OFIX - Earnings call 3 2023 | Orthofix Medical Inc.

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Operator

Hello. Good afternoon, and welcome to the Orthofix Third Quarter Earnings Conference Call. [Operator Instructions] As a reminder, this call is being recorded for replay purposes.

I would now like to turn the call over to Louisa Smith from the Gilmartin Group for a few introductory comments.

Louisa Smith

Thank you, operator, and good afternoon, everyone. Third Earnings Orthofix the to Quarter Call. XXXX Welcome

today of Officer, Directors me Geoff Burzik; on and Board call the Gillespie. Officer, Financial Executive Joining Chair are Interim Interim Chief and Catherine Chief

make will as statements about statements any All those including we call, earnings than this forward-looking that we and other are involve facts historical statements guidance statements strategies, occur. on of such any uncertainties. cautioned risks forward-looking beliefs, plans, statements and is not During provide such expectations, reliance place undue statements objectives. that are our assurance goals Investors to in forward-looking the there no contained or matter will

The expectations undertake to revise forward-looking are and as call of statements. today's or update today, any obligation such XXXX. will statements not make forward-looking November on do beliefs based on our X, we We

Some disclosed X, actual factors differ include the and well filed XX, XXXX, forward-looking statements November to the make this the Form by future. our as XX-Q ended as from December XX-K under risk in in heading the filings materially call that we us Factors SEC Form on the afternoon, cause made additional XXXX, factors year results could for Risk

non-GAAP today's news on short-term a to these we our to financial refer addition, in of GAAP. financial U.S. measures results. announcing determined review financial as matters accordance trends, refer to the release measures our in these to to quarter U.S. for financial supplement long-term XXXX will In with Investors that measures. third financial properly to non-GAAP call, reconciliations results GAAP Please believe and various We our today's order understand may wish

Cathy. call over point, this turn I At to will the

Catherine Burzik

results, a I will highlights for operational and today's more comments. Gillespie thank business detailed this review the review Geoff with of financial then at by quarter we our you, with units, a of will question-and-answer the Thank and conclude will us performance finish results, On joining our followed session. and some third you, look Louisa, everyone, afternoon. the call,

pleased that me extraordinarily the announcement smoothly for Let surgeons. in distributors employees the since proud begin management our am I by operated of our of support has business grateful that and commitment our very the and we're transition of saying September.

is the fostered the off foot gas business on momentum January. continuing the have our to in company taken was throughout simply Our finalized build have put, transition. since period we combination And of not we the

leadership The vision team is announcing and by share, utmost Our the capture & executive we search highly our firm, company. the by Heidrick market confidence permanent our value is ability the Struggles, of and a the deliver the for year. permanent have search long-term end of anticipate well-regarded a on and to capable led CEO I in CEO execute underway

thesis strategy the our me merger fundamentals that business, remain Let the of the reiterate growth intact. long-term and

Turning highlights quarter U.S. a order stocking the in growth and reported normalizing quarter a onetime quarter BGT XXXX, on of Orthofix third now the of was X.X% XX% basis revenue representing forma on forma pro and for occurred in the X.X%. of that a We results. unprecedented growth basis, basis a growth a Revenue to grew in for third on third Orthopedics. million, saw performed $XXX double-digit XXXX well. pro

quarter. XX% strong delivering our representing are adjusted over and for sequentially million We improvement proud of performance the second quarter, $XX.X EBITDA the

of double-digit Therapy, revenue period XX% third or the the in strategic periods, meaningful prior BGT, We marking and cross-selling an our Bone BGT with quarter $XX.X XXXX Growth Beginning year-over-year, added key opportunities commercial of our commercial decisions was initiatives for distributors. of consecutive with made including executed million, third and a expansion reach growth. record-breaking increase

the effective the pleased We cross-selling C-spine Legacy encouraged channel. the and sales business teams, by our particularly BGT with are sales of performance increasingly of are our

The channel, quarter's In the taking share significantly, success in building where XXXX, invest fracture and and BGT managers which from establish most market adding product we across out Orthofix impressive included [indiscernible] management from in fracture on all more spine growth channel are our sales a area the lines came and sales a decision representatives made to organization. to more meaningfully focused competitors.

