NASDAQ:OFIX Orthofix Medical Q1 2024 Earnings Report $13.79 +0.24 (+1.77%) Closing price 05/2/2025 04:00 PM EasternExtended Trading$13.79 0.00 (0.00%) As of 05/2/2025 04:52 PM Eastern Extended trading is trading that happens on electronic markets outside of regular trading hours. This is a fair market value extended hours price provided by Polygon.io. Learn more. Earnings HistoryForecast Orthofix Medical EPS ResultsActual EPS-$0.95Consensus EPS -$0.54Beat/MissMissed by -$0.41One Year Ago EPSN/AOrthofix Medical Revenue ResultsActual Revenue$188.61 millionExpected Revenue$183.40 millionBeat/MissBeat by +$5.21 millionYoY Revenue GrowthN/AOrthofix Medical Announcement DetailsQuarterQ1 2024Date5/7/2024TimeN/AConference Call DateTuesday, May 7, 2024Conference Call Time8:30AM ETUpcoming EarningsOrthofix Medical's Q1 2025 earnings is scheduled for Tuesday, May 6, 2025, with a conference call scheduled at 8:30 AM ET. Check back for transcripts, audio, and key financial metrics as they become available.Q1 2025 Earnings ReportConference Call ResourcesConference Call AudioConference Call TranscriptSlide DeckPress Release (8-K)Quarterly Report (10-Q)Earnings HistoryCompany ProfileSlide DeckFull Screen Slide DeckPowered by Orthofix Medical Q1 2024 Earnings Call TranscriptProvided by QuartrMay 7, 2024 ShareLink copied to clipboard.There are 7 speakers on the call. Operator00:00:00Thank you for standing by. My name is JL, and I will be your conference operator today. At this time, I would like to welcome everyone to the Orthofix Q1 2024 Earnings Call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question and answer I would now like to turn the conference over to Louisa Smith. Operator00:00:27You may begin. Speaker 100:00:29Good morning, everyone. Welcome to the Orthofix First Quarter 2024 Earnings Call. Joining me on the call today are President and Chief Executive Officer, Massimo Calafiore and Chief Financial Officer, Julie Andrews. During this call, we will be making forward looking statements that involve risks and uncertainties. All statements other than those of historical facts are forward looking statements, including any earnings guidance we provide and any statements about our plans, beliefs, strategies, expectations, goals or objectives. Speaker 100:01:06Investors are cautioned not to place undue reliance on such forward looking statements as there is no assurance that the matter contained in such statements will occur. The forward looking statements we will make on today's call are based on our beliefs and expectations as of today, May 7, 2024. We do not undertake any obligation to revise or update such forward looking statements. Some factors that could cause actual results to materially differ from the forward looking statements made by us on the call include the risk factors disclosed under the heading Risk Factors in our Form 10 Q filed this morning, May 7, 2024, as well as on additional SEC filings we make in the future. In addition, on today's call, we will refer to various non GAAP financial measures. Speaker 100:01:56We believe that in order to properly understand our short term and long term financial trends, investors may wish to review these matters as a supplement to the financial measures determined in accordance with U. S. GAAP. Please refer to today's press release announcing our Q1 2024 results for reconciliations of these non GAAP financial measures to our U. S. Speaker 100:02:19GAAP financial results. At this point, I will Speaker 200:02:22turn the call over to Massimo. Thank you, Luisa, and Speaker 300:02:27thank you, everyone, for joining us this morning for our Q1 earnings call. I'll spend some time providing insight into our higher leverage strategy as well as updates on some key priorities and initiatives before I turn it over to Julie for further details on our quarterly performance and financial results. I'm pleased to report another strong quarter for Orthofix, driven by healthy business fundamentals and exceptional operating performance of our teams. We continue to gain momentum and leveraging strategic initiatives to grow Orthofix across all our business segments. Net revenue for the Q1 was €139,000,000 representing a 7.5% year over year increase in constant currency, led primarily by 10% growth across our USA businesses. Speaker 300:03:36The strength in USA performance was driven by 10% growth in BGT, 16% growth in spine fixation and 23% growth in orthopedics. We are clearly outpacing market growth in all of these segments. We are delivering innovative products and outstanding service while executing to plan and taking advantage of emerging opportunities. I remain very confident in our future and the prospect to deliver value moving forward. To reiterate some of the 2024 priorities that we laid out in our Q4 call, we are diligently focused on: 1, profitable growth 2, emphasizing a synergistic and balanced approach to our portfolio platforms and 3, strategic innovation. Speaker 300:04:37We remain committed to delivering across all three in the near term and are already seeing pull through in our results. Our first priority is to grow the business and grow it profitably. Julie will discuss the specific metrics later, but I'm happy to report that in the Q1, we saw an improvement on more than 200 basis points in our adjusted EBITDA margin as a result of strong top line growth and the realization of synergies. We will sustain this momentum by spending existing customers and distributor relationships, optimizing our product portfolio and improving our working capital management. In the Q1, revenues benefited from continued PGT cross selling within the spine channel. Speaker 300:05:35In USA Spine Fixation, we saw increases in average price per procedure as we broadened the use of interbody and thoracolumbar products across our surgeon customer base as well as through significant contribution from new distributor partnership. We are penetrating deeper into existing accounts with our procedural solutions, while expanding our distribution network. In addition, we are maximizing the robust portfolio of the combined company by focusing on our higher margin products and rationalizing any overlap. This product lifecycle management will not only reduce cost by simplifying our supply chain, but enable us to direct resources and investment towards the expansion of new and innovative product lines. Furthermore, this strategy improves our working capital by lowering the number of products and SKUs we carry. Speaker 300:06:46We are efficiently allocating the recent investment in paneling plant instrument set to our larger, more dedicated distributors, which will improve inventory and instrument utilization. And finally, we see further opportunities to improve cash flow by focusing on DSO efficiencies and accelerating cash collection. As a result of these initiatives, we expect to be cash flow positive in the Q4 of 2024. Moving now to our second priority, which is to leverage our technologies and sales channels across all product segments. Our products work together to create a best in class offering, each improving the performance of the other and enabling growth through cross selling opportunities. Speaker 300:07:43We are seeing traction across our commercial infrastructure with increasing interest in what we are building, allowing us the opportunity to be selective in our choice of distribution partners. Additionally, the team is aligned on driving pull through revenue across spine, orthopedics, biologics and BGT. We are seeing market share gains in complementary areas of the portfolio where our offerings are able to support the outcomes of the