter update call our a the overview in U.S. progress of for an have impact XXXX, by on providing I'll was from the thus turn by million XXXX, performance. quarter On after first made we to provide negative line procedures financial today's internationally. $XX.X call, revenue primarily Jon to in for of questions. Then $XX.X the the an both during and opening provide first which down far of million, on over quarter the driven before Total COVID-XX the overview, begin I'll first the elective

While our the XXXX, innovation and portfolio. to during successfully we within continue key Holo focus achieving milestones is our deliver of development product primary

first the number During of products, in the expansion launched States. coflex Europe quarter, Fortilink and new we in a of including United an

prototype to providing development recently we version the to Diego, of the fully out week, next decrease San us us design surgeon hosted integrate art we addition, individual instruments team capable the device to time time. for of enable our meet which the of was This on cadaver record acquired manufacturing In medical quickly the as acceleration in meeting our market testing allowed allows custom implants needs. for surgeon to us state and the This also support assets machine of into feedback display design. turned and investment was and this and allows shop our to will capability research The agenda by the of last a innovation benefit in capabilities. prototyping

first to the for call focused year. with clearance with our filed We I'll With the we over that the Surgical being FDA remain initial announce a XXX(k) of the to incremental are on U.S. to performed remain in platform for the excited expected guidance track to and Turning intelligent leading of the the half second to Holo. platform of on the have that, With turn by system. ongoing submission Jon the very the end cases financial milestones review. development a now Holo up XXXX, we

Jon Singer

predominantly was a the as spending in for a the spending XX% million and adjusted reduction in a improvement to elective OEM compared the was the XX.X marketing was million international million a from of is driven loss EBITDA XXXX. elimination million decline -- period. The ended of margin quarter sold X.X quarter XXXX company Marketing, of XXXX XX.X million costs EBITDA XX, million The of of in to to months we procedure ended reduction is three improvement million The XX% decline spine sale with for due for infrastructure from XXXX million was period. decrease is from spending to XX% March million the quarter revenue first result expenses global we to development declining of compared months costs general million the in the March the of compared revenue fixed for administrative for a and business. general primarily or the sale decreased or of result XX.X X.X business. expenses first XX.X Research the [Technical R&D the or quarter a build XX.X in move Gross reduction months the to of the and Difficulty] in administrative three as XXXX. pandemic X.X in The internal Adjusted revenue XX.X and the a decline to XX, the ended in after XX, as Global and the purchase a March prior profit and of manufacturer an business. and Domestic first or by impact for and of operating price of X.X volumes. due Terry. COVID-XX from related revenue XX, XXXX. to was year of year in begun to Thanks, first by million The in the development decreased gross revenue million the marketing, X.X revenue three distribution XX.X March expenses year the on revenue its million has quarter OEM the XXXX million, simplification X.X manufacturer driven integrated compared a $X.X XX.X the the was XX.X loss prior certain or million decline reduction rate to XX% when quarter. in ended the organization the OEM expense due for research was million prior out of

Operator

Ladies gentlemen, patient. be please and

We shortly. will technical Thank you. this difficulties experiencing conference are your resume And at time.

Jon Singer

turning I guidance. to would start

Operator

And you back in, are sir.

Jon Singer

over about international our recovery to that. particularly XXXX. quarter markets XXXX, Sorry to on of back. a impact first X% as We're a XXXX to beginning beginning see pandemic I total believe second of the of for sequentially result COVID-XX during quarter by expect our The are global and were continued demand in the the impact a revenue with at grow strong our for markets. guidance. we domestic We to products slow X%

to to anticipate million XX% in to revenue continue the of XXX of compared range growth revenue XXXX. We X% full in year full year

Our end guidance and the assumes for at of was returns manufacturing global slow contribution to normalizing from due the our recall limited the coflex which towards quarter continue January. partner by a market with withdrawn procedure historical ACP, from a volume progress and this to begin levels Cervalign in

back loss to year full a adjusted of will has to anticipate of as requirements. revenue, addition, to million. million in upon In be I regulatory of $XX $XX be the to assumed Terry. classified products FDA EBITDA upped we we XXX(k) certain clearance impacted in range this the Based by like the the the now products delay continue would will a call biologic turn

