Orthofix Medical (OFIX) 6 Aug 242024 Q2 Earnings call transcript

Thank you for standing by. My name is Krista, and I will be your conference operator today. At this time, I would like to welcome everyone to the Orthofix Medical Second Quarter 2024 Earnings Conference Call. [Operator Instructions] I will now turn the conference over to Julie Dewey. Julie, the floor is yours.

good and operator, you, morning, everyone. Thank the to Orthofix Second Call. Earnings XXXX Quarter Welcome joining appreciate us. We you Dewey, Chief Julie I'm Orthofix's Officer. IR and Communications

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

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

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

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

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

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

we the longer therefore, have pro As as of call, referring SeaSpine merger first will, be growth. noted in impact no and the annualized a to quarter reminder, the forma

on be in refer results will prepared basis. adjusted operations our that comments a all of non-GAAP we addition, to as In

now Massimo. call that, over turn With to I'll the

some time have Thank you, thank the board turn Julie, our and us. Andrews, with before welcome you to results morning, of spend second providing and our initiatives, over other us I Julie quarter I'll to Good it about team. joining CFO, for and and for to revised you key on Glad earnings call. to our the updates specifics business information cover QX guidance. everyone,

Orthofix had above-market quarter, second a strong portfolio. across delivering virtually entire growth the

my continues fundamentals to I after business plan. team in that can quarters the are X Our excellent. execute And role, confidently say to very

continue considerable this to and leveraging earlier cash strategic our have than paving second year. the momentum the positive half way of we for have cash made much usage, advantages, free We the expected flow progress for in

come growth as XXXX basis. was of or Orthopedics. penetration X% as continued Therapy by Spine in by Bone was market in $XXX.X representing to operationally primarily businesses, Both BGT Growth and our first in pleased on U.S. I'm and a commercially, our and currency encouraged strength Growth well and revenue half million, U.S. Net led constant the year-over-year the for what's remainder beyond. of performance with second quarter

were and grew fixation cross-selling in XX%, from efforts are Orthopedic Spine benefited with and Spine and Implant quarter. share have twice And our rate. the business. BGT increased Fractures capturing U.S. we market more the than every markets from spots again, Spinal market team bright once

products lumbar interbody X a proprietary release patient's fusion limited began interbody we Orthofix for and tiring expand It our address new portfolio market quarter, anatomy. second features of surface the to technologies During advanced designs.

also properties bone-on Our new growth. Lateral Interbody of favorable supporting Reef mechanical PEEK to imaging L while designed the Lumbar maintain is and

expanded to the to with options in augments on launch last best-in-class U.S. Meridian deformity XXX(k) in market has solutions further clearances Fusion we additional technology X% pair U.S. the Orthopedics nail million bolstering the grew further in for $XXX year's reconstruction include competitive been Reef-L that preferences. portfolio received surgeon Interbody surface successful Importantly, our the procedures. XD-printed Building Lengthening position ALIF our Transport Lateral WaveForm used limb our and majority vast and comprehensive correction the and new System, FITBONE of and address portfolio FITBONE trochanteric

year, a are growth, profitable as committed key which and In XXXX. We outlined approach platforms. for to our priorities key remain balanced both on a in products, I've that We in benefiting decisions strategic and expect including from synergistic limited we're product these to market and the these calls, are QX portfolio of a innovation release prior result. we to focusing launch made and this efforts

relating In to commercial highlights to like expanded merger the and integration successes call addition innovation I'd to leadership team, those opportunities milestones. some out across priorities,

the long-term mid-August. tasks we on of am One finalized executing taking leadership capable latest team vision for shaping my of addition recreate of report business a first role who leadership executive value team, was to class a the start I pleased have will with to a in in orthotics. creation Orthopedics this of that and for leader successfully seasoned culture world on team a our

more of Collectively, the a company's of have our that is prioritizing full blend are than XXX poised now achieve now August on leaders Spine on the of and experience and few respective this believe initiatives, of plan than in and business together long-range markets. team strategies will unlock bringing future commitments we ready We team's forward. to Orthopedics fuel our this, our we profitable The initiatives the ever, each new to on propel profitable align of fuel at deliver talent further specific cross-functional will years has tenured and be vital I To and growth. And define impactful potential end most in to our focus space. to the growth. more a the group

with you and our on quarter in targets share We earnings plan financial intermediate as longer-term our strategy to call our to well third goals November.