more complex product lines in Orthopaedics and Spine. For example, we just completed the 100,000 implementation of our strength family of demineralized bond fibers. These strand fibers are designed to enable maximum bond forming capacity and fusion potential. Speaker 300:08:42The alignment of BGT enabling technology, biological selling opportunities highlights the complementary nature of our offering as a whole. A key part of Orthofix success and our strong performance to date are the committed employees and leadership team that we have in place. Since beginning my role at the company, we have made a few changes to certain roles, expanded others and finalized some key hires that will set us up for the future with an eye towards efficiently managing our product portfolios. For example, I would like to highlight the recent promotion of Doctor. Paul Standish to Chief Enabling Technology Officer. Speaker 300:09:33In this expanded role, Bob will oversee strategy development, the implementation of software and corresponding hardware across all our product portfolio, reinforcing our commitment to drive synergies throughout the business. Enabling technology has been a key differentiator for Orthofix. Our investments in the 7 d flash navigation have established Orsofix as the partner of choice for surgeons seeking innovative data driven intraoperative solution with improved workflow. With this new role, we will leverage our combined intellectual capital, a comprehensive suite of software and hardware products to support both spine and orthopedic surgeons throughout the continuum of care. This begins with pre operative planning using our orthopedics planning platform, OrthoMed. Speaker 300:10:37Continuous with real time operating room navigation and guidance through 7dflash navigation and extend to post operative care with our bone growth stimulator devices. Our award winning patient engagement app SteamOnTrak supports patient compliance and tracks patient reported outcome. By expanding the capabilities of our existing technology platforms across all our businesses, we will accelerate growth in high value procedures and drive significant gains in market share. This investment in enabling technologies are also consistent with our 3rd priority, our commitment to Orthofix innovation engine. We have several promising products in development and a robust pipeline of upcoming launches. Speaker 300:11:35We are investing in markets with a higher return potential, especially where Orthofix has the opportunity to establish itself as a leading player over there remain significant untapped needs. For example, we are just beginning to expand into the USA orthopedics market, which presents incredible growth opportunities given our unique and innovative product lines. Our focus in Orthopaedics, providing highly specialized solutions for underserved markets, is underscored by 2 recent 510 clearances. Speaker 400:12:17For the Speaker 300:12:18rhodiotelascopic intramedullary nail and for the 5th bone of bone transport lengthening nail. It is the only commercially available nail capable of both transport lengthening and the only bone transport nail available in the U. S. We will be launching both of these products through limited USA market releases in the coming months. These achievements demonstrate our ability to deliver innovative products in the United States orthopedics market and reflect our current focus on strategic innovation across complex limb reconstruction and deformity correction. Speaker 300:13:04In our spine portfolio, we are continuing to validate our MIS anterolateral portfolio integrating novel access solutions with our differentiated hardware and biologics. This is just one of many procedural integration in the works to advance patient care and improve the surgeon experience with state of the art enabling technology in 2017. Our goal is to be the trusted partner for surgeons in spine and orthopedics, providing solutions for the most complex cases through our unique complementary product platform. All in all, I'm very pleased with our performance during my Q1 on the job. I remain encouraged by the prospect for Orthofix and inspired by a team that is embracing a relentless focus on execution and innovation. Speaker 300:14:13As a result of that confidence, we are narrowing our full year 2024 revenue guidance and raising the bottom end of the range by €5,000,000,000 We now expect 2024 revenues to be between €790,000,000 to €795,000,000 as compared to the prior guidance of $7.35,000,000 to $795,000,000 and 5% to 7% growth. The merger thesis and the fundamental strategy across spine Orthopaedics, Biologics and BGTE remains compelling. We are growing the company in a measured and strategic manner to reach profitability and we are creating value for our customers, patients and shareholders. I truly believe the best is yet to come. With that, I'll now turn the call over to Tulli to review our Q1 financial results. Speaker 100:15:22Before I begin, I'd like to remind you to please refer to our press release published earlier today for information regarding our non GAAP results, including our reconciliation of these results to our GAAP results. Additionally, all revenue percentage changes discussed will be on a constant currency year over year basis. As of this quarter, we have annualized the impact of the merger and will no longer be referring to pro form a growth. In addition, all results of operations that I referred to in my prepared comments will be on a non GAAP as adjusted basis. As Massimo noted, Orthofix had a strong first quarter delivering 7.5% constant currency top line growth and EBITDA margin expansion of approximately 220 basis points. Speaker 100:16:12For my commentary, I'll go through each of our business units and review financial results on the quarter as well as provide an update to our guidance for the full year 2024. Total company net sales were $188,600,000 for the Q1 of 2024, up 7.5% over prior year. Bone Growth Therapies revenue grew 10 percent to $52,500,000 in Q1 and marks the 5th consecutive quarter of double digit growth for the BGT franchise. This growth was driven by above market performance in both the spine and fracture channel. In the spine market, where we hold the number one market share position, we continue to take share with more than 50% of the growth coming from new customer acquisitions. Speaker 100:17:02In addition, investments in the fracture market sales channel drove 16.8% growth in fracture with AccelStim continuing to outperform the market. As a reminder, the fracture market represents an opportunity of more than $200,000,000 and we are just beginning to scratch the surface of our potential in that market. Global spinal implants, biologics and enabling technologies 1st quarter revenue was $108,800,000 with year over year growth of 7.2%. U. S. Speaker 100:17:36Spine fixation revenue grew 16.1%, well above market growth rates driven by contributions from new distributor partners where we saw revenue nearly double from Q4 2023 and deeper penetration of existing accounts with increases to the average revenue per procedure. Additionally, in the biologics business, we saw a positive impact of new distributor partnerships as well as cross selling initiatives, which drove growth in line with the overall market. The global orthopedics business grew 3.8% in the first quarter, led by 22.9% growth in the U. S. As a result of strong performance across our portfolio, as well as distributor expansion and sales channel investments. Speaker 100:18:22The international business declined 2.7% versus prior year due to timing of orders from our stocking