Orthofix Medical (OFIX) 7 May 242024 Q1 Earnings call transcript

Thank you for standing by. My name is Jay, and I will be your conference operator today. At this time, I would like to welcome everyone to the Orthofix Q1 2024 Earnings Call. [Operator Instructions] I would now like to turn the conference over to Louisa Smith.

You may begin.

morning, good and you everyone. Thank Orthofix Welcome XXXX Call. Quarter to the Earnings First

today on and Chief Officer, me the are Calafiore; Financial Andrews. Joining call Julie and Massimo President Officer, Chief Executive

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

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

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

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

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

on time to details for earnings results. spend joining and and call. before over Louisa, quarterly you, updates our on as some morning everyone, some financial for Julie into first key priorities quarter for initiatives, this I it our insight strategy and performance as thank turn higher-level our well I'll Thank us providing you, further

driven Orthofix, and by of for quarter operating performance strong teams. another report our exceptional fundamentals healthy to pleased I'm business

grow to revenue first Orthofix led was gain a continue to by Net in our strategic quarter all growth initiatives XX% X.X% million, year-over-year and the in constant across by BGT, We XX% across strength businesses. was in our $XXX representing business momentum U.S.A. currency, segments. and The in spine performance increase driven primarily leveraging Orthopedics. U.S.A. growth fixation growth in XX% for XX% growth

are market We clearly in all outpacing these of growth segments.

are to future while remain emerging We advantage innovative deliver plan prospects of executing I delivering and moving and service opportunities. the forward. value our outstanding in confident products taking and to very

the one, quarter To innovation. approach already to seeing XXXX growth; pull-through laid to We near all committed out reiterate diligently some the of our in and term our and priorities profitable focused are we in three, on: synergistic a and fourth emphasizing across remain X that delivering platforms; two, results. in we strategic balanced portfolio call, our are

than as of discuss synergies. in to priority first the XXX Our quarter, report of we EBITDA more basis improvement an the the strong will I'm is a saw but first and to in and happy growth growing adjusted specific Julie the metrics profitably. result top that of points our line realization business margin later, grow

optimizing our We distributor management. will our existing momentum and and this expanding sustain customers improving capital by relationships, portfolio working product

channel. base, surgeon the well spine distributor products average broadened we customer from per procedure increases we revenues partnerships. across quarter, benefited price first continued from of cross-selling interbody saw In Fixation, U.S.A. the through in significant as contribution Spine as our BGT and new In within the use thoracolumbar as

expanding our our with network. distribution deeper penetrating are procedural We accounts while into existing solutions,

cost by chain, cycle maximizing the direct our any higher-margin number strategy improves innovative by only product working and but the This lines. of of on capital products and supply towards investment and products product new simplifying company our Furthermore, the are this enable life the us SKUs reduce carry. our lowering we portfolio combined to resources overlap. expansion and In rationalizing will focusing of addition, we robust by not management

to investment on We will recent instrument are distributors, is and efficiently spinal utilization. finally, cash the efficiencies cash implant allocating more instrument DSO and improve flow larger, our opportunities collection. further see And by we set inventory improve accelerating dedicated which focusing to the

quarter initiatives, result we cash of in positive expect fourth these to a As be of flow the XXXX.

our sales across is which to second segments. technologies our all priority, channels leverage to now and Moving product

enabling the Our products cross-selling and opportunities. the work performance together to other best-in-class offering, improving through of each growth create a

choice what are traction with selective infrastructure us building, our be allowing in We opportunity of our we across distribution seeing in commercial increasing the partners. are to interest

is the and team driving pull-through biologics on across revenue spine, aligned Additionally, BGT. orthopedics,

We outcome market the and support the of share complementary areas are offerings in are of portfolio where complex seeing our gains able to product lines orthopedics the in spine. more

demineralized the our of are Strand capacity fibers. completed just bond-forming family to implementation maximum of ] XXX,XXXth For fibers [ fusion potential. Strand bone enable These designed example, and we

