SRGA - Earnings call transcript Q3 2021 | Surgalign Holdings, Inc.

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Operator

Good day, ladies and gentlemen, and welcome to your Surgalign Holdings, Inc.

Third Quarter 2021 Results Call. [Operator Instructions] At this time, it is my pleasure to turn the floor over to Chris Thunander, Chief Accounting Officer. Sir, the floor is yours.

Chris Thunander

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

today the Kris me Chief Medical Joining on Executive President Rich, Officer. Officer; and our and Dr. Siemionow, Chief call our are Terry

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

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

performance platform. I'll in then year. with Terry over results through Investors begin to call, progress to the GAAP uses are strategy of measures noncash non-GAAP release, results. and competitors a the other both tables call, U.S. Holo operating to are of between website. can our our Reconciliations made Management to measures, our strategic and our overview Management third to forecast update call an investors will to On and certain section certain quarter our which performance and guidance compare turn core non-GAAP the indicative also in digital the decisions. found useful we presented not believes for GAAP externally present During excluding against information by we the earnings and and measures for in and compensation walk information U.S. providing conjunction accompanying that non-GAAP provide that financial expenses the our with our plans basis. of relative be management today's our performance non-GAAP benchmark the financial I'll taken for on an financial certain

to quarter, $X.X the then the in headwinds includes financing OEM to on working $XX.X million the quarter period. in revenue million the line profit for development was the cash a the for XX, cash dispute. the the Gross of for million of for third XX, million questions. the due of months in will sale the completed net $X.X of the quarter September $XX.X and resolution the year quarter liabilities quarter. Domestic loss compared result a of was compared loss to third and XX, XX.X% or $XX.X million and the EBITDA as in with to XX, in third settlements $XX.X year well Marketing, open which of related were $X.X Global revenue million the ended expenses spine with capital prior to period. was million XXXX, of of third with business September ended XXXX. revenue was million procedure ended quarter X decrease tax review revenue June XXXX, as third $X.X the quarter. prior and surgical year in months the proceeds XXXX, the the final We the prior revenue and equivalents, million XXXX for $X.X of $XX.X The administrative million of quarter ended $XX.X XXXX for the XXXX. compared $XX.X XX.X% compared million million XX, to Starting million demand $XX.X year compared of to Research We XXXX. for for compared was in $XX.X as months September is COVID-XX-related compared expenses to prior the quarter X general the decreased for ended of were primarily million in X Adjusted September international elective the or million $XX quarter. a revenue

guidance. third now impact expectations procedural our quarter quarter, of Based well -- on headwinds on as pressures year the our supply the as on to full revenue headwinds, global chain-related performance COVID during shortages staffing including of COVID for Turning hospital demand, in fourth elective continued we We range now to and EBITDA With that, will the the to $XX call of to like prior range year $XX adjusted I to $XXX of compared to $XX guidance million loss Terry. be expect $XX million million would the in of million turn over million. full $XX to million. expect

Terry Rich

Chris. Thanks,

focus main and platform the Starting a the path growth milestones near-term Holo development of update. for to continues driving in the the commercialization. be with business the long-term Our of regulatory on achievement to

our We that to as activities clearance. AIs, system the an shifted application, to the our requests, system. a XXX(k) clearance as initial of our certain validate were productive information Recently, of for time continue relates to have error texting dialogue regarding FDA automated with a additional and require FDA has slightly. line omitted The it performance result, or notified error we the

clearance performing to system and but the exceeding end nominal will year a as the and due and first expectations us the into in Holo required to quickly revert tests push the is the timing is possible, To as XXXX. delay, or does our belief that this this does are a clearance risk our clearance and criteria. or clear, change of cases meeting early pose this We automation error document impact shift FDA could for to FDA very now be by not

Additionally, ability the sites of the related more and the first alpha change year to to through expectations platform broadly this half and not our second the launched IRB of half our initiate in shift does XXXX.