distributors. Due to the nature of this business, we expect to see variability from quarter to quarter in the growth rates. Moving on to some details below the sales line. Starting with our Q1 non GAAP adjusted gross margins, we achieved a 70.3% rate for the quarter, a decrease of approximately 40 basis points compared to Q1 2023. This reduction is primarily due to an overlap in vendors as we phased out a legacy partner and moved to a new vendor that will result in cost savings starting in Q2. Speaker 100:19:03Non GAAP sales and marketing expenses were 51.8 percent of net sales for the Q1 compared to 52.3 percent of net sales for Q1 2023. The decrease as a percent of sales was primarily driven by the realization of cost synergies and a lower effective commission rate due to product mix. Non GAAP general and administrative expenses were 13.7 percent of net sales for Q1, twenty twenty four, down from 17.8% in the same quarter prior year. The decrease as a percent of sales was primarily driven by the impact of cost synergies and a reduction in stock based compensation. Non GAAP R and D expenses were 10.2% for the quarter compared to 10.5% for the prior year quarter. Speaker 100:19:54The decrease as a percent of sales was driven by a reduction in product development spend due to project rationalization, partially offset by increased clinical spending related to EU MDR cost, which are no longer adjusted from operating results and the M6 two level study. Below the operating income line, interest expense and other was $4,500,000 for the quarter. Altogether, this resulted in non GAAP adjusted EBITDA of $7,700,000 or 4.1 percent of net sales for the quarter, a 220 basis point expansion over Q1 2023 due to the capture of merger related synergies and driving leverage on sales trends. This represented a 34% drop through on incremental revenue dollars. We remain encouraged by these results and we are seeing the impact of merger related synergies and our ability to drive leverage on sales growth materialize. Speaker 100:20:52From a cash standpoint, our total cash balance including restricted cash at the end of Q1 of approximately 29,000,000 dollars During the Q1 of 2024, we exercised our borrowing rights under our 4 year $150,000,000 financing arrangement to the delayed draw term loan of $25,000,000 which has ended of March 2024 expiration date and repaid the outstanding revolver of 15,000,000 dollars This brings the total borrowings to $125,000,000 Our free cash flow usage was $29,000,000 in the quarter, primarily as a result of annual incentive and one time merger related retention payments. Q1 will be the highest quarter of cash burn for the year. As Massimo mentioned, we are focusing on improving our working capital management, specifically our inventory and instrument utilization and DSO efficiency. With these efforts as well as continued execution of merger related cost synergies, we expect to be cash flow positive in Q4, 2024. Overall, we are pleased with our Q1 results and we continue to be confident in our ability to drive profitable revenue growth moving forward. Speaker 100:22:06Moving on to 2024 full year guidance. As Massimo stated, we are narrowing our guidance for full year net sales to range between $790,000,000 $795,000,000 representing implied growth of 67% year over year on a constant currency basis. This is in comparison to the guidance issued during our Q4 call of $785,000,000 to $795,000,000 a 5% to 7% growth. Please note our expectations are based on current foreign exchange rates and do not account for rate changes that may occur throughout 2024. Our outlook for full year 2024 non GAAP adjusted EBITDA remains at $62,000,000 to 67,000,000 And finally, we expect to be cash flow positive in the Q4 of 2024. Speaker 100:22:57While we do not provide quarterly guidance, I will give some directional commentary on the expected cadence of our business to assist you in modeling our quarterly performance. These comments remain in line with the directional remarks provided on our Q4 call in March. We expect Q2 revenues to be slightly below our full year growth guidance range due to the timing of stocking orders in 2023. Additionally, we expect Q3 to reflect the highest year over year growth due to disruption in the prior year as we close the quarter and the impact of one additional selling day in 2024 versus 2023. This extra day results in approximately 1.5% of additional growth for the quarter. Speaker 100:23:44For gross margin, we continue to expect 2024 full year gross margin to be the 71% range in line with 2023. We also expect operating expenses to decrease approximately 200 basis points to 300 basis points through leverage on incremental sales and additional cost synergies. To assist you with modeling EBITDA, we reiterate our outlook for depreciation expense, which for the full year 2024 is in the range of approximately $36,000,000 to $37,000,000 as compared to 33,000,000 in 2023. Stock based compensation expense is expected to be in the range of 30,000,000 to 32 months. Below the operating income line, our expectation for interest and other is approximately $5,000,000 per quarter. Speaker 100:24:33We expect adjusted EBITDA margin improvement of 200 basis points for the full year to be fairly consistent over the course of the year with margin expansion in the first half of the year to be slightly higher over prior year as we annualize synergies. And finally, for cash, we still anticipate an improvement in net cash outflows in Q2 relative to Q1 due to the payment of the annual bonus and merger related costs that occurred in the Q1. The second half of the year will progress towards breakeven with positive cash flow for the Q4 as we ramp up revenue, leverage our fixed expense base and improve inventory and DSO efficiencies. I'll now turn the call over to Massimo for some closing comments. Speaker 300:25:20I'll close today's call by emphasizing my confidence in the business and reiterating my enthusiasm to be part of the Orthofix team. We have solid fundamentals, exceptional employees and a best in class portfolio that is driving above market performance. Throughout 2024, we will keep delivering on our commitments to patients, customers and shareholders, driving the company to new heights. Before we set off, I would also like to thank all of our employees worldwide for their dedication to Orthofix and its mission. I'm very excited for the next chapter ahead of us. Speaker 300:26:07At this point, we will open the line for questions. Operator00:26:12Thank you. The floor is now open for questions. Your first question comes from the line of Matthew Blackman of Stifel. Your line is open. Speaker 200:26:42Good morning, everybody. Can you hear me okay? Yes. Yes. Hi, Matt. Speaker 200:26:46Great. Hello. Maybe the first question and I hate to nitpick here, but guidance for the year is up about $2,000,000 to $3,000,000 midpoint to midpoint versus the $4,000,000 to $5,000,000 1QP. I appreciate it's early in the year, I sense conservatism, but just want to make sure you're not seeing anything different here in 2Q that maybe has tempered your momentum? Speaker 100:27:08Yes. No, we wouldn't we're not seeing anything that would temper our momentum. We're again it's early in the year. We want a new management team in place and we are confident in what we're delivering, but nothing that's tempering our enthusiasm. Speaker 200:27:25Great. That's what I figured. And then just maybe a housekeeping question. Did you have one fewer day selling day in the Q1 versus 2023? Some of your peers have, so I'm just curious about your calendar. Speaker 200:27:36No, it's not. No, okay. Speaker 