Technologies, whole. of opportunities Orthofix's and our success we of of key complementary our strong performance A and leadership team alignment that nature have the highlights in offering date employees part The cross-selling the Enabling committed to Biologics BGT, place. are as a

certain portfolios. made eye hires for roles, the product up some will we at role few our with have efficiently others that changes key towards the expanded us set and managing finalized my beginning to future, Since a company, an

of synergies throughout corresponding I portfolio, commitment reinforcing promotion to of to Enabling highlight software strategy Dr. our the drive expanded the For Beau this Chief recent across Officer. In Standish Beau and product the oversee hardware our Technologies business. like to will role, all example, would development, implementation

for key differentiator Enabling been Technologies Orthofix. has a

the Orthofix both the spine support the With of will intraoperative in throughout a XD FLASH role, the our this of surgeons choice workflow. seeking Navigation care. combined established capital, and software we have products for leverage as investments new solution Our partner comprehensive better-driven hardware intellectual with surgeons orthopedic of improved innovative, and continuum to suite

STIM growth OrthoNext, patient using navigation planning room our platform, our care stimulator devices, preoperative Navigation planning continues with engagement and strategic post-operative operating real-time to guidance with award-winning begins bone extend and XD FLASH through with our This onTrack, throughout across businesses, high-value significant and our the By drive will in of capabilities share. platforms growth expanding procedures our we to and market all compliance in gains app, patient-reported existing accelerate post-patient technology outcome.

This investment a Orthofix with in engine. priority, Enabling are also our consistent Innovation third Technologies commitment to

products promising several and of have pipeline upcoming We in a robust development launches.

has with in ]. the there, investing a potential, remain where as We to [ significant are leading opportunity especially player needs Orthofix a top return itself establish and higher markets over

incredible given our beginning lines. the opportunities unique into are just expand which innovative product U.S.A. and example, we For to presents orthopedics market, growth

FITBONE transport specialized and Our underscored transport highly the nail. bond clearances, RODEO focus orthopedics, XXX(k) market, lengthening, for and the providing is for nail the U.S. in is It underserved only the lengthening for both only recent available in and the solutions by intramedullary transport nail nail commercially of and bone telescopic available capable X

We deformity These market focus launching be demonstrate correction. will limb current innovative market limited to achievements our both and complex same in of on innovation United deliver coming through products months. U.S. reflect products and ability releases the orthopedics States reconstruction across our strategic the these in

our MIS and in improve state-of-the-art the differentiated procedural patient in with with Spine our to one solutions anterior and surgeon care to and our integrating enabling of This hardware works advance continuing novel are integration biologics. the just In access portfolio, validate lateral experience portfolio technology is we many XD.

is Our product spine orthopedics, for solutions trusted most through partner the our and for complementary to complex in goal be platform. providing surgeons cases the unique

inspired first during I'm on in on relentless Orthofix my and with quarter pleased very is the performance focus I job. that all, innovation. our All embracing a execution by by and team remain encouraged prospect for a the

our the result are million by a end guidance $XXX the to million $X of the guidance confidence, to and We between expect revenues million As XXXX revenue to raising bottom year and to million of that to X% X% of $XXX million. now as $XXX prior narrowing $XXX compared growth. be we XXXX full range

Biologics strategy and thesis merger BGT remains across the Spine, compelling. Orthopedics, and The fundamental

creating in patients for and to growing the are and best value strategic We come. is believe I customers, and our shareholders. company to the reach profitability, we truly major manner yet are a

the financial turn quarter now call to over first to our I'll review that, results. With Julie

like please today for our reconciliation GAAP regarding results, resales. release information our including earlier to non-GAAP to begin, refer published Before a I'd press to I you remind our of to these results

percentage be discussed revenue on currency will all changes basis. year-over-year constant a Additionally,

and quarter, merger of As growth. of this be we have forma the will no annualized to pro referring impact the longer

in on prepared my that In be as a adjusted will results comments of all referred I addition, basis. to operations non-GAAP

first currency X.X% noted, delivering margin growth approximately XXX Massimo line quarter, had of Orthofix and a top As EBITDA basis points. strong expansion constant