that key milestones at post-merger, say SeaSpine to gone milestone to recent reaching and well, with has complete of relates achievement the cultural the other the an including it system As SeaSpine. ERP implementation exceedingly perspective, successful from integration operational to I'm pleased key

are for efficiencies growth strategy our laying key strategy more components: the foundation portfolio; to system engagement Flash X loyalty. and At drive above-market accounts; innovation includes taking and XD with of existing two, portfolio improve product a sustainable to across our outcomes our brand commercial level, drive deeper access three, commercial and surgeon to focused this navigation across patients We for surgeon one, going points leveraging into high our meaningful a build multiple and advantage customers.

these next the detail. minutes each of in spend more covering few now I'll

product recent serve SeaSpine which hardware, believe following over merger, we of surgeons' with well enabling the the are First, launches, and biologic we technologies. a spinal product comprehensive positioned needs, XX% includes portfolio, to spine

We to also with us believe stickier relationships, attract expect distributor lift our exclusive and pull-through will result product that ASP well surgeons in relationships we enable sales a benefits. from an as incremental talent, to comprehensive and which hospital increase portfolio, cadence of top steady innovation drive accounts, mix

offering above to business multiple of Second, paths rates. the the sustained market breadth and Orthofix Spine provides and grow the and depth Orthopedic

products taking into For hardware, to our Spine navigations customers. opportunities of sell advantage BGT our example, are cross-selling biologics spinal already BGT introducing well SeaSpine and as we accounts, as to

structure through We our also our have additional channel. simulation and products, opportunities Orthopedics biologics with

Flash drive opportunity XD and Finally, interest system portfolio. that unique Orthofix hospital surgeons navigation broader in believe our represents to we a account the

commercial As quarter, has as Spine portfolio announced to will across positioned our such structure have reorganized of of navigation successive growth parts our innovation last by leadership XD commercial This team. fixation. be we the as Flash our asset XD our an Spine evidenced that under drive

Navigation, more radiation free. image efficient the first XD system, continues making faster, As it world and machine surgical revolutionize to vision Spinal

surgeons, capability surgeries. a in key of or minutes mind open in especially no total interventions, is systems XD mere XX proving still radiation current as driver of technology approximately the penetration. competitive compelling registration With for those intraoperative open performing positioning represents incremental that XX% for XD Spine more procedure Keep and surgery versus requiring navigated seconds to

believe also a in interest with is and relative us efficient pricing. small surgery into positioned workflow The for for have settings. ASC, moving since well We to slowly XD is procedure ambulatory some of been the footprint, the ASC surgery spine market center the procedures MIS XD system

still stage, in able have to few where accounts a the some a with we've DASC, early been system. very we in Although gain XD initial placed experience

ever With than the evolution more of significant our XD portfolio. strategy, in its we in our role are confident increasingly

innovation across all alongside software shift allow our launch impactful our product integration pipeline as products franchises. the team enabling and drive technologies the enhance Additionally, we to will R&D

system. combination We through the of to are opportunity motivated highly technology our our ourselves enabling differentiate platform the hardware portfolio with by

with them OR. approach a patients to focus, and and navigation product surgeons continue have in Our will provide we the to become the unique

improve such on and a our Overall, great correction. recent several market and and successes in deliver differentiated our complex reconstruction product orthopedic innovation customers. Growth capitalize Orthofix launch is market-leading to surgeon products as Therapies, Bone efficiencies and leaders patients have outcomes the and We remain in comprehensive a in biologic for the portfolio to position meaningful trauma specialized deformity markets,

and fully we and compelling expanding ahead. and to product our on raising and are the share full highly I'm guidance. remain in quarter the net and momentum, continues broadened trends, differentiated opportunities In second pleased is differentiated positive our our sales with optimistic and our strength portfolio Based adjusted our Spine of growth enabling confidence portfolio, by about EBITDA supported technology. continued the sustainable Additionally, which year win best-in-class performance summary,

flow positioned second of originally our half a beyond. we are clear well cash year, And With mentioned I to we believe sight, track than positive as earlier, earlier the to line of for achieve anticipated. this are objectives and free achieve I this on year we much

not will patients XXXX Orthofix. shareholders. deliver productive customers, I'm strategic for a up operational second of the forward half and execution, what's letting to are for on long-term come it efficiencies take to and and value looking We to

results that, over guidance. to quarter now With to updated I second the our financial and review Julie, turn call

good line $XXX.X sales million a and EBITDA growth second XXX Orthofix expansion Thank currency company you, morning, basis or Massimo, total had everyone. delivering margin approximately strong adjusted of top and constant points. net X% quarter, of