Terry Rich

Jon. Thanks,

to year portfolio surgical digital focus development ongoing re-imagine and build is whole and to of roadmap portfolio, long-term primary digital outcomes. out to continued the to seamlessly to Our accelerate and progression pace Starting Holo will developments platform promise better new to the introductions continue which align of strategy, work platform, organization patient this our product development product support the product integrate our includes of the our with recent with on surgery. product of some surgical our of of digital that the the Surgical the the deliver whole with we the

In accelerated into the will addition whole digital initiatives, supportive platform. term, products segments portfolio of near critical existing our out be on of we've innovation the development any believe portfolio identifying to of individual agenda we focusing going In our our that identify can are and integrated don't our strategy a building or surgical forward. be are products, that to assessment product we undergoing new

expect The surgery forward Turning and into There join that of in a together talent within came after President this surgery is Vice This at surgery. to this which with recently on the Holo XXX system brings intraoperative end XX anatomical automatically system Surgical provide have of team Smith development such announce system reality achieve FDA Brainlab focused more do the Shortly Executive developments will experience and veterans the we prior and surgeon possible the target initial Marc validation with procedure, will patient with group, In his of as for the position, in size, our medical efforts. navigation leadership images via clearance team is very from years augmented field. systems as look angle in includes we require someone Nephew. surgical that to by the and with the real-time digital relating happy XXXX, surgeon with relevant the to spine for to head than they the its connective the platform. muscles provides Marc's with technologists, Surgery. intelligent available what the have which platform. submission also the Mackey, had we senior augmented to trajectory have to the our point surgery, way. surgery milestones surgical to our team, & device XD tremendous trajectories clinicians, surgical only no combined platform, guidance acquisition of working redefine location, we look not the surgery from all our the of that be which of away up intelligent AI-based and of system's from appointed digital We're to away efforts implant. addition the our planning the our field, the of The We're in the to digital lead intelligence the artificial of leading is the does caliber XD or surgeon contribution FDA. Digital functionality included guidance quarter, having at and see critical does the re-imagine a All to number the strategy to the for robotics traditional patient's display key tissue The the implant patient digital tasked spent so Holo. its were guidance. skin, look the define above engineers, to regarding first spine XXXX Marc digital to the of are excited revolutionary tremendous to first which to digital stages integrated our surgeon reality aspects to and Marc team segment made if a initial surgical the combines digital required our details, with team of the fully the leadership is added allows guidance

represents Anderson. in work Having to utilized beyond kind technologies, press confirmed a Surgical the two spine our of innovation more Holo of intelligence Surgalign with make for augmented will and Dr. development but incredibly to neuro, technology enthusiastic new decades, we lab and our surgical not combination Anderson for from my Surgical release the to a standard will Dr. its not digital just this is them other continue patients, navigation, Holo artificial will still their elevate transformational me digital in in applications technology first as unique specialties practice decisions and across general surgical in technology. one Greg half Although as quote a realm. I've unique, This shared Section were Neurological of Department my many Surgery provide morning of and receive represent and at applications than FDA me and system of Anderson Orthopedic the from two game a of allow the we which the combination Director the It's capabilities Institute. regarding of bring is and surgical and the Clinical accurate of by seen Its the expand of only best-in-class initiatives file had the changer. of through Professor The of better is Holo allow digital to the on surgery. in is Sethi the release thought reality offer first that second working and the but collaboratively certain something care gained of during environment. intelligent deliver We forward look Thomas Dr. the hosted the incremental to orthopedics, Orthopedic to to platform XXXX. and and our our Laboratory many this the clearance the in regarding submissions the only belief efficient expect in the more leaders surgeons related University Spine and Jefferson Research continuum with Rothman care. continue to will recently at agency to to introduced product many Holo We the truly the Dr. input does press surgeon quotes technology. that care surgical accolades group the it Surgical revolutionary evolution Surgical guidance. The help we of