surgical of software spine ultimately initial promise more believe that and technology Holo the augmented guidance branding planning with Holo on our patient deliver will quickly surgical better The utilizing system, help artificial better and intelligence proprietary the outcomes image-based segmentation perform are We of satisfaction. combines portal we reality, surgery as Portal. platform, application Holo the guidance automated and surgeons

Holo the the it noted, previously term we solutions. support, market diagnostic, postoperative tremendous When encompasses the interoperative As we we to outside new long into is Portal's and additional total over and uses a addressable within the opportunity as of platform initial at integrate billion, planning of including procedures, looking surgical move variety as spine Holo for approximately estimate will market lumbar exponentially application $X be the which expand indications capabilities.

preliminary general is continuum utilizing specialties many the a and system we clearance. surgeons strong, we have directly has and As and in applications working institutions expanding the Because number the up been interest many other to a extremely has currently been sites this R&D multiple with and of to applications order in are in this care. submission working Early the of of platform. as our their orthopedics already running first after a into and short surgical neuro, the of expect work, across U.S. relatively on reminder, install

of spent appointment brings of to orthopedic part addition Board appointed in as Conley leadership Chairman Before years our highlight September, Q&A, at Zimmer. over to Board meeting. over recent of the a In Directors. turning was Sheryl the following experience executive Sheryl space including X to XX wanted annual the decades to her Board our I as of

intelligence, help and to through evolution be the reality. excited analytics artificial of are of leaders to ourselves guide company surgery now position her the in of application data development for we the We augmented our as

excited me of into for addressable with Let opportunity Surgalign that markets. in reiterate. We're a company as selection lies transforms AI the about applications incredibly it technology-focused ahead an broad

Surgalign a to becoming Portal. major digital will the clearance XXX(k) across to successful organization rollout to we'll achievement the be care. shift leader impending required the our focus commercial the a in of represents and Our step for steps ensure major health the towards Subsequent Holo everyone taking clearance, first

market In to addition, to opportunity continue advantage I'd the platform and questions. we With for of to in the of the patient like revolutionary better development this open the invest and heavily line promise that ultimately the that, on exists platform take satisfaction. outcomes will deliver technological qualitatively for of massive

Operator

question with [Operator We'll from O'Brien Matthew take our Piper Instructions] first Sandler.

Simran Kaur

like guess this that just to automated Am from error correct? I initial admitted I contingent I that processing. upon understanding with start off requirement Matt. is sounds completion for wanted was the of submission on in Simran It the reprocessing first of is documentation filing. testing FDA This the this

Terry Rich

or Yes. questions that X for There additional AIs, left that received. were request information, were we of off the original group of

so process. in The And we're rest are complete.

we're to So testing reply process of the to in X. finalizing last those

Simran Kaur

Okay.

information what pushed the now, do then back to in of to expect and marginally? you the ahead And time data only right lines that FDA for getting FDA. with those the in Holo confident what thinking be So makes you terms being turnaround you

Terry Rich

the FDA. with Just based on our conversations

again. them questions And in, so the starts XX-day with the get it when clock we

resubmit we're get components. testing as and So possible, the again X to as pushing done last the efficiently we'll

Simran Kaur

Okay. a little sheet. a million have the on It over like quick guys $XX And in then one cash. balance you looks

So provide on in and of help much year? quarters qualitatively next both SG&A could does are then cash to from with given us are how you understand quantitatively an OpEx runway Holo guys product pace we launches side? R&D with ahead some you the standpoint, see And subsequent pushing new the spending that expecting or maybe you and

Chris Thunander

of launch cash, IRB commercial cash answer on of get Holo. prepared for size your the question enough first and To have broader broader for the runway Yes. launch the we for Holo,

the on line side, I and of related So OpEx the think continue in to OpEx sites be alpha the spend that. legacy likes. that support the similarly, Holo, our and kind And And we'll with to R&D it. that's would of development and business will the IRBs how of the