QX Bone For for Growth go quarter driven both grew Fracture full and an $XX.X year as growth the and for results in of and our the review my for by of XXXX. commentary, franchise. guidance as the the well units the This update growth double-digit our above-market Therapies consecutive to sixth BGT financial each revenue marked channel. in to million quarter XX% I'll business provide performance through Spine was

market, of from coming growth continue new market share customer more with the the In the #X XX% hold share take where BGT acquisitions. to position, we Spine we than

Growth Bone addition, device In Therapy outperform Fracture AccelStim investments market in drove channel XX% with sales Fracture in market. the continuing growth to the the

As market. position we very the of market more than building Fracture represents million, in a $XXX early an in innings that the opportunity reminder, still our and are of

quarter deeper implants, penetration existing Biologics well with customer of of Spine Spinal was X%. and and Enabling driven above Technologies, rates, market by second revenue year-over-year base. Fixation growth $XXX.X growth Global revenue XX%, expansion our grew U.S. of accounts million,

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

X% Gemini well Global line The U.S. extension growth rates. particularly expect system. The sales and grew this distributor quarter-to-quarter portfolio in second recent quarter, by the in International timing strong our of from as business to variability due Due in X% and our expansion as grew stocking performance growth investment. Fixation of across volume to the distributor a business of result business, the in Orthopedics channel the versus to X% prior the Galaxy we as orders, see primarily led around nature year

effective to below on the for the to was QX marketing a decrease realization non-GAAP second margins, by product to for commission synergies XXXX. which quarter in gross Starting lower rate of compared and were cost primarily expenses sales the some the as to our Non-GAAP XXXX. net compared The QX sales due percent line. were with XX% of XX.X% Moving of detail XX% adjusted driven XX.X%, for QX sales sales and net sales of quarter mix. a

sales a for research and relatively at other Below QX, primarily sales percent for cost by prior reduction the non-GAAP general in expenses synergies Non-GAAP sales the same interest million the as net X% were was and development Non-GAAP of The to decrease quarter expenses and net was a XX% expense administrative were of the in quarter. compensation. driven and $X.X income of XX% impact year. line, quarter. compared of stock-based flat the for operating

XX% resulted basis this XXXX, or merger-related of leverage expansion adjusted over sales X.X% capture of for we to sales a remain encouraged growth and and due merger-related synergies materialize. non-GAAP growth. of incremental driving in This are quarter, our point Altogether, sales these We synergies XXX on drive of the EBITDA the QX represented net the $XX.X to a seeing revenue ability by on dollars. drop-through impact leverage million results as on

standpoint, cash at approximately the QX million. restricted cash total of balance, a was including From $XX.X our cash end

utilization. merger-related cash as XXXX. was bonus result Our over quarter, free This the for over a flow of free the in payments, $XX improvements payment flow was the first well cash as approximately retention in this usage Adjusting DSO inventory higher and significant quarter QX $XXX,XXX onetime improvement annual EBITDA improved year. of million and a

in synergies million Overall, we of our ability and to continue drive revenue second our in million are with to results, growth $XX quarter years our confident pleased synergies be achieved merger. have in ability post X are moving to close date to $XX and in forward. achieve confident the We we annualized profitable

to guidance. on year full Moving XXXX

constant range growth of note, $XXX year Massimo compared guidance growth. a on occur previous current account are net million sales to our do to may X.X% million, guidance or are rates basis XXXX. to based Please foreign implied to for stated, million X% our changes As million and rate through that and for of $XXX X% between not X.X% increasing exchange expectations $XXX year-over-year we to representing $XXX our full on currency

compared million also our increasing $XX XXXX $XX full our $XX are guidance non-GAAP EBITDA of million. million, to million adjusted year to $XX to previous We to

our management, to DSO instrument utilization are and specifically Finally, we continuing focus and improving capital on working our inventory efficiency.