We are the decision. that now benefits reaping of

the Additionally, to by this growth reported XX% we from XX% our quarter. traction in the the we increase rate continue second demonstrated prior over accelerating growth for to quarter as relative to see [indiscernible] great product further an sequential from sequential

partnerships, the X.X% in Implants, Moving basis, performance quarter. Spinal growth Enabling with Xx reported U.S. rate. approximately The focus market distributor The a part and by products exclusive adding increased to and during third Orthofix U.S. Biologics access and forma above on We cross the year-over-year Technologies. distributor the strong on were more large an pleased performance offering pro vice estimated was on Legacy Legacy contract versa. in C-spine driven

the in top Our from larger in our resulted more partners distributors. high emphasis on and XX year-over-year teens growth exclusive

we build able pleased maintain existing new been We relationships are partners. and distributor key our have with to

Global basis revenue of million third representing this the effect third $XX to of X% included for compliance. compared decrease $XXX global XXXX Normalizing million totaled revenue to the of year our period growth order, X.X% on of stocking Europe cost XXXX. that stocking quarter large with the a prior MDR from to this important, high order was year-over-year. C-spine segment associated a due exit of quarter however, the the It's a for in of note pro [indiscernible] forma

and in to innovation perspective, well Implant product launches the had portfolio. been Spinal a new market, From and X of our all committed across we have remain extensions very line have we year-to-date, received which

Waveform continue [indiscernible] driving in posterior new unique our fastest-growing our C, [indiscernible] products our with lateral growth and interbody cervical, franchise, NorthStar, We proud franchise across which cervical of system. our greater particularly to than Retractor, led our momentum our Within recently great Lateral are cervical launched is see XX% by we platform.

spinal procedural each to has conditions. element optimized portfolio [indiscernible] from lateral bearing improved access effectively our in order treat to indicate Surgeons more

our of coming treat are spinal to inventory initiative of online chain channel new reach. worked even growth this additional more build quarter, have sets steps within commercial supply We with us patients a these to allowing for implant existing partners. our and significant with new successfully Many

to X-year a trial respect manuscript motion MX we Journal. of MX-C pleased artificial our FDA that disc of results clinical been the preservation the of franchise, device detailed IDE, in share are our has publication to With investigational Spine cervical accepted for exemption,

study lowest of surgical X.X% shared subsequent Results rate previously other compared disc MX-C in end cervical of the of positive at this but have point, and when showed first trial approved SSI We the our official marks abstracts X-year at publication. very the that interventions, IDE this presentations other the results the to demonstrated one this discs. FDA

MX franchise. MX United We expect major another history. outside States achieve and have XXXX clinical the artificial in commercialized was milestone robust disc to an in the The established

to during our quarter. We MX franchise. Congratulations this disc implantation XXX,XXX the fourth complete expect to

options the OsteoCove driven Within allograft ] collagen has to DBM the Biologics, [ An synthetics substitute and been in indicated cellular market. This historically announced portfolio. a for preference leader spectrum in in use OsteoCove, market. in mid-October, portfolio our offer product in Biologics filled clearance we with Advanced infusion, full Bioactive posteriolateral the and of strengthen entire synthetic XXX(k) a of will the surgeon a Orthofix commercial graft. an launch bone gap

X units of brings revenue ]in Technology XX those to the earn-out $X.X the We million. Enabling XX commitment to with via XX [ arrangement. via total with number units placed XX, now of an quarter, of franchise. placed the third Turning an This earnouts annual

capitalize and market leveraging increasing product of our growth with the enabling the the unique adoption expected that reduced hospital and technology with pleased We We across are growth its flash to ] [ very all role radiation on the high XX the market technology systems navigation lines. exposure in plays in that believe well and our positioned XX guided ASP capabilities environment. is to both