100:27:39Yes. Speaker 200:27:40Okay. And then I guess my last question. And Julie, you sort of alluded to it. I was hoping maybe get some firmer numbers, but you gave a great metric in the Q4 that 8% of sales were from new distributors. You mentioned that continued. Speaker 200:27:53Any chance you can update that number similar to last quarter higher? And I appreciate you may not have this at hand, but also is there any way to give us any sort of same store sales kind of growth number for your accounts? And I'll leave it at that. Thank you. Speaker 100:28:08Okay. I'll say in the revenue from new distributors, I said in the prepared remarks that it nearly doubled. So you can interpret that from the 8% to nearly doubling. And then I don't have same store sales at the ready in front of me, but we will think about really if we want to release that or not. Thank you. Speaker 200:28:31Yes, fair enough. Thanks so much. Operator00:28:35Your next question comes from the line of Ryan Zimmerman of BTIG. Your line is open. Speaker 500:28:41Hi, good morning guys. This is Izzy on for Brian. So just first off on the gross margins, it looks like you guys came in, in line with our estimates this quarter. We were just wondering what you could see that could drive them higher over time? Speaker 100:28:55So yes, so over I mean this year we've said that our margins would be 71% in line with last year. I think as we look into the future we haven't issued long range guidance on it. But we do see opportunity in the gross margin line. I think there's synergies with supplier rationalization, leveraging our footprint and those types of things that we're working on. Speaker 500:29:21Great. Thank you. And then next on the bone stem, it looks like you guys are seeing some pretty strong growth here. Just wondering what you can do to maintain this growth in a market that's maybe growing not as fast? Speaker 300:29:34Yes, it is an excellent question. Look, we see for the foreseeable future great potential just given from what we said during in our remarks about we are leveraging as much as we can right now all of the new surgeon coming from the C Spine acquisition. So I said, it's true that the market grows on market rates, but if you confine the business in our domain, we see strong potential, as I said, for the next few quarters. So we will try to maximize this potential as much as we can. Speaker 500:30:20Great. Thanks for taking the question. Operator00:30:24Your next question comes from the line of Jason Luedes of ROTH MKM. Your line is open. Speaker 600:30:30Hi, thanks for taking the questions. Just on the growth rates we saw this quarter, especially I mean, you kind of mentioned for Global Orthopaedics, it's going to vary. The spine growth has been the spine growth has been pretty nice. Is that something we should expect to continue for the rest of the year? Could you comment on sort of what the trends are for the remaining other businesses? Speaker 300:30:54Yes. Look, we feel pretty confident about the growth rate that we are achieving right now. As we said earlier, we have clearly identified couple of growth driver for us. One, we are getting a lot of interest from new distributor and new surgeons. The amount of inbound calls that are coming has been pretty remarkable for us. Speaker 300:31:21And all of these has allowed us to really pick and choose the right partner because remember, we are fully focused on profitable growth. So and we can achieve this if we get the right partners. On the same token, with our investment in innovation, we are seeing a further utilization of our product. So a very healthy increase on revenue per case. So all of this to say that we see a very strong business fundamental for the foreseeable future. Speaker 600:31:57Okay. Thank you. I'm sorry to interrupt. And then you mentioned you should go cash flow positive in Q4. I assume that's sustainable and going forward, the quarters will be cash flow positive from there on or will seasonality impact that or sort of what's the outlook for cash flow generation? Speaker 100:32:20Yes, we haven't issued formal guidance on that for 2025 and we'll do so later this year. But yes. Speaker 300:32:32Okay. Speaker 600:32:35I'll jump back in queue. Thank you. Speaker 100:32:37Sure. Thanks, Jake. Operator00:32:41Your next question comes from the line of Jeff Cohen of Ladenburg Thalmann. Your line is open. Speaker 400:32:49Hi Massimo and Julie. How are you? Speaker 100:32:53Good, Jeff. How are you? Speaker 400:32:55Just fine. So I wondered if you could talk about a self stim a bit and fresh fractures and talk a little bit about some of the channels and I did hear you call out the fracture market and some of those channels, some of those stocks. And are you still focused on surgeons? Is there some focus that's on pain docs as well? Thank you. Speaker 300:33:20No, right now, I think that we are keep leveraging our network on the surgeon side. So at the end, we have 2 products that are helping us to address the continuum of carrying fracture, track structure and Mullenion. So we are keep driving our product portfolio using existing distributors plus try to find synergies with the distributor that are working on the orthopedic side. So our market is defined right now on the surgeon piece. Speaker 400:34:00Okay, got it. And then could you talk a little bit about the larger more dedicated distributors as far as aggregate numbers you anticipate over the balance of this year that the actual number of distributors will decrease? And then could give us a sense of feet on the ground? Thank you. Speaker 300:34:22Yes. I don't think that we give a specific detail about like the amount distributor and like in general. What I can tell you is that on the positive side, we are seeing that all our top distributors keep increasing the royalty to us. So I think that what we're seeing on the is everything is shifting to have, let's say, given the depth of our portfolio, especially in spine, our top distributor becoming exclusive to us. So and I think this one is going to keep driving, it's going to help us to drive compliance moving forward and focus with our products. Speaker 300:35:06So as I said, we don't give a specific number, but what I can tell you that that actually the quality of revenue that we are seeing is pretty high right now. Speaker 400:35:19Okay, perfect. Thanks for taking our questions. Operator00:35:24That concludes our Q and A session. And this concludes today's conference call. You may now disconnect.Read morePowered by Conference Call Audio Live Call not available Earnings Conference CallOrthofix Medical Q1 202400:00 / 00:00Speed:1x1.25x1.5x2x Earnings DocumentsSlide DeckPress Release(8-K)Quarterly report(10-Q) Orthofix Medical Earnings HeadlinesFinancial Review: TearLab (OTCMKTS:TEAR) vs. Orthofix Medical (NASDAQ:OFIX)April 28, 2025 | americanbankingnews.comOrthofix Medical Inc. 