flow as we synergies, anticipated. these free half than merger-related of to With second the of efforts earlier positive we as had now cash in well continued expect cost XXXX, be originally execution

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

to in net closed guidance of disruption the day additional of we quarter selling in QX expect range sales and year end due the at versus high be the one the We growth prior impact to the as XXXX. XXXX

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

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

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

Our quarter. expectation is approximately interest for per $X and million other

the the QX year, of expected margin bulk approximately expansion We expect the of half EBITDA XXX half QX. annualize improvement second XXXX. be adjusted the for basis we adjusted margin in the over to of less of margin be year EBITDA in with than first full points is synergies year prior as lower in expansion slightly to XXXX

back Now turn up let we for before comments. Massimo the questions, open me to Massimo? for call concluding it

leadership continue now it full growth our drive Thanks, executing very shareholder Julie. have express QX. efforts team we my instrumental is With team closing, the I'm profitable progress entire I proud In appreciation performance our commitments, for and time our sustained contribution for driving want to has and us in Their of made. value. expand to their the been in to our place, Orthofix in against

I'm to us and come. we excited encouraged have an The mindset have what by what's we to are fundamentals for carry forward. achieved innovative strong, and

questions. open line let's for Operator, now the

from question with [Operator first Instructions] Mathew Your Blackman Stifel. comes

a you, Julie, couple Julie precise. I've be got Andrews, for to

how little You talked those there more the of about to opportunity to much others? levers in important, comments, a maybe And get your faster more little expected? pull the but bit or positive it cash a can more end at talk levers about than may you you be bit flow

Should maybe positive flow in that and XQ 'XX, expect cash in out? exception from of in XQ some, here, here clarification flow or spend on half it and seasonally free the heaviest we cash XQ guide. stay the flow maybe the free then free just I'll then cash second should And just out just throw with positive some in

Thanks, Okay. Matt.

start one Those the well. there as well I'll driver So with capital main improved improvement, the well first working had the cash your free and was we seeing drivers through as we're question, really EBITDA that flow saw within the utilization DSO a usage our improvement and drop improvement as quarter. were efficiency as on with inventory as good

with still adjusted do see increases that opportunity is opportunity still flow there EBITDA line do then DSO that there And inventory half and within a that's think we what's conversion we'll well. as driving positive. the good year, cash our free back as opportunity the to with that of think our there. course, within, being outlook really We there's less on of efficiency, kind of cash that some but And

and not guiding half we positive. the year. individually -- free back QX are of QX We are, being cash but full to flow the QX, back

-- that flow cash then it won't we mean positive be for Yes. quarter. second believe will sustainability. XXXX, your And every be free yes, question we I

payments wouldn't free expect that and -- As that we won't be a you positive. flow mentioned, be seasonal to QX cash has make, that we

And follow-up question. do me Julie -- one Okay. if you allow

implied does as and Or maybe the the is go something XXXX? drop-through, of of a these how it of Julie thinking something think that be should initiatives? XX%, Andrews some annualize some than Is beyond synergies initial you that about as drop-through cost for neighborhood. rule again. thumb lower in half and I -- in that we like you, The I is second implied the this think,

would Yes. We in I mean, our to annualize generally, XX%, the over as range time. XX% won't we maintain expect range be XX% synergies. the we

specifically given We numbers. haven't

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

guys. products, on Congrats this I want the progress I questions to quarter, if on may. ask all X

tech, and look Biologics. of spend a wondering could overall growth, is you as tech demand? little growth on to pipeline the Massimo, segment? that. in relative biologics of color on the Spine XD enabling to enabling And up a how going I at I'm on hardware, if see bit First, commentary the just kind I shaping then the particularly that hardware, tech? And forward, think contribution the of to in that I do on that enabling after of you that segment in how Stim terms question about the What appreciate kind have for

to our question. interest Yes. great as multiple are by as We lot team you really believe machine a around focused of growth that discussed XD there drive see on going to said growth. a creates efforts we is that this sustainable unique the a start more is that us a a sustainable on a replacement on and utilization because the earn-out. fundamental OR. in strong lot on can differentiable right for of for focus pretty higher there creating multiple was create putting the out a -- and we XD times, and -- XD Actually, we more be There creating implant that Look, of earn-outs experience now is because technology times,

are on about let's company same the can investment more to XD. what from R&D translate we very focused believe machine going be that it's There's of we around perspective, vision. do excited have for And because surgeon add technology given that bringing to 'XX us translating the board. and proprietary can other piece no can beyond, on we with say, a our and time, this on very, is At going we all the

system on development add to great navigation So become focus XD, creating alternative focus system earn-out not an on opportunities in there. robotic but brief, to to again, great out there on just a also out

Okay.