$XX.X segment, which X% Orthopedics the approximately currency on a basis. year-over-year represents In X% Global growth and approximately reported million, a constant totaled basis on revenue

momentum best-in-class growth programs sales product surgeon double-digit the driven launches pleased by and FITBONE. continued with and education U.S. our investments and in TrueLok exceptionally are XX% U.S. EVO The marketing, We like and in growth innovation is

driven a quarter as XXXX. stocking basis, comp third a of saw contraction primarily year-over-year difficult X% the a we were in orders international Internationally, on significant by there constant currency

Our commitment and market to pack expansion single-use our developed of ankle we launch innovation the announce our specifically share is sterile U.S. kit to recently market. were central the excited galaxy to for

to expand our across brought We pack continue of all sterile product single-use Orthopedics kits already lines. offerings

company and will are committed as as will for is are fully drive of margin beyond Orthofix' value mission originally to disruption growth the profitable EBITDA believe Geoff and we our to of and us businesses, opportunities improvement, the broadly, as progressing meaningful Orthofix C-spine ahead continue explain. integration significant. growth we The evidenced without we by contemplated individual More

of of benefits share. of cross-selling the our a the commercial seeing initiatives, channels capturing strengthening market are We and

range updating near-term million our are due disruption. be revised pro changes to in X.X% $XXX over We year. revenue million, the is competitive market growth and the $XXX resulting XXXX prior guidance forma to primarily representing X.X% between This environment, in to

While guidance forward. our Orthofix momentum ability leverage XXXX, give we am going to are for not going to I in confident

distributor on with relationships are surgeon strong our We and maintaining partners. focused

well We pipeline new products. meet have we to of on surgeons, XXXX. launched new of and products have distributors expectations a a and And launch We strong newly believe our robust that and of distributors. development we in executing existing are new pipeline inventory will have the sufficient commercializing under we

profitable laser-focused we on driving forward, growth. Going are

to EBITDA improve be cash late continuously in positive expect will XXXX. and We flow

for for I'll on quarter details Orthofix. Geoff excited what's over our financial very further the to that, With to Geoff? call results. I'm to incoming turn third

Geoffrey Gillespie

everyone. and Cathy, afternoon, Thanks, good

XXXX for X% As pro XX% earlier, on basis over the X.X% year a third of currency Cathy a quarter reported of occurred of representing that third on revenue stocking a of over basis the pro constant basis Revenue XXXX the the year quarter period. forma for the onetime $XXX period, in XXXX. prior was prior normalizing and growth total million, forma noted third on quarter in order grew

a revenue double-digit for over grew XXXX. third to BGT period. by show increase the over X% the strong total prior growth periods franchise, million prior launched $XX.X led an sequential In second product, year quarter, revenue over with million, XX% was increase Revenue marks led third which for by of sequential XXXX. [indiscernible] X% of growth increase the XX% which Orthopedics XX% the growth from quarter period the year-over-year Orthopedics recently quarter reported to consecutive the X experienced $XX.X Global the BGT, the a QX of and over U.S., continued of year growth

third quarter compared to XXXX of for XX% XX% XXXX. Legacy of for for XX% margins for year quarter margin to gross the quarter XXXX was for Adjusted gross Orthofix. of period third was GAAP XX% the third the compared the prior

temporarily to companies obsolete impact of ensure to to excess standard million product purchase margin, depress continue of business made the In acquired that charges These noncash by future million legacy in the the of SeaSpine SeaSpine gross $X.X value-added date; decisions ] business Orthofix amortization connection GAAP driven [ acquired recorded activities to margins following: charges gross on result acquired legacy on merger inventory rationalization must in margin. the and with in of related combination recognized are the subsequent as of as only adjustments charges are $X.X dilutive merger up a third overall and quarter inventory basis step the and XXXX, merger-related primarily inventory. noncash accounting the

the to presentation, including for year-over-year. Orthofix a forma of XXXX pro gross QX in revised by estimate The conform XXXX margin product primarily that large did by results On financial and quarter. improvement the is the forma XXX increased in stocking pro current to low-margin driven not the basis gross XX% a to SeaSpine quarter reoccur [indiscernible] we third that basis, points adjusted margin of mix

product margins as efficiencies, well expect we the generate final as expect a other efficiencies time and set to rationalization We that utilization adjusted increase merger. of we gross as over result to implant as recognize

