Q1 2020 RTI Surgical Holdings Inc Earnings Call
Good morning, ladies and gentlemen, I wanted to the Archie I surgical business update conference call.
This time all participants are in listen only mode. Later, we'll conduct a question answer session and instructions will follow at that time.
I would now like to kind of call over to Mr. John singer. Please go ahead.
Thank you good morning, and thank you for joining our T.I.s business update conference call. Joining me today on the call is Camille <unk>, our president and Chief Executive Officer.
Before we start let me make the following disclosure the earnings and other matters, we will be discussing on this conference call will involve statements that are forward looking statements are based on our managements current expectations. They are subject to various risks and uncertainties associated with our lines of business and with the economic environment.
In general our actual results may vary from our statements concerning our expectations about future events that are made during this call. We make no guarantees S. The accuracy of these statements. Accordingly, we urge you to consider all information about the company not to place undue reliance on these forward looking statements.
During the call. We're also present certain financial information on a non-GAAP basis.
Management believes the non-GAAP financial measures taken in conjunction with U.S. GAAP financial measures provide useful information for both management and investors by excluding certain non cash and other expenses that are not indicative of our core operating results management uses non-GAAP measures to compare our performance relative to forecast and strategic plan.
And the benchmark our performance externally against competitors for certain compensation decisions reconciliations between U.S. GAAP and non-GAAP results are presented in tables accompanying our earnings release, which can be found in the investors relations section of our website.
Now I'll turn over the call to Camille. Please go ahead.
Thanks, John Good morning, everyone.
As you are likely aware, we have been very busy since our last call in January.
The goal of our call today is to provide you with an update on all developments in the business, both completed and ongoing before providing an overview of our recent financial and operational performance.
Specifically.
We will review the filing of our 2019 form 10-K as well as in 2018 form 10-K as part of our completed financial statement restatement, which John will discuss in more detail.
Also the status of the sale of our OEM business, an update on spine as we prepare to go forward as a pure play global spine company the impact of covert 19 on our business and our first quarter 2020 performance.
Starting with the status of the sale of our OEM business.
As we announced previously we amended the purchase agreement with Montague adjusting the total consideration to $440 million for $490 million.
All required government and regulatory approvals have been received and the last remaining step in the process is shareholder approval.
As of the time of this call.
Applicable shareholders should have received by mail the proxy statement related to the annual meeting and the OEM transaction and annual report.
The company will be hosting its 2020 annual shareholders meeting on July 15.
As part of this meeting we will also be holding a special meeting of stockholders to vote on amongst other things.
The approval of the sale of the OEM business.
Assuming shareholder approval, we expect this transaction to close soon after the shareholder vote on the 50.
Turning to our separation efforts and the brief OEM business update.
Well covert 19 has caused some disruption in our efforts to prepare for the separation of the businesses. We are close to completing the process.
While I will discuss the impact of covered on our business in our response to the pandemic in more detail. Shortly I wanted to provide a brief update on the specific impact within OEM.
During the pandemic, we have continued to operate this business with care and diligence to preserve its long term attractiveness.
We have supported as many ongoing for jurors as possible and have maintained our efforts to deliver innovation to customers.
Given the contractual nature of the OEM business. The short term impact has been less severe than in our spine business.
Silver lining them the delay in closing the transaction is the fact that we have been able to achieve broader more comprehensive progress toward separation and as a result, we expect there will be fewer entanglements and transition service agreements or T assays post close.
We have been able to fully separates our enterprise systems, including many of the key back office processes and are currently practicing to operating as two independent businesses.
Our teams have shifted to working together as strategic partners with our spine business, placing orders with OEM and OEM fulfilling those orders to ensure our relationship will continue to operate smoothly and without disruptions, one especially separated.
Given what we believe is the imminent closing of the transaction our remarks today will generally be focused on our spine business.
After the close of the transaction.
Our T I will be a global pure play spine company with what we believe our strong fundamentals.
Redefined balance sheets on leverage profile and exciting long term growth prospects.
Concurrent with the transaction.