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Email Address About Orthofix MedicalOrthofix Medical (NASDAQ:OFIX) operates as a spine and orthopedics company in the United States, Italy, Germany, the United Kingdom, France, Brazil, and internationally. It operates through two segments, Global Spine and Global Orthopedics. The Global Spine segment manufactures and distributes bone growth stimulator devices for enhance of bone fusion, including adjunctive and noninvasive treatment of cervical and lumbar spine, as well as a therapeutic treatment for non-spine; designs, develops, and markets a portfolio of motion preservation and fixation implant products, which are used in surgical procedures of the spine; and offers biological products, such as fiber-based and particulate demineralized bone matrices, cellular bone allografts, collagen ceramic matrices, and synthetic bone void fillers, and tissue forms, which allow physicians to treat various spinal and orthopedic conditions. This segment also designs, develops, and markets a portfolio of navigation technologies, including tracked surgical tools, intelligent software, and imaging equipment based on machine-vision and optical innovations. The Global Orthopedics segment offers products and solutions that allow physicians to treat various orthopedic conditions related to limb reconstruction and deformity correction unrelated to the spine. This segment designs, develops, and markets external and internal fixation orthopedic products that are coupled with enabling digital technologies to serve the complete patient treatment pathway. It sells its products through distributors and sales representatives to hospitals, healthcare organizations, and healthcare providers. The company was formerly known as Orthofix International N.V. and changed its name to Orthofix Medical Inc. in 2018. Orthofix Medical Inc. was founded in 1980 and is headquartered in Lewisville, Texas.View Orthofix Medical ProfileRead more More Earnings Resources from MarketBeat Earnings Tools Today's Earnings Tomorrow's Earnings Next Week's Earnings Upcoming Earnings Calls Earnings Newsletter Earnings Call Transcripts Earnings Beats & Misses Corporate Guidance Earnings Screener Earnings By Country U.S. Earnings Reports Canadian Earnings Reports U.K. Earnings Reports Latest Articles Amazon Earnings: 2 Reasons to Love It, 1 Reason to Be CautiousMeta Takes A Bow With Q1 Earnings - Watch For Tariff Impact in Q2Palantir Earnings: 1 Bullish Signal and 1 Area of ConcernMicrosoft Crushes Earnings, What’s Next for MSFT Stock?Qualcomm's Earnings: 2 Reasons to Buy, 1 to Stay AwayAMD Stock Signals Strong Buy Ahead of EarningsAmazon's Earnings Will Make or Break the Stock's Comeback Upcoming Earnings Palantir Technologies (5/5/2025)Vertex Pharmaceuticals (5/5/2025)Realty Income (5/5/2025)Williams Companies (5/5/2025)CRH (5/5/2025)Advanced Micro Devices (5/6/2025)American Electric Power (5/6/2025)Constellation Energy (5/6/2025)Marriott International (5/6/2025)Energy Transfer (5/6/2025) Get 30 Days of MarketBeat All Access for Free Sign up for MarketBeat All Access to gain access to MarketBeat's full suite of research tools. 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There are 7 speakers on the call. Operator00:00:00Thank you for standing by. My name is JL, and I will be your conference operator today. At this time, I would like to welcome everyone to the Orthofix Q1 2024 Earnings Call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question and answer I would now like to turn the conference over to Louisa Smith. Operator00:00:27You may begin. Speaker 100:00:29Good morning, everyone. Welcome to the Orthofix First Quarter 2024 Earnings Call. Joining me on the call today are President and Chief Executive Officer, Massimo Calafiore and Chief Financial Officer, Julie Andrews. During this call, we will be making forward looking statements that involve risks and uncertainties. All statements other than those of historical facts are forward looking statements, including any earnings guidance we provide and any statements about our plans, beliefs, strategies, expectations, goals or objectives. Speaker 100:01:06Investors are cautioned not to place undue reliance on such forward looking statements as there is no assurance that the matter contained in such statements will occur. The forward looking statements we will make on today's call are based on our beliefs and expectations as of today, May 7, 2024. We do not undertake any obligation to revise or update such forward looking statements. Some factors that could cause actual results to materially differ from the forward looking statements made by us on the call include the risk factors disclosed under the heading Risk Factors in our Form 10 Q filed this morning, May 7, 2024, as well as on additional SEC filings we make in the future. In addition, on today's call, we will refer to various non GAAP financial measures. Speaker 100:01:56We believe that in order to properly understand our short term and long term financial trends, investors may wish to review these matters as a supplement to the financial measures determined in accordance with U. S. GAAP. Please refer to today's press release announcing our Q1 2024 results for reconciliations of these non GAAP financial measures to our U. S. Speaker 100:02:19GAAP financial results. At this point, I will Speaker 200:02:22turn the call over to Massimo. Thank you, Luisa, and Speaker 300:02:27thank you, everyone, for joining us this morning for our Q1 earnings call. I'll spend some time providing insight into our higher leverage strategy as well as updates on some key priorities and initiatives before I turn it over to Julie for further details on our quarterly performance and financial results. I'm pleased to report another strong quarter for Orthofix, driven by healthy business fundamentals and exceptional operating performance of our teams. We continue to gain momentum and leveraging strategic initiatives to grow Orthofix across all our business segments. Net revenue for the Q1 was €139,000,000 representing a 7.5% year over year increase in constant currency, led primarily by 10% growth across our USA businesses. Speaker 300:03:36The strength in USA performance was driven by 10% growth in BGT, 16% growth in spine fixation and 23% growth in orthopedics. We are clearly outpacing market growth in all of these segments. We are delivering innovative products and outstanding service while executing to plan and taking advantage of emerging opportunities. I remain very confident in our future and the prospect to deliver value moving forward. To reiterate some of the 2024 priorities that we laid out in our Q4 call, we are diligently focused on: 1, profitable growth 2, emphasizing a synergistic and balanced approach to our portfolio platforms and 3, strategic innovation. Speaker 300:04:37We remain committed to delivering across all three in the near term and are already seeing pull through in our results. Our first priority is to grow the business and grow it profitably. Julie will discuss the specific metrics later, but I'm happy to report that in the Q1, we saw an improvement on more than 200 basis points in our adjusted EBITDA margin as a result of strong top line growth and the realization of synergies. We will sustain this momentum by spending existing customers and distributor relationships, optimizing our product portfolio and improving our working capital management. In the Q1, revenues benefited from continued PGT cross selling within the spine channel. Speaker 300:05:35In USA Spine Fixation, we saw increases in average price per procedure as we broadened the use of interbody and thoracolumbar products across our surgeon customer base as well as through significant contribution from new distributor partnership. We are penetrating deeper into existing accounts with our procedural solutions, while expanding our distribution network. In addition, we are maximizing the robust portfolio of the combined company by focusing on our higher margin products and rationalizing any overlap. This product lifecycle management will not only reduce cost by simplifying our supply chain, but enable us to direct resources and investment towards the expansion of new and innovative product lines. Furthermore, this strategy improves our working capital by lowering the number of products and SKUs we carry. Speaker 300:06:46We are efficiently