merger period. of in in driven prior net and materialize. quarter sales quarter sales integration-related by up XXXX XX% increase severance, XX% expenses the [indiscernible] of year the XX% EBITDA third GAAP to third marketing third fourth from [indiscernible] continue The sales Adjusted the net Net with sales planned expenses XXXX. expense in is as in operating and marketing adjusted up from were for quarter marketing retention quarter, the of the to increase of synergies and sales, costs, continue in of XX% were expense the stock-based primarily associated and compensation to XXXX

gross industry. and EBITDA and A in is operating reconciliation are Adjusted against gross operating release pro that that we the it updated report that margin non-GAAP to pro presented of in forma back tables companies of our EBITDA other afternoon. provide X-K forma investor on between in current margin A to compare is reconciliation our the financial and of included periods financial valuable results, adjusted today. measures adjusted performance adjusted our the on adjusted Form adjusted issued this included in we our the news of presentation making gross core was easier information EBITDA and filed GAAP margin

September cash And XX, $XX outstanding as of XXXX, our $XX facility. September credit million we XXth, of equivalents on Cash million. and million borrowings totaled under $XXX had

During entering XXXX, million [ date, the company with in million The fourth effective full outstanding under which secured amounts Blue the loan $XX revolving ]. the into a million senior delayed and financing funded Capital facility. terminated financing senior connection secured the in a quarter provides term on with senior repaid arrangement million $XX company's a for $XXX financing was of revolving entered company secured senior Torch arrangement draw X-year secured $XXX loan credit In all facility. the commitments prior the credit agreement, term and fully

included Our increase quarter from to includes is for million $XX.X the instruments respectively, disruption. we third cash to flows attributed Free third million $X.X on of $XX.X million, by million is The reported second of which merger-related outflow sequential first, expenditures was free of and and inventory XXXX, investments as channel the second an spend increase estimated of flow market $XX.X flow, and which in million, of a for primarily and displacements operating quarters continued capital take cash $X.X cap in quarter the items. of advantage XXXX. continue driven cash an XXXX

guidance the updated to of for Turning full year XXXX.

X.X% to are be full anticipate XXXX X.X% revising on the guidance. million the mentioned, representing a We Cathy forma to $XXX of a to revenue $XXX range in million, growth now basis. our year-over-year for a full we year As pro revenue year

cash previously and forward For adjusted full remain $XX range to our estimates year EBITDA free full gross year to reaffirming margin, overall XX% issued going and guidance range flow between between We million. of profitability the to maintaining $XX are for million XXXX. we adjusted on are focused positive XX% and

synergies, outflow free flow cash for year expect we cash be leverage positive full continue to We we that realize continue expense to gain expect the operating million to be in 'XX flow will operating approximately $XXX and as continued XXXX.

earnings [ expense synergies estimates second annualized OpEx COGs million our $XX ] Finally, quarter our in $XX and call, we by to from raised of million XXXX.

million be that $XX is of realized of maintaining and have are million than in ahead We tracking rate guidance The and achieve are an pleased be $XX $XX million dollars the XXXX. approximately synergy we exit expected to those on cost to our XXXX. run higher those target with as over we'll synergies more spent of being estimates annualized to

provide like Cathy At comments. this to to closing to call point, would I over the turn

Catherine Burzik

the want delivering long-term prospect I'll carrying and our business, that the close incredible are the all by for highly the creating mission remains dedication of to of and value employees entire of thank by of their again patients. stability improve we our team company to momentum reiterating encouraged commitment the our and to and I XXXX. lives their collaborate, to our into innovate

At this you. please the point, for operator, questions. line open Thank

Operator

Stifel. first comes Instructions] line question of [Operator from Mathew from Blackman Our the

Mathew Blackman

you me Can okay? hear

Catherine Burzik

Matt. Yes, we you, can hear you

Mathew Blackman

the do lower guide. I start, to with seeing was prudent follow-up hoping you're hit Maybe detail walk I've I bigger margin uncertainty that? implied sales to you're got revenues, I little us driving what you're or just the a more few then some And seeing EBITDA a on both? this if on dislocation contribution A have questions. that's trying math Is could through the Great. XQ bit of combination to for the to expected would I EBITDA. or that, be think the you

drop in that if is a that are seeing right? synergies the additional of a cutting? cost lift so, a all, if cost follow-ups, mitigated Or I function from higher is then couple First may. we of And And perhaps to? of