We plan to pay off our outstanding long term debt.
And after transaction expenses will have approximately $100 million to $125 million in cash.
As we continue to move towards closing, we are evaluating the appropriate capital structure off the spine business.
Looking back at the progress we have made as part of our multiyear long term strategic transformation.
We have completed phase one.
Which includes reducing complexity driving operational excellence and accelerated growth.
Phase two of the transformation is creating value as a pure play global spine company.
At the highest level our goal will be to deliver double digit topline growth with gross margins are probably approaching 75% by focusing on the stabilizing and building of our foundation driving new product innovation and being acquisitive.
As we continue to build out our foundation in preparation for a transition towards becoming a high growth business.
We are focused on assembling a strong management team with deep spine experience and track records of success.
In December of 2019, we announced the appointment of Terry Rich as president of global spine.
Terry has significant experience in delivering innovation and driving growth in the spine and orthopedic space.
In June of this year, we announced the appointment of two key members of the team Scaturro as Chief Commercial Officer, and Brian Cornwall, Executive Vice President Research and clinical affairs, who together bring over 50 years of experience in the medical device industry.
In addition to adding talented experienced leaders we are retooling our leadership team to reflect our ongoing focus to become a leader in the global spine market.
In addition in early May stored Simpson joined the board of Directors and was recently named Vice Chairman of the Board. Mr. Simpson brings decades of industry experience, which will be valuable in supporting our DIY strategy as a pure play global spine company.
Beyond stabilizing and building a foundation for growth we are investing in a strong innovation pipeline and are committed to a rapid cadence of new product introductions.
2020, we continue to expect double digit new product releases or launches to set the stage for growth in 2021.
We have already begun to generate momentum with someone products were that where we have both received CE Mark and filed for five okay approval in the first half of the year.
Our existing design center in Germany.
And new innovation competencies to be built by our growing spine leadership team.
We are confident our current R&D pipeline supports the ongoing launch of double digit new product introductions.
We are finalizing our plans for the remainder of the year and looking to 2021, then beyond we anticipate we'll be prepared to provide a more comprehensive view of our innovation and acquisition approach during our second quarter call.
After the close of the state of the OEM business.
Shifting gears to an update on corvid, including the operational and financial impact the pandemic has had on our business.
As a company who develops manufactures and commercialize this primarily elective procedure based products the unprecedented condition surrounding coal that caused the significant disruption to our business, particularly within the global spine portfolio.
As youre well aware the spread of covert 19 caused many hospitals and other healthcare providers to refocus their care on the surge of the covert 19 cases.
To postpone elective non emergent procedures to restrict access the facilities and in many cases reallocate scarce resources to their critically ill patients.
Our decision, making in response to the pandemic was guided by a focus on four pillars.
Prioritizing employee safety.
Managing inventory levels in the global supply chain preparing for the sale of the OEM business.
And long term positioning of our spine portfolio for growth as highlighted earlier.
First and foremost.
Our top priority.
Was and is to keep employees and their families safe by mid March all applicable employees were working remotely and action that after a short transition period has caused little to no disruptions to effectiveness for efficiency.
Our next priority was to maintain appropriate inventory levels across our global supply chain inclusive of our OEM partners.
Our goal was to ensure our and our partners, we're able to continue to support procedures during the pandemic.
While the majority of procedures performed with our products are elective and in many cases those procedures were either delayed or deferred there were certain volume of elective procedures being performed in addition to those procedures considered more emergent or necessary.
Throughout this time, we reduced the capacity at our key manufacturing facilities, but make sure. There was no interruption in supporting the production and delivery of products needed for existing surgeries.
So it means that remained open we implemented safety measures, including appropriate social dispensing and local safety mandates.
To be able to efficiently and effectively continue delivering products to customers.
We're also focused on securing our supply chain of scheme and factoring inputs mbps. So that we had the adequate materials necessary to safely maintain production.
In addition to closely evaluating the supply chain, we prioritized activities that were necessary to support the upcoming sale of the OEM business.
We continue to invest in key separation activities and building certain competencies to ensure we would have to strong businesses prepared for long term success when the impact of the pandemic was mitigated.