Stim. question on Next

of continued myself, do very much impressive. I I can from the Where business. SeaSpine but imagine, more should in in that legacy you at continue double-digits, cross-selling that think, the SeaSpine from from bone you're is how not everyone You a Stim. penetration? that surprise row, would particularly on a success base? mean, in think Part your I you just into X -- customer in benefit quarters of to, you Stim terms cross-selling, legacy benefit,

is worry some at -- not this growing a that again, but digits, maybe single market growth I not worry, you may And if point, that's low I that, slow. guys, maybe

me your of help so understand do think mind in you And how kind continue? tailwinds these long can

it's ourselves. because question we great a a is ask this that question Yes, of

now, you see we So of with merger are at our SeaSpine. right like that the can infancy

future, keep seeing I point the as within that the cross-selling for segment, you is opportunity that synergistic foreseeable that on bringing same. think approach to given So leverage, our up are said, we the the we the call

in Over of slowdown, But said time, the at as given rates we're growth merger. let's to I above market, the of going think a our slowdown say, rates. to, see that dominance a before, the or still natural our market infancy are market we

that still and think there you're let's I the room I to now. of seeing leverage you're think to synergies, with eyes. right say, seeing the synergies that again, So set is But drive still, right drive

Instructions] next Jason question with from ROTH [Operator MKM. Wittes Your comes

MIS should on work and right From Maybe growth XD. your placements of MIS a quick think the the how are of applications? percutaneous XD, focused sort just most is surgical follow-up Is about procedures that in and a for still commentary, interpretation? it open especially like Or we sounds or on progress.

I've on the at we said the Jason, be, can is, where easily time as before, used the remarks, are procedure. Yes, setting, ASC also where say, thank MIS we in I like expecting a see end, going the to said let's that is machine that over -- one to switch are question. be given poised you my Look, XD we the on footprint, the for

that to MIS market. see a there the the in now, all comparable as system for is out So right of XD you need system to

connection an to the that the on we in at the between we for modules Of the and given the art. course, a we hardware to want MIS, of our open level, not on specific tighter investing hardware procedure. if believe we MIS software, you on let's see But on that about are XD that XD say, XD, same investment talk side, specific MIS open bring specific create as is -- and the they're of again, market, of state procedure the going because

you right it So by over MIS, others. to that the well do over have for procedure, now, given we that performance our as time, can said again, system we're work as before, time, But believe make I there. competitors we for the going open as state-of-the-art even MIS capability out

related very and then go I was somewhat you selective That on until helpful. my pretty going flow distribution, careful ads? with happened distribution. guess read this X was breakeven, that what's give force update us you your can that. And in cash to in think, quarter sales at be questions Okay. terms on I least that an of to to you're terms One, of

more increase like secondly, then happening which improves, sounds pace, cash the it's be right the aggressive faster a am there assume to certainly I at in a position when force. that And may sales

to great commercial is our is spend. strategy ability the change, We to not specifics This dependent going our is question. is -- give is today. network can look, to What our tell about distribution commercial is network on not don't philosophy how about distribution -- that, our a you be going I

growth find we the sake I I think our and to leader create to growth. sustainable just of force times, we growth, for will said that want commercial not multiple

we're very are proud but to is has to of that the how we be end quality what of much this we're a EBITDA bringing now our on quarter saw growing, revenue made organization. ability not just how very you is the Look, dogmatic pull-through function right At the the that of doing. me

if accelerated partner want the us, being growing on trade focused to is So going above in profitability a to to stay revenue let's is rate this and to going that say, going EBITDA find. market always make, future, you that see keep best that can is imagine it's decrease we us to company on focusing you going if the is to

ability we the Because best at just And the assets we also that we do it's the commercial growth rate, in if as a the day, of partner. our possible. have utilize way have end success but that not to very good can

our Julie And now that concludes over the I back turn Dewey. conference session. will question-and-answer to

appreciate This call. We look you forward all you. Thank now of our to you talking quarter. with us, joining we concludes and next