from still We dumb visualization and surgeon are have most patient the The technology not robots, robots comprehensive intelligence. direction significant is guidance Holo guidance trajectories. its despite the from improved designed in as intelligent anatomy progress forward The provide the made need not aspects, to information progress visualization real a current and and blind therefore is and or require that anatomy require their human in to in intelligent to [ph] significant do Surgical a two difference traditional Our them and to that time. know understand direct to introduction, the tissue, and outcomes. do navigation with deliver with remember current leap surgeon fundamental the opposite, they robotics

launch launch clinical for IRB IRB In to part the generating XXXX sites, clearance, will the of of FDA studies. the early studies. we the launch Following or involved as sites second work not alpha with in initial adopters conjunction also the milestone is of data

as will States, expect about what alpha a and combination we fourth We the sites, running the Since both while the excited expect milestone first in pillars. Surgalign becoming we IRB momentum sites company. of clearance. to Holo digital build of be currently Holo to I XXXX. and during launch the we and drive Surgical and quarter have United final our have surgery XX relatively year's occur of cases performed acquisition quarter, towards made approximately This in Surgical, following towards we have of XXXX our to in short accomplished the very and build up am that substantial order of in innovate we the continuing mission a generated strides

our have R&D talent I the in In and addition team to experienced our added believe is department of digital leadership every in top to we completing the the talented most U.S. spine build and Poland out literally team, spine and of company in tripled added team what size the unmatched of

a We a are us moving technology tools company. of being to being surgeons provider from

for the will the line enable critical during We of in now strategy to many are highly focused open questions. place will XXXX, With digital coming quarters. on the balance our like the of executing of I'd as components that long-term against success that, put platform into our be

Operator

[Operator Instructions].

of first line Sandler. O’Brien Piper with Your question the comes Matthew from

Matthew O’Brien

just guess, of from to your much want don't X quick, press questions. and XX. this too guidance to XX but Thanks overstate afternoon. to I for March reiteration taking real of in Jon, mid Good X was the release I

So are for full you kind of towards of really more that of steering kind year? range X% the

Jon Singer

think quarter I commentary to last our in X XX. press Well, the was the -- release

guiding I script. would say the had we're the it's that what the consistent the first of towards in quarter, what lower with trending in we end guidance. upon quarter and So we're second based

Matthew O’Brien

it next that should expect you you're Terry, a pushing the me. of to be data, and of kind right this do be you're paying of commitments? but of group roll Okay, IRB/clinical kind half we or And before then And out XX of going centers need away, terms to the broadly a 'XX, a what to compile still the getting to that to year? sell sense. And then and to were system, more to is site more -- it just of think, in be them makes just get going system, first quickly fairly expectation targeting in really getting kind for for going usage total in systems lot you're you couple you clinicians I it, volume

Terry Rich

Yes.

need So, on that, to and get hands. Matt, and here, true, systems on need is which is But in gain and we show the goal patient with to data experience be a outcomes. in do we experience out publish can surgeon's these system what we we have and believe them differentiated that differentiate fact it revolutionary highly help to that

the right, I we'll that, other mentioned, on lumbar is submission, this and the as spine. of The focus component first

application We And patient the again, that there in Still will expect have drive of to system continue fully over next the continue reported to today time. have full expand of models exist demonstrated release that a we use the until out systems we'll to the outcomes. year. we difference

Matthew O’Brien

it. Got

expecting we into That's of a So pretty should the system this late year. measured next be fair? rollout year

Terry Rich

That’s fair.