We continue to invest in key development projects and targeted leadership positions for both the spine and OEM businesses.
Our goal was to balance the operating actions above long term capital strength.
We wanted to exit the impact of the pandemic and the close of the OEM sale with a strong balance sheet to support long term innovation and growth.
As a result, we implemented cost reduction initiatives, including salary reductions for members of the management team, including John and myself.
Either furloughing or reducing the hours of over 500 of our US based employees beginning in early April.
And limiting our domestic manufacturing activities to pick pack and ship for most of the month of April.
As hospitals have been through various stages of reopening throughout the country real progress in our reopening process. We are pleased to say the vast majority of our employees have returned to work.
To maintain social distancing and minimize the potential risk we have staggered our employees return to our various offices and facilities. Our remaining employees will return in conjunction with the ongoing return of elective procedures.
From an expense reduction perspective, reduce senior management salaries will continue until all employees have returned to work.
Turning to an overview of our first quarter performance.
For the first quarter of 2020.
Revenue increased 5% to $73.7 million, primarily driven by the Annualization of the paradigm acquisition, we began seeing the impact of covert 19 in the international business in early early in March and domestically in the second up the month, resulting in an estimate.
20 person drop in procedure volumes between the beginning and the end of the quarter.
In April we continue to experience a steep decline in procedures of somewhere between 60, and 70% of normal across the portfolio of direct products.
We did see more rapid return in May and June than we initially anticipated with Mays volume nearly doubling versus April and June approaching levels, we saw earlier in the year.
It is difficult to assess whether the performance in May and June represents a trend or the impact of pent up demand.
In June.
Most of our top 10 states are experiencing average daily sales in the range of 80% to 90% of their levels from January and February.
However, several of these states are seeing significant rise in now new covert 19 cases, so it remains difficult to project expectations for the balance of the year.
The situation remains fluid and we continue to actively monitor procedure volumes and managing operations Accordingly.
The world looks much different today than it did that the beginning of 2020.
When we last provided you then update.
Not only within the our T.I. organization, but throughout the global healthcare industry.
We as a company have faced a variety of significant challenges in addition to operating through a global pandemic.
In spite of these challenges we continue to believe that underlying dynamics of our long term strategy remains strong and we continue to be very bullish and our ability to move forward and create significant shareholder value as a global pure play spine company we greatly appreciate.
All the effort that each and every one of our employees as given during these uncertain times and we also want to thank our investors for their patients as we work to come out of the other side of that overhead and move to the next phase of our transformation.
And with that I would like to hand, the call over to John to provide a financial review. Thank you Camille before jumping into an update on our first quarter performance I'd like to discuss our recently filed financial statement restatement.
On June Eightth, we filed our form 10-K for the year ended December 30, Onest 2019, and completed our previously announced financial statement restatement.
Earlier this year the company made the decision to launch an internal investigation to certain accounting matters. The most notable of those matters was the company's past revenue recognition practices for certain contractual arrangements with certain OEM customers in basic terms, we determined that revenue for certain invoices had been recognized earlier than its.
Should have been based on the terms of the contracts with their customers in greed upon delivery Windows. The company has completed its investigation to these matters as opted to restate certain of our historical financial statements for the fiscal years ended December 30, Onest 2016, 2017 in 2018 as well as selected financial.
Data for the years ended December 31st 2014 in 2015 and related disclosures for the quarterly periods for such years each on a form 10-K eight in restated condensed consolidated unaudited financial statement for the quarters ended March 30, Onest 2019 June 32009.
In September Thirtyth 2019 reflected in.
Our 2019 form 10-K.
The previously announced investigation by the FCC remain ongoing in the company is continuing to cooperate FCC in its investigation.
I want to recognize the hard work of our internal finance organization as we work through the restatement and audit and audit, which was compounded by the impact of covert 90. It was a herculean effort by an incredibly dedicated team of professionals.