provide as units business results the go XXXX. guidance as full each financial For well our an quarter my our I'll on through update commentary, year and for the review to of

year. than market, coming share both #X of $XXX.X were to Growth fracture performance Therapies for more quarter Total market hold double-digit QX driven sales from of the and company XX% over in XXXX, growth we the by take consecutive in for the above-market grew and quarter franchise. the with the In up of prior fifth was million Bone spine first customer where growth channel. acquisitions. million XX% new $XX.X share the spine This net BGT continue growth to marks revenue X.X% position, the we

continuing channel fracture, fracture drove AccelStim the addition, in sales In investments to in market the outperform XX.X% market. growth with

an represents of more just market $XXX in the As our beginning market. that a the than potential and are opportunity scratch we of reminder, surface fracture million, to

U.S. growth first deeper contributions double rates, saw Biologics per of Implants, revenue with distributor growth partners Spinal we nearly quarter X.X%. where new above revenue revenue of accounts QX driven to Fixation average Global and existing well increases revenue procedure. million, and XXXX, from XX.X% Enabling $XXX.X grew was by market the penetration with from Technologies year-over-year Spine

we growth line in initiatives impact as saw cross-selling market. positive which new as partnerships the the overall drove Biologics well with Additionally, business, distributor of a in

as the stocking the grew X.X% business, as performance U.S. orders to XX.X% across led and versus from Due distributor expect we expansion business in result in The declined growth to quarter-to-quarter of sales international Global timing as channel from Orthopedics due to see investments. strong the distributors. nature portfolio The the first this X.X% prior by variability year of of a growth rate. our our quarter, in well business

driven achieved as sales that a a net is of Moving below the QX partner by new XX.X% the due out to as rate in sales will in of QX sales vendors the primarily on and XXXX. a and QX. effective of a Non-GAAP mix. an XX.X% decrease a to expenses moved for of margin, commission our points net primarily a vendor, cost sales QX for compared basis quarter, of the overlap rate compared gross we for and line. approximately phase XX.X% were This decrease to result non-GAAP detail to we lower XX The to with adjusted product Starting reduction synergies some due realization quarter in sales savings marketing cost starting percent first was XXXX. to legacy

expenses results project reduction MDR quarter compared stock-based compensation. prior adjusted Non-GAAP from was study. administrative to offset year for by R&D quarter. due Non-GAAP general clinical are QX a expenses synergies were by increased XXXX, related by year. the EU sales operating decrease were to driven of spend quarter XX.X% a a The longer partially of to XX.X% product costs, same XX.X% no of and as the for and was development from primarily which percent a in net sales the down the cost the MX prior as for XX.X% X-level in in percent The impact spending and sales decrease driven reduction of rationalization,

a for the sales income the a the operating non-GAAP leverage in million resulted synergies XXX at this synergies end cash point revenue the drive of merger-related represents drop-through capture line, cash sales ability a over of and the XX% cash expansion results sales on on and and as or seeing to due growth. of other XXXX of $XX for quarter. impact incremental This million. expense interest quarter, $X.X the of was net QX, million to standpoint, adjusted QX are merger-related including restricted growth our We Below remain approximately balance, these EBITDA total dollars. basis driving leverage our on X.X% we Altogether, was materialize. From $X.X encouraged by

March the borrowing our has we loan quarter XXXX of exercised arrangement first X-year of $XX right borrowings revolver the $XX the repaid During to outstanding $XXX term million, date under and of financing XXXX, our the million delayed to draw which million. brings $XXX This expiration million. end total of

incentive and primarily quarter, usage result of an in the merger-related retention Our free cash onetime flow $XX as million was annual a payments.

cash QX the highest for year. be burn quarter will of the

improving inventory specifically working efficiency. capital we instrument management, on our and mentioned, our DSO and utilization Massimo As focusing are

as of we to be we with merger-related efforts, as first continued profitable be positive QX expect and in revenue in we XXXX. Overall, results these forward. to cash well drive cost With ability execution synergies, quarter confident continue pleased to flow our are growth moving our