allocating the recent investment in paneling plant instrument set to our larger, more dedicated distributors, which will improve inventory and instrument utilization. And finally, we see further opportunities to improve cash flow by focusing on DSO efficiencies and accelerating cash collection. As a result of these initiatives, we expect to be cash flow positive in the Q4 of 2024. Moving now to our second priority, which is to leverage our technologies and sales channels across all product segments. Our products work together to create a best in class offering, each improving the performance of the other and enabling growth through cross selling opportunities. Speaker 300:07:43We are seeing traction across our commercial infrastructure with increasing interest in what we are building, allowing us the opportunity to be selective in our choice of distribution partners. Additionally, the team is aligned on driving pull through revenue across spine, orthopedics, biologics and BGT. We are seeing market share gains in complementary areas of the portfolio where our offerings are able to support the outcomes of the more complex product lines in Orthopaedics and Spine. For example, we just completed the 100,000 implementation of our strength family of demineralized bond fibers. These strand fibers are designed to enable maximum bond forming capacity and fusion potential. Speaker 300:08:42The alignment of BGT enabling technology, biological selling opportunities highlights the complementary nature of our offering as a whole. A key part of Orthofix success and our strong performance to date are the committed employees and leadership team that we have in place. Since beginning my role at the company, we have made a few changes to certain roles, expanded others and finalized some key hires that will set us up for the future with an eye towards efficiently managing our product portfolios. For example, I would like to highlight the recent promotion of Doctor. Paul Standish to Chief Enabling Technology Officer. Speaker 300:09:33In this expanded role, Bob will oversee strategy development, the implementation of software and corresponding hardware across all our product portfolio, reinforcing our commitment to drive synergies throughout the business. Enabling technology has been a key differentiator for Orthofix. Our investments in the 7 d flash navigation have established Orsofix as the partner of choice for surgeons seeking innovative data driven intraoperative solution with improved workflow. With this new role, we will leverage our combined intellectual capital, a comprehensive suite of software and hardware products to support both spine and orthopedic surgeons throughout the continuum of care. This begins with pre operative planning using our orthopedics planning platform, OrthoMed. Speaker 300:10:37Continuous with real time operating room navigation and guidance through 7dflash navigation and extend to post operative care with our bone growth stimulator devices. Our award winning patient engagement app SteamOnTrak supports patient compliance and tracks patient reported outcome. By expanding the capabilities of our existing technology platforms across all our businesses, we will accelerate growth in high value procedures and drive significant gains in market share. This investment in enabling technologies are also consistent with our 3rd priority, our commitment to Orthofix innovation engine. We have several promising products in development and a robust pipeline of upcoming launches. Speaker 300:11:35We are investing in markets with a higher return potential, especially where Orthofix has the opportunity to establish itself as a leading player over there remain significant untapped needs. For example, we are just beginning to expand into the USA orthopedics market, which presents incredible growth opportunities given our unique and innovative product lines. Our focus in Orthopaedics, providing highly specialized solutions for underserved markets, is underscored by 2 recent 510 clearances. Speaker 400:12:17For the Speaker 300:12:18rhodiotelascopic intramedullary nail and for the 5th bone of bone transport lengthening nail. It is the only commercially available nail capable of both transport lengthening and the only bone transport nail available in the U. S. We will be launching both of these products through limited USA market releases in the coming months. These achievements demonstrate our ability to deliver innovative products in the United States orthopedics market and reflect our current focus on strategic innovation across complex limb reconstruction and deformity correction. Speaker 300:13:04In our spine portfolio, we are continuing to validate our MIS anterolateral portfolio integrating novel access solutions with our differentiated hardware and biologics. This is just one of many procedural integration in the works to advance patient care and improve the surgeon experience with state of the art enabling technology in 2017. Our goal is to be the trusted partner for surgeons in spine and orthopedics, providing solutions for the most complex cases through our unique complementary product platform. All in all, I'm very pleased with our performance during my Q1 on the job. I remain encouraged by the prospect for Orthofix and inspired by a team that is embracing a relentless focus on execution and innovation. Speaker 300:14:13As a result of that confidence, we are narrowing our full year 2024 revenue guidance and raising the bottom end of the range by €5,000,000,000 We now expect 2024 revenues to be between €790,000,000 to €795,000,000 as compared to the prior guidance of $7.35,000,000 to $795,000,000 and 5% to 7% growth. The merger thesis and the fundamental strategy across spine Orthopaedics, Biologics and BGTE remains compelling. We are growing the company in a measured and strategic manner to reach profitability and we are creating value for our customers, patients and shareholders. I truly believe the best is yet to come. With that, I'll now turn the call over to Tulli to review our Q1 financial results. Speaker 100:15:22Before I begin, I'd like to remind you to please refer to our press release published earlier today for information regarding our non GAAP results, including our reconciliation of these results to our GAAP results. Additionally, all revenue percentage changes discussed will be on a constant currency year over year basis. As of this quarter, we have annualized the impact of the merger and will no longer be referring to pro form a growth. In addition, all results of operations that I referred to in my prepared comments will be on a non GAAP as adjusted basis. As Massimo noted, Orthofix had a strong first quarter delivering 7.5% constant currency top line growth and EBITDA margin expansion of approximately 220 basis points. Speaker 100:16:12For my commentary, I'll go through each of our business units and review financial results on the quarter as well as provide an update to our guidance for the full year 2024. Total company net sales were $188,600,000 for the Q1 of 2024, up 7.5% over prior year. Bone Growth Therapies revenue grew 10 percent to $52,500,000 in Q1 and marks the 5th consecutive quarter of double digit growth for the BGT franchise. This growth was driven by above market performance in both the spine and fracture channel. In the spine market, where we hold the number one market share position, we continue to take share with more than 50% of the growth coming from new customer acquisitions. Speaker 100:17:02In addition, investments in the fracture market sales channel drove 16.8% growth in fracture with AccelStim continuing to outperform