Matthew O’Brien

is then it West. guys new hear was for last acquired And Okay. that me interesting to one company out machining you

You've well now. as got this R&D group massive

are I'd in of then, to important, about but Can years? product product So couple new we talk Holo also you you're next have flow? flow new top support the over products. going more capacity And I new importantly, to it that the you is to say on of with going guess try terms anticipate should what to of augment that, step

Terry Rich

Yes.

with we're So, look, doing compatible the Holo. is, key going stated Matt, is to is be everything we

to to substantially can more changes, running speed forever hardware process prototypes. testing need having in, on market. to Holo to development increases get get platform your waiting and without out continue those making differentiate the forward. us prototypes look help And we This we'll use differentiated as dragged machine to to move we shop them, best-in-class our so currently, capabilities, have And and hardware, for

able we're an on currently, So, but us. we'll support that for not next key again, some issue of be the focused year, sets should to areas be Holo

Matthew O’Brien

Got it. Thank you.

Terry Rich

Thanks, Matt.

Operator

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

Ryan Zimmerman

Hi. Thanks question. for taking the

So, on put of looking up, product, of your I Could with, of understand what not keep. may you help in sized you maybe not continuing be you of at what just in have may a kind and at or you point point finer us Terry, some you're mentioned think kind dynamic of some and little hardware, that your you what a terms time? may it

Terry Rich

you the I gist there, a over, We've were that brands it. to got of out almost how but think is sorry, forget little cutting lot countries a I I bit I’m and got XX many maintain.

And so invest to we to that need going the products in. we're continue smarter be to about

And to to that are to to portfolio out we platform, help to because to Holo we're us so continue the products ways, do with going drive that and is rationalize the outcomes. the come the be smart what looking effectively in want support products

not into today, gist. So specifics going the get but on brands here that's to XX-some

Ryan Zimmerman

Okay. just a maybe help maybe if And up provide accretive boost dilutive, you an will a this directionally but impact as I on have to on margins, your thoughts then Jon? that, it assume would follow for margins? will Jon it, could just

Jon Singer

of we're And think guidance. that I this guidance rationalization margins. is targeting in contemplated we've products that given Look, XX% XX%,

that's these different on product we be way products to point out way we'll new bring doesn't an change of at transition as we've So transparent as in I in and don't create see we're operational brands families, something a that significant And from -- as able in going will surgeons consolidate on bring Terry hopefully a that than perspective. be a intelligently indicated, guided migrate we to this as time. it what

Ryan Zimmerman

the questions. Okay. taking Thank for you

Operator

with The Craig-Hallum. question the comes of line from Hewitt next Matt

Matt Hewitt

afternoon. Good

it's following or Just anticipate trend little little margins there around year in another up, a a other the over I nice QX we bounce as higher on pick the Should of there, here. gross up procedure going to to that continuing bit? course at factors of couple uptick guess play questions. obviously, that the volumes are

Terry Rich

products, all were our No. leverage. manufacturing there's We get -- don't buying because we Matt, no

predominantly time So in in function than you've of anything seen mix a this it. should at It's be point else. the in margins ranges which the

Matt Hewitt

during with pipeline potential about only Will of fair how launches remarks, then that? Okay, your that impact And commented some an thinking products product existing have products, on prepared in should of classing enough. or certain the some you some biologics. and impact will new we up regarding it the on be delays existing the

Terry Rich

pushback in Yes, the we're from from a that FDA. there's getting DBM, process, through a particular, as Florida DBM got went they're they that legacy the they

product a the disruption. I a temporary in We've an partner, it's we're this with so that that a could going -- order in think quarter, particular, could and alternative sales. an partner we have have And specific working identified new to gap we're But potentially during we in to a to fill quarter gap. existing

Matt Hewitt

And A of any impact up? or us help big sizing percent how an way that with to headwind couple that? is

Terry Rich

I gave it's Yes, already it's numbers. contemplated think on I projection the the you in so in embedded quarter, guidance the for the

Matt Hewitt

All helps. you Okay, fair Thank right, that very enough. much.