XXXX to full guidance. on Moving year

As to rate current fourth to quarter our rates foreign XXXX. exchange that changes X% based $XXX account note, our do sales on of during we $XXX expectations X% are million for implied narrowing representing currency X% Massimo million guidance to constant a growth. issued million occur may million, or of full on X% net and call $XXX not the stated, in is This throughout growth our between to to year-over-year range year basis. guidance comparison for $XXX and are Please

EBITDA Our to flow outlook be million. fourth finally, we to million XXXX. at the $XX XXXX remains adjusted positive for cash quarter $XX non-GAAP expect full And of in year

I provide our some While business line directional quarterly These on call of with we provided March. quarter do modeling not in fourth to performance. in quarterly commentary the give expected directional the remain our our in you on will guidance, comments remarks assist cadence

year expect in orders growth be QX revenue full stocking slightly XXXX. We to timing the range to our due below of guidance

X.X% XXXX. results additional reflect XXXX year-over-year quarter to growth day of we expect growth additional to approximately of highest the in the extra prior in we in for QX year closed the quarter. day the impact as disruption Additionally, X the and the versus selling This due

margins line For gross range, gross to be in expect in to the we continue full year XXXX XXXX. XX% margin, with

leverage and additional decrease synergies. incremental We through XXX operating on expect also expenses approximately to XXX to cost sales points basis

in To as which, $XX EBITDA, is is million $XX million for expense, expense the for range of approximately assist expected million XXXX, be XXXX. to $XX reiterate the compared you $XX million. with outlook of range full modeling year depreciation compensation million we in $XX to our in Stock-based to to the

and $X income operating for interest the million other Below is line, expectation our per quarter. approximately

EBITDA of over We be expansion of the be year, margin for year margin higher the XXX course prior over to we to year the synergies. expect of year the half basis slightly adjusted fairly full improvement with the points consistent as in annualized first

occurred cash QX QX annual outflows still relative the an merger-related we improvement payment that And to finally, in and for in quarter. anticipate cash, the net bonus the to in due first of costs

the second leverage base with revenue, of and towards the The as efficiencies. fourth half up inventory year progress and will quarter ramp breakeven, fixed expense positive cash our improve flow for DSO we

turn to comments. Massimo some for closing now call the over I'll

emphasizing Orthofix enthusiasm in and team. be close my I'll confidence reiterating by the to today's call business the part of my

the have XXXX, driving to keep We a fundamentals, shareholders, best-in-class exceptional is delivering our solid portfolio Throughout commitments customers driving employees and that on performance. we new above-market company heights. and will to patients,

for the worldwide open this of of Before ahead for mission. employees excited very our and for I'm dedication I next to would At us. off, chapter like will also we their point, line Orthofix we all its thank questions. send the to

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

Can you me hear okay?

Yes.

Maybe I to the to question but make in just the guidance year momentum. you're to here your is here, million early sense maybe to million hate seeing $X and $X in sure midpoint about anything and different midpoint not first for million versus want I XQ. million year nitpick conservatism, it's appreciate tempered the I -- to I but up $X XQ $X the

we We enthusiasm. would are the again, not in that's nothing place, -- confident we're momentum. But -- wouldn't year. team our anything new we in we're want a that early it's and management tempering delivering. what temper our seeing No, in Yes. We're

maybe X first Great. question. have Some I the XXXX? And -- fewer That's of versus figured. then selling day peers your what just a housekeeping have. Did in you quarter day

just calendar. So your I'm curious about

No, we did not.

No, okay.

it. sort alluded distributors. of metric new I then gave you were And firmer and but sales I of question X% -- maybe quarter, a Julie, fourth numbers, that hoping the guess you to from in was get to great Okay. my some last

continued. also update And any you I'll your growth number is this leave same-store of give to way sort accounts? you And that chance at last not may have appreciate sales higher? of number any there mentioned us Any similar I but quarter or to that. can You that it at kind for hand,

Okay. I'll in say in doubled. that said the it the revenue from new distributors, prepared I remarks nearly

And you. So ready to release front X% sales you have if same-store then can I the that the we at to Thank interpret that nearly release doubling. think me, of but or in want not. from about we'll -- don't

of line next comes the from Your Zimmerman BTIG. Ryan question of

on for Izzy is This Ryan.