the market. As a reminder, the fracture market represents an opportunity of more than $200,000,000 and we are just beginning to scratch the surface of our potential in that market. Global spinal implants, biologics and enabling technologies 1st quarter revenue was $108,800,000 with year over year growth of 7.2%. U. S. Speaker 100:17:36Spine fixation revenue grew 16.1%, well above market growth rates driven by contributions from new distributor partners where we saw revenue nearly double from Q4 2023 and deeper penetration of existing accounts with increases to the average revenue per procedure. Additionally, in the biologics business, we saw a positive impact of new distributor partnerships as well as cross selling initiatives, which drove growth in line with the overall market. The global orthopedics business grew 3.8% in the first quarter, led by 22.9% growth in the U. S. As a result of strong performance across our portfolio, as well as distributor expansion and sales channel investments. Speaker 100:18:22The international business declined 2.7% versus prior year due to timing of orders from our stocking distributors. Due to the nature of this business, we expect to see variability from quarter to quarter in the growth rates. Moving on to some details below the sales line. Starting with our Q1 non GAAP adjusted gross margins, we achieved a 70.3% rate for the quarter, a decrease of approximately 40 basis points compared to Q1 2023. This reduction is primarily due to an overlap in vendors as we phased out a legacy partner and moved to a new vendor that will result in cost savings starting in Q2. Speaker 100:19:03Non GAAP sales and marketing expenses were 51.8 percent of net sales for the Q1 compared to 52.3 percent of net sales for Q1 2023. The decrease as a percent of sales was primarily driven by the realization of cost synergies and a lower effective commission rate due to product mix. Non GAAP general and administrative expenses were 13.7 percent of net sales for Q1, twenty twenty four, down from 17.8% in the same quarter prior year. The decrease as a percent of sales was primarily driven by the impact of cost synergies and a reduction in stock based compensation. Non GAAP R and D expenses were 10.2% for the quarter compared to 10.5% for the prior year quarter. Speaker 100:19:54The decrease as a percent of sales was driven by a reduction in product development spend due to project rationalization, partially offset by increased clinical spending related to EU MDR cost, which are no longer adjusted from operating results and the M6 two level study. Below the operating income line, interest expense and other was $4,500,000 for the quarter. Altogether, this resulted in non GAAP adjusted EBITDA of $7,700,000 or 4.1 percent of net sales for the quarter, a 220 basis point expansion over Q1 2023 due to the capture of merger related synergies and driving leverage on sales trends. This represented a 34% drop through on incremental revenue dollars. We remain encouraged by these results and we are seeing the impact of merger related synergies and our ability to drive leverage on sales growth materialize. Speaker 100:20:52From a cash standpoint, our total cash balance including restricted cash at the end of Q1 of approximately 29,000,000 dollars During the Q1 of 2024, we exercised our borrowing rights under our 4 year $150,000,000 financing arrangement to the delayed draw term loan of $25,000,000 which has ended of March 2024 expiration date and repaid the outstanding revolver of 15,000,000 dollars This brings the total borrowings to $125,000,000 Our free cash flow usage was $29,000,000 in the quarter, primarily as a result of annual incentive and one time merger related retention payments. Q1 will be the highest quarter of cash burn for the year. As Massimo mentioned, we are focusing on improving our working capital management, specifically our inventory and instrument utilization and DSO efficiency. With these efforts as well as continued execution of merger related cost synergies, we expect to be cash flow positive in Q4, 2024. Overall, we are pleased with our Q1 results and we continue to be confident in our ability to drive profitable revenue growth moving forward. Speaker 100:22:06Moving on to 2024 full year guidance. As Massimo stated, we are narrowing our guidance for full year net sales to range between $790,000,000 $795,000,000 representing implied growth of 67% year over year on a constant currency basis. This is in comparison to the guidance issued during our Q4 call of $785,000,000 to $795,000,000 a 5% to 7% growth. Please note our expectations are based on current foreign exchange rates and do not account for rate changes that may occur throughout 2024. Our outlook for full year 2024 non GAAP adjusted EBITDA remains at $62,000,000 to 67,000,000 And finally, we expect to be cash flow positive in the Q4 of 2024. Speaker 100:22:57While we do not provide quarterly guidance, I will give some directional commentary on the expected cadence of our business to assist you in modeling our quarterly performance. These comments remain in line with the directional remarks provided on our Q4 call in March. We expect Q2 revenues to be slightly below our full year growth guidance range due to the timing of stocking orders in 2023. Additionally, we expect Q3 to reflect the highest year over year growth due to disruption in the prior year as we close the quarter and the impact of one additional selling day in 2024 versus 2023. This extra day results in approximately 1.5% of additional growth for the quarter. Speaker 100:23:44For gross margin, we continue to expect 2024 full year gross margin to be the 71% range in line with 2023. We also expect operating expenses to decrease approximately 200 basis points to 300 basis points through leverage on incremental sales and additional cost synergies. To assist you with modeling EBITDA, we reiterate our outlook for depreciation expense, which for the full year 2024 is in the range of approximately $36,000,000 to $37,000,000 as compared to 33,000,000 in 2023. Stock based compensation expense is expected to be in the range of 30,000,000 to 32 months. Below the operating income line, our expectation for interest and other is approximately $5,000,000 per quarter. Speaker 100:24:33We expect adjusted EBITDA margin improvement of 200 basis points for the full year to be fairly consistent over the course of the year with margin expansion in the first half of the year to be slightly higher over prior year as we annualize synergies. And finally, for cash, we still anticipate an improvement in net cash outflows in Q2 relative to Q1 due to the payment of the annual bonus and merger related costs that occurred in the Q1. The second half of the year will progress towards breakeven with positive cash flow for the Q4 as we ramp up revenue, leverage our fixed expense base and improve inventory and DSO efficiencies. I'll now turn the call over to Massimo for some closing comments. Speaker 300:25:20I'll close today's call by emphasizing my confidence in the business and reiterating my enthusiasm to be part of the Orthofix team. We have solid fundamentals, exceptional employees and a best in class portfolio that is driving above market performance. Throughout 2024, we will keep delivering on our commitments to patients, customers and shareholders, driving the company to new heights. Before we set off, I would also like to thank all of our employees worldwide for their dedication to Orthofix and its mission. I'm very excited for the next chapter ahead of us. Speaker 300:26:07At this point, we will open the line for questions. Operator00:26:12Thank