Operator

The of Capital. comes Brooks next the with question Street Lake from line O’Neil

Brooks O’Neil

how I cut to anticipate I ask little the with the call, talked forward? guys. extent product little product the if capabilities apologize. at to quickly be least as you configured about you've a able align the bit going already I that I'm and integrate line, your about, something would willing if you line curious being Good so a talk to you existing bit afternoon, during anticipate being out Holo

Terry Rich

during And Brooks. Thanks, I a we cut think Yes. well. call out the as while for

clearance. upon immediately will we one, day So

for submission our In is the fact, with existing systems. clearance

So day one.

Brooks O’Neil

Fantastic. Great.

integration and regard you all today across essentially Second organization? is what organization kind progress and a with realigning you your going whatnot. you spot in today? b, And obviously, how cultural speak global organization do feel question, of pretty you're can that's to made like tremendous the to the a good A,

Terry Rich

absolutely. Yes,

is thing in the past, the I'm Brooks, of. So, as proudest the I've organization mentioned

here department Mackey, are level through organization in the full into to hire, every And we're understands that of alignment. do we're continues the highlighting there's clearly culture executive we the better our literally very couldn't most organization. every about this rebuild, what I more and excited bringing building. suggest to a would recent but get grow be I every have We Marc week. and again, everybody is literally literally talent and and what unparalleled And

Brooks O’Neil

That's fantastic.

one just pretty a, the B, regulatory to maybe about you I'm Obviously, looks as in me news if internationally. might give on Holo? you you start us for a all think can the We're internationally. the curious doctors United like Let what a more. excited seeing you've a what just COVID been the the outside ask pathway And States? for has opportunity sense you're surgeries when with be congratulations doing place well? and States you accomplished. Thanks outside lot the in United

Terry Rich

been difficult lot, to canceled. trying of number have they talked where been surgeries had in a that we've of the they lockdown thanks been a to meeting encountered international had a Germany markets. times very this live, is about because to difficult it's were And have the morning what but Brooks. And We a Yes, of sales things call there. the back in in countries A move number have it over virtual. yes,

out. and is so great get health in thankful to that forward to as continuing our they the and And open hopefully we're good spirits, up team things look vaccines

the Holo our relates to As Holo, strategy our going markets. working get strategy international what we're regulatory to be it cleared in is through still to for

you MDR has components some change know, As from significantly of the more MDD may to it. clinical

pathway that understanding now. in And so process we're of

Brooks O’Neil

for Thanks sense. color. the lot a makes all Perfect,

Terry Rich

Brooks. Thanks,

Operator

Jim Instructions]. line comes with The from the of Sidoti. question Sidoti [Operator next

Jim Sidoti

it are me. How ones Two It XD afternoon. most sounds Good for a to adopt them this take think general, a most system. just make like to -- technology? to using doctors will used you quick many newer take long to do the Hi. many for surgeons long or XD? cases will them it how transition how from in a now, How for XD

Terry Rich

system a it Yes. to is a and going set as easier right. happen in more lot. before will before to had never Hi, than they've required something of be be excited train used meeting here have the wanting had as they been use we them. had well that going before And and to will the a happen that of have It surgeons units there, town, other number training, literally accolades their to It what We about to to wait feature bunch to alphas surgery in is clearance we familiar Jim. design they the but not be there. Thanks I and We're system, a makes on IRBs. requesting surgeons a for showed Again, part either. more received. the products, they've could them right that it understanding obviously, of far

Jim Sidoti

And But forward? the me, this quarter, said if you second for for diluted the be know Jon, I share don't in Okay. one we not. after using should or going raise first what count

Jon Singer

Yes.

right So around Jim. shares outstanding XXX we've million million, got just right XXX now,

look So -- that's probably probably directional. when average you at the weighted for the year, that's

Jim Sidoti

you. Thank Okay.

Operator

back for call at remarks. Mr. now will the Rich any over to I And questions Terry turn further this no have time. We closing

Terry Rich

Surgalign. for we're Look the Thanks as what our excited about today. next at Excellent. quarter building couldn't we us updating more forward be Thanks. joining here in to again everybody progress here

Operator

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

Surgalign (SRGAQ) 11 May 212021 Q1 Earnings call transcript