So just could in, like the quarter. time? you with drive line on margins, see it higher them that could just looks were We wondering guys this gross you in estimates off what over first came our

yes. So

So over in XX% year. line -- year, our this that mean, be I with said we've last margins would

we I gross opportunity look but future, into guidance margin issued do long-range an we we think the it, line. as on in see have the

there's think things I our supplier on. that footprint leveraging synergies with types looking rationalization, those of we're and

bone then next, some are it like here. the And stim, Great. pretty looks you strong on guys growth seeing

not market what do you wondering maybe as fast? growth growing maintain this in a can Just to that's

Yes, potential. foreseeable future Look, for it's great see question. an we the excellent

as what we we said our -- acquisition. from SeaSpine are leveraging during from in remarks, the right surgeons coming we the can all of given as Just but now much new

but the I strong domain, it's confine our said, grows quarters. that business see as we for next you few true in said, market if the market rates, So our the as potential,

try as this will we can. as much to we potential So maximize

comes question of MKM. line Wittes of next from the ROTH Your Jason

something mentioned pretty the rest for this growth Spine it's comment that sort continue kind of what we saw expect has going other to businesses? Orthopedics, to that are I the the year? nice, we for you rates of mean, trends Just the for The Global Or could been on of on quarter, growth vary. is remaining the you

about feel rate we confident growth right are now. pretty the achieving Look, Yes. that we

get As earlier, we from allow couple And if achieve a One, partners. coming The and are have pretty partner. identified pick interest we inbound us remarkable us. new growth growth, on said of we profitable right has of for distributors new of these so we getting we all clearly cost really lot of us. remember, are choose been drivers we a can and right that -- surgeons. Because for to are amount fully focused the the this and

in token, seeing further utilization the same On of with our investment are we innovation, product. a our

So a case. revenue per very healthy increase on

all of the that So to future. we say this strong for a foreseeable see business very fundamental

should cash Okay. cash And from assume the flow sort Or be on? you in the go seasonality flow impact will there going I that? sustainable. quarters QX. flow the And Or generation? then will you positive outlook of mentioned forward, that's cash for what's positive

on guidance yes. formal a But, that issue for do and XXXX, so We'll Yes. later year. this we'll

Ladenburg from question Jeff Your of next comes line the Cohen Thalmann. of

that's I bit call you about fresh on And So there some surgeons? you docs, I in those well? channels. a you if little as the focus hear talk and AccelStim bit docs market are fractures, of out pain could did of the channels, focused some still of and in some about Is a wondered those on some talk fracture

now, side. keep think we Right on leveraging that I network the our are surgeon

that fresh the fracture, and of helping care have continuum are address products the at end, in fracture, So to us we X malunion.

plus find to existing keep synergies the on side. distributor distributors, the driving product orthopedic with portfolio using our try that we working So

defined on is surgeon market now our the piece. So right

larger, feet if this aggregate of us balance bit you And a anticipate decrease? you number then that the then as as dedicated the actual it. a you could the the of year, far Got little give sense ground. Okay. on numbers distributors could more will And about distributors talk over

you among that distributors think increasing are the like I on all the that don't we top specific tell Yes. we like positive keep distributor general. seeing give our to and in detail side, I that about can us. their loyalty What is

of distributor we're us. the at given are say, seeing is the especially moment have let's So on everything the to to in I Spine, becoming our depth top -- portfolio, exclusive our shifting -- think

I -- keep products. with is to forward compliance help our and going -- think So going and to going this to focus one driving is us drive

high what said, we directionally, don't specific is as right tell give So we that, I the now. that number. can a quality you are I revenue of But seeing pretty

concludes call. session, this conference Q&A That today's concludes our and

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