you. The floor is now open for questions. Your first question comes from the line of Matthew Blackman of Stifel. Your line is open. Speaker 200:26:42Good morning, everybody. Can you hear me okay? Yes. Yes. Hi, Matt. Speaker 200:26:46Great. Hello. Maybe the first question and I hate to nitpick here, but guidance for the year is up about $2,000,000 to $3,000,000 midpoint to midpoint versus the $4,000,000 to $5,000,000 1QP. I appreciate it's early in the year, I sense conservatism, but just want to make sure you're not seeing anything different here in 2Q that maybe has tempered your momentum? Speaker 100:27:08Yes. No, we wouldn't we're not seeing anything that would temper our momentum. We're again it's early in the year. We want a new management team in place and we are confident in what we're delivering, but nothing that's tempering our enthusiasm. Speaker 200:27:25Great. That's what I figured. And then just maybe a housekeeping question. Did you have one fewer day selling day in the Q1 versus 2023? Some of your peers have, so I'm just curious about your calendar. Speaker 200:27:36No, it's not. No, okay. Speaker 100:27:39Yes. Speaker 200:27:40Okay. And then I guess my last question. And Julie, you sort of alluded to it. I was hoping maybe get some firmer numbers, but you gave a great metric in the Q4 that 8% of sales were from new distributors. You mentioned that continued. Speaker 200:27:53Any chance you can update that number similar to last quarter higher? And I appreciate you may not have this at hand, but also is there any way to give us any sort of same store sales kind of growth number for your accounts? And I'll leave it at that. Thank you. Speaker 100:28:08Okay. I'll say in the revenue from new distributors, I said in the prepared remarks that it nearly doubled. So you can interpret that from the 8% to nearly doubling. And then I don't have same store sales at the ready in front of me, but we will think about really if we want to release that or not. Thank you. Speaker 200:28:31Yes, fair enough. Thanks so much. Operator00:28:35Your next question comes from the line of Ryan Zimmerman of BTIG. Your line is open. Speaker 500:28:41Hi, good morning guys. This is Izzy on for Brian. So just first off on the gross margins, it looks like you guys came in, in line with our estimates this quarter. We were just wondering what you could see that could drive them higher over time? Speaker 100:28:55So yes, so over I mean this year we've said that our margins would be 71% in line with last year. I think as we look into the future we haven't issued long range guidance on it. But we do see opportunity in the gross margin line. I think there's synergies with supplier rationalization, leveraging our footprint and those types of things that we're working on. Speaker 500:29:21Great. Thank you. And then next on the bone stem, it looks like you guys are seeing some pretty strong growth here. Just wondering what you can do to maintain this growth in a market that's maybe growing not as fast? Speaker 300:29:34Yes, it is an excellent question. Look, we see for the foreseeable future great potential just given from what we said during in our remarks about we are leveraging as much as we can right now all of the new surgeon coming from the C Spine acquisition. So I said, it's true that the market grows on market rates, but if you confine the business in our domain, we see strong potential, as I said, for the next few quarters. So we will try to maximize this potential as much as we can. Speaker 500:30:20Great. Thanks for taking the question. Operator00:30:24Your next question comes from the line of Jason Luedes of ROTH MKM. Your line is open. Speaker 600:30:30Hi, thanks for taking the questions. Just on the growth rates we saw this quarter, especially I mean, you kind of mentioned for Global Orthopaedics, it's going to vary. The spine growth has been the spine growth has been pretty nice. Is that something we should expect to continue for the rest of the year? Could you comment on sort of what the trends are for the remaining other businesses? Speaker 300:30:54Yes. Look, we feel pretty confident about the growth rate that we are achieving right now. As we said earlier, we have clearly identified couple of growth driver for us. One, we are getting a lot of interest from new distributor and new surgeons. The amount of inbound calls that are coming has been pretty remarkable for us. Speaker 300:31:21And all of these has allowed us to really pick and choose the right partner because remember, we are fully focused on profitable growth. So and we can achieve this if we get the right partners. On the same token, with our investment in innovation, we are seeing a further utilization of our product. So a very healthy increase on revenue per case. So all of this to say that we see a very strong business fundamental for the foreseeable future. Speaker 600:31:57Okay. Thank you. I'm sorry to interrupt. And then you mentioned you should go cash flow positive in Q4. I assume that's sustainable and going forward, the quarters will be cash flow positive from there on or will seasonality impact that or sort of what's the outlook for cash flow generation? Speaker 100:32:20Yes, we haven't issued formal guidance on that for 2025 and we'll do so later this year. But yes. Speaker 300:32:32Okay. Speaker 600:32:35I'll jump back in queue. Thank you. Speaker 100:32:37Sure. Thanks, Jake. Operator00:32:41Your next question comes from the line of Jeff Cohen of Ladenburg Thalmann. Your line is open. Speaker 400:32:49Hi Massimo and Julie. How are you? Speaker 100:32:53Good, Jeff. How are you? Speaker 400:32:55Just fine. So I wondered if you could talk about a self stim a bit and fresh fractures and talk a little bit about some of the channels and I did hear you call out the fracture market and some of those channels, some of those stocks. And are you still focused on surgeons? Is there some focus that's on pain docs as well? Thank you. Speaker 300:33:20No, right now, I think that we are keep leveraging our network on the surgeon side. So at the end, we have 2 products that are helping us to address the continuum of carrying fracture, track structure and Mullenion. So we are keep driving our product portfolio using existing distributors plus try to find synergies with the distributor that are working on the orthopedic side. So our market is defined right now on the surgeon piece. Speaker 400:34:00Okay, got it. And then could you talk a little bit about the larger more dedicated distributors as far as aggregate numbers you anticipate over the balance of this year that the actual number of distributors will decrease? And then could give us a sense of feet on the ground? Thank you. Speaker 300:34:22Yes. I don't think that we give a specific detail about like the amount distributor and like in general. What I can tell you is that on the positive side, we are seeing that all our top distributors keep increasing the royalty to us. So I think that what we're seeing on the is everything is shifting to have, let's say, given the depth of our portfolio, especially in spine, our top distributor becoming exclusive to us. So and I think this one is going to keep driving, it's going to help us to drive compliance moving forward and focus with our products. Speaker 300:35:06So as I said, we don't give a specific number, but what I can tell you that that actually the quality of revenue that we are seeing is pretty high right now. Speaker 400:35:19Okay, perfect. Thanks for taking our questions. Operator00:35:24That concludes our Q and A session. And this concludes today's conference call. You may now disconnect.Read morePowered by