Operator

question Markets. We'll next with take Street O'Neil our Capital from Lake Brooks

Brooks O'Neil

but did this just to following ask asked guys that forget something up X is the not you they there see questions? and quickly, curious, missed I'm responding? Or FDA significant, did not terribly you Just

Terry Rich

to automated and only Yes. questions No. -- And the this an that we the PDF X weren't over that had were just Brooks, error Apparently, an this there's us. admitted. of ones system the error. sends automation questions

Brooks O'Neil

Sure. That's helpful. Cool.

you've how you it? business, sort sell Are that kind next of you company talk about sort you've going significant? do I'm of business? hoping a more over it outlook to Just about that year business. your fitting you the thinking before Is little provided ignore bit the How spine historic X, traditional we for out into could should a about think it? revised loud of see or device got -- Holo. just you Obviously, talk the we

Krzysztof Siemionow

Yes.

no So We've wants and pandemic. largely and seen before, just guidance. related guess think to I I haven't experienced we that this the Brooks, is things through one I year, to lower -- obviously, think

back at and to have the losing it not that enough the swings kind new much you're fast not just quarter-to-quarter, enough effect, that quarters, fast If business we up you you're look picking to have of taken have how worst was made by quite really QX. the us. that kind in on thought effect we of effect. progress And We've And great the we dramatic the area. behind were was

of We've quality quarters, If you on the referred some knock we've those the wood, great back progress us. of consider and on previous issues Surgalign out We're behind we made is market. have the in to on number navigation started out. instruments we'll the the We've them, new are the here -- Europe a the interbodies got with of and coming market. first start shortly back out in year. after We've

headed a that a And products look So to door. in we in to the out up, really, we've good now new we're down getting testament I that forward to this moving team is shore forward the path. these brought really and R&D believe

Brooks O'Neil

Yes.

TAM. and thinking how wonder number, Okay. about you're you help could be your just you the around then hoping And that's if going Chris put a us Obviously, or That's some you really billion juicy Holo. will. if in sort I'm seeing might of you're helpful. opportunity market to context with any able provide after a the $X And color

Krzysztof Siemionow

then, or But robotics I'll whether adoption Yes. are a of you navigation seen I why and number the think those start, on Chris, of Holo a jump that low has in overcomes look, I rates. don't And reasons why there number end? that believe it's issues.

as I or the about as applications that have even I the outside within going think the excited Brooks, excited I'm OR. getting spine, am even have brain, And applications to for is we're more the for potentially surgery. general thing, we're and going orthopedics OR that of other that's the to

see. this programs. build And making out see first of so a exciting we'll what year progress to the we incredibly these And it's of with to of areas, they're some after unveil as and begin advance and team with number the further we the in continue

So Chris, and comment? why don't you go ahead

Chris Thunander

Yes.

the around and the have So granted very doing we patent the things Brooks, and think a release fronts, is to But made is we X what of press highlighted but of ordinary what's to on shown a is of room. one normally, this them something intellectual press is granted, patent we foundational wouldn't release about number which understand, already, we're that intraoperative some do I actually of key this a the and some property, we've applications. operating outside getting

that So the a we coming that multiple through been graphic people during the showing once guiding surgical And been applications. again, have is have the to procedure. technology surgeon surgeons office and very a has one

you same I'm about, -- the and know the same core technology what However, so quarter. talking

Brooks O'Neil

Yes. No. I tried it.