Catherine Burzik

question. start I'll EBITDA about turn So prudent, commentary for your the it really bright And to the question. to it's then answer Geoff here. about Thanks Matt, let me over being and talk

look complicated at turbulence about of competitive talked are all lot point, the environment overall we there's market this others we right is a market As at the I now. have that facing. too, mean this

be proud. I said, very think whole here I'm we lost should organization not That have any we of proud distributors. the that

of have the to last during not employees at all We months. the lost course any Orthofix several competition

very is stable. company the So

marketplace, the happening a is in market of as slowdown turbulence. see decision we result in What making however, the just a

very pipeline pipeline, strong. is distributor Our our

of funnel regularly have opportunities. very review We a we good that

the distributors the the of of last We few a number have as already in result months. in market gained a activity

As the the I forward. really off adjustment quarter just would being a here, very well started give month say is just in October. I you that color the little said, going to prudent of

see how we'll So the turns out. quarter the rest of

And your the to I'll proud -- for turn and it our observation line. on to of EBITDA on, on is EBITDA pretty we're execute yes, ability spot Geoff

Geoffrey Gillespie

think I Yes, that's right.

company optimize mind, continue been through we top we're obviously, and As the our to and the line. to really bottom the here has the as through those business, see flow to that dollars continue integration, fall we gain starting of line. to footprint go to continue our we bottom And to we're more that's optimization dollars synergies to going in see as story

Mathew Blackman

you really, the was stability answers That -- force. a gave and I Okay. us, the encouraging on those very of [indiscernible], think, really both of update sales

of we couple much through here. the some are how of guess, the you is larger couple are But is here, as along in thoughts selling with next at the was your distributors on the the that you more selling risk conversations question how over that where you've word far guess of the your the the of it there how in your locking risk here there footprint? to with from from onboarded years, Are I worst Obviously, last And well. the of particular, potentially? I extent sort I in think really risk of just we're quarters? still much can? process footprint is over

Catherine Burzik

So meet funnel, are to trying for the regularly any I'd the relationships trying distributor leaders, understand now I up renewal. with to that understand sales say

fair all point. it's an to at say think this it's hands-on I process

new we right dealing both distributors I have know of forward that And the you with moving that as built that additional the said, are distributors. organization strong obviously I the think have calls. at in We the distributors, have. and now, in we're confident talked leadership and top about we with past past very sales pipeline that We've we inventory. distributors

are of now, our get so into updated steps the hands well out forward. inventory spinal distributors existing our in Our new as rolling can as process as them the renew sets of definitely going we and we to inventory distributors

things So being in this decision-making. I short just short I answer near-term at a it's right And stable mentioned, we what think guess very see relatively as slowdown I we a the see point is is in time. term, now

Mathew Blackman

Cathy, your ability sets of to midst distributors. your to what's here point, last potentially extent, obviously, to instrument more going this question, this those in I even you've of sets hope but uncertainty? that swear. that the your expectation possibility obviously distributors? is I new a my But Is available last it Okay. -- just think, mentioned And use some onboard new to follow up some a you, to And got or

Catherine Burzik

distributors. numerous about already this weekly our at new hear We're I meeting. onboarding Yes.

as We're rolling So entire planned. sets are so distributors new the we our many distributors. to that forward process yes, is onboarding providing

Operator

the somebody that Actually, but off. right. We looks they our question. last had dropped All like on line,

Cathy now the to to comments. for would Okay. call back I closing Burzik turn like over

Catherine Burzik

join day. for We're Well, that you really pleased have much. right. rest afternoon very could you Thank care. very thank the all conference All much. the us of and a good call, this you of Take

Operator

Have a today's concludes call. This pleasant day.

Orthofix Medical (OFIX) 8 Nov 232023 Q3 Earnings call transcript