Chris Thunander

Yes.

have. an same automated the a for The behind have reader. developing as of You years technology we curtain core number image to been serve

the anatomy hospital, radiologists, CT CT down deployed room So are we have that surgeon, the right? and at X-rays. scans, MRIs of have operating MRI, the being the deployed technology week X-rays that in now, read done So same imagine guide day scans that the that by a and read also every to we breaks to right they're

So with the images. rid for very into surgeons, example, here," the is are or radiologists and definitely by they with to we "Hey, getting doing daily in once workflow help better testing but of we're soon, going radiologist to because And us but on practitioners, reading care are neurologists, we're faced no the some the And do but as means not patient. the what's heavily will rely non-surgeons that again surgical understand not the experience primary no such to introducing and saying, them. software the on applicable we be only surgeons only physicians operating to have for with room technology that

So us that about the unveiling in more that's you will something be hearing we as little months from start coming bit. a

Brooks O'Neil

think specifically talked markets bit of the those Or guys a of Do planning that you derive a surgical planning? and sales Yes. the do help sell component you think are surgical value systems use the where with more some from system you little it's things. you you you about And enhances could of system? those that think

Chris Thunander

lot actually, space Yes. answer on images possible. are surgery to as goal such are both right? hitting marking It to The certain in a engineering that on a of device Terry. I'm go, in, to orthopedics, manufacturers we're as going hand is relying make -- such certain that that not because depends angle you're procedure manual by and there achieve to essentially at robotic which a a

a and, the once other see those our equals do. software companies all that lot those up and to of speed So those with opportunities we those to time, for again, things, money workflows which teams of amount assist and reduce and that manual have intervention,

So that plan. do operating of room. the artificial how our system one a will the that's formulate intelligence then to of And outside of feel we be that differentiators the this I on utilize key

room. Of job the will course, operating that I the doctor's in errors and validates for doctor they That's those what do think checks it. save time a and reduce is. significant patients But

Brooks O'Neil

that continue evolve. Appreciate this I'm color. Great. to seeing all excited about

Terry Rich

Thanks, Brooks.

Operator

with & last Company. from take Sidoti our We'll Jim Sidoti question

Jim Sidoti

the any issues COVID all quarter. up. quarter It it at the have with towards company half an of the through the first Are ticked first not relief end Or you XXXX? do the think really October? and to like into you issue in be will seems this seeing of You're

Terry Rich

get you bigger QX that's difficult. I certainly, the just so I you QX. And again, Jim. question, the of Great mean I Look, this quarter, thing upticks throughout look points course quarters year, in is than various made what's at and downticks never if wish knew. the mean our Yes. and I

struggle Australia is normal picking At level we'd hit back We same again. we had on it the progress a and be to back seems things from thought never we're time, up has in things in continue Europe track. as we But and more get that something And us COVID the hopeful certainly greater have down that, that recently get of there. to -- predict. to so again. I say kind QX, to And back experiencing closing QX we some pressures we been we it can on

be a at tough just it's where things balancing now. act it's to -- predict are So right these to able

Jim Sidoti

the anything do my and feedback tweak get the can to be to then now approval follow-up, and is sure kind make when going out go from of FDA you And to Great. it you Holo to XXXX? doctors what there you that on prior system, think going it's it's be in launch

Terry Rich

Yes.

to and have with we've that of does their and the us. So than But the and get with number system of they doing commercial how help we which folks into a require of IRBs a theater, you been the work in different the And the validate with lot are feedback. to alphas to we cadavers taken is launch. things shown why prior surgeons lot plan always when that or are we've testing starting them it in come do operating proceeding broader phantoms a with where you on actual to a

Jim Sidoti

issue likely the XXXX. still first Okay. correct? the that's of happen FDA, that half with Is had And the you think despite you in to

Terry Rich

Yes, do. Thanks, Jim. yes. We

Operator

We'll Rich, now is yours. call closing turn Mr. Terry for the over remarks. the back Rich Mr. to floor

Terry Rich

to to making get company our be in Excellent. exceptionally and the everybody, excited forward you. our we are to that Thank progress updating on for we're next call. this on joining extremely bullish market. Again, Thanks, call. you transformation I the continue on Holo the look platform to

Operator

you for your This does participation. conclude thank today's teleconference. We

have great your time, disconnect lines day. may and You a this at

Surgalign (SRGAQ) 10 Nov 212021 Q3 Earnings call transcript