Turning to Q1 performance briefly global revenue for the quarter ended March 30, Onest 2020 was 73.7 million 3.7 million or 5% growth compared to $70 million for the prior period first quarter OEM revenue was 46.6 million growing 1 million dollar.
These are 2% compared to 45.6 million in the prior period global spine revenue was 27.1 million growing 2.7 million or 11% compared to 24.4 million in the first quarter of last year.
Gross profit for the first quarter, 2020 was 40.5 million or 55% of revenue, a 7% increase compared to 37.9 million or 54% of revenue in the first quarter 2019 gross profit for the first quarter 2020 included $900000 charge for the purchase accounting staff.
Bob of co flex inventory gross profit adjusted for the impact of nonrecurring charges was approximately 56% of revenue for the first quarter 2020.
Adjusted EBITDA for the first quarter of 2020 was 1.4 million compared to approximately $7 million for the first quarter of 2090. The decline in adjusted EBITDA was driven primarily by the inclusion of a full quarter Paradise operating expenses audit and legal costs related to the FCC internal investor.
Jason in incremental administrative investment to support the separation of the spine and OEM businesses in anticipation of the upcoming sale of the OEM business.
Lastly, as it relates to guidance given the overall uncertainty of the recovery of the business. During 2020 as a result of covenant to 19, we will not be providing forward looking guidance. At this time, we saw more rapid return of elective procedures than we initially anticipated in our cautiously optimistic and expectations for the remainder.
The year. However, the situation is still to fluid is too early to project current activity through the ended the year, we intend to provide a more detail strategic update on spine business. During the Q2 call after the sale the OEM business.
Operator, I'd like to open the call for questions.
Yes.
And there are minor to ask a question viewing to press star one on your telephone.
To address your question.
Please send violently composite can a roster.
Your first question on cost line, Matt Hewitt, Craig Hallum, you may begin.
Good morning, gentlemen, thanks for taking the questions first one how much of a challenge does.
The pandemic present from an access standpoint, with your salespeople being able to be.
Visiting hospitals, visiting surgeons and what does that mean as you start to look at later this year into next year, what these product launches you've got a pretty aggressive.
Launch.
Planned for later this year and into next year and I'm curious, how this situation and access impacts.
Yes, Hi, Matt.
You know it varies by hospital in hospital system.
And.
What I would say is we believe that.
Everybody is becoming more accustomed to doing things remotely and in some of the training sessions that we have held remotely we've had more attendance that way.
We continue to.
Work with the med and the rest of the association to try to develop a standard approach to doing that.
And we feel that that is not going to be impacting our growth.
Opportunities and the ability to trained surgeons on the new products that are that are coming now.
However, as you get into the.
What I'm going to call the in and out of the surges that we have seen hospitals may change their prioritization on the procedures that is probably a bigger impact than be access.
Question, but so far I would say, we're managing this very well Terry and team are all over that and the digital way or remote way of providing training.
Has been pretty pretty welcome so far.
Understood. Thank you and then I guess a second question for me. So the shareholder vote is expected to occur on general is expected to occur July 15th all the regulatory.
Items have been crossed off the list why the delay until the end of August to close the transaction is it possible that that transaction could close much sooner than that.
Yes.
Yes. The end of August was the contractual end date, we're planning to close the transaction reasonably close to the shareholder vote.
Okay. That's great and then the one that I get the most frequently and I'm sure you've gotten quite a bit as well, but is there as you look at it aside from the shoulder shareholder vote is there anything that could.
Go astray with this transaction I mean, it seems pretty logical that the shareholders vote for this and it isn't it moves, but what what else could pop up that could prevent this transaction from closing that's it for me.
Now were look we're actively working with the buyer on a daily basis and move.
The transaction towards close.
And so as we sit here today, we feel comfortable that we'll have the shareholder support for the close the transaction in will move to close and so we don't see anything as of right now.
Hi, good hinder the closing of the transaction Matt.
Just just for kicks into goals that when we closed ziggo, though as a snowstorm and we had to delay the close by one day, because we couldn't get to the filing and then we were going to close paradigm. There was a government shutdown and that.
Little bit of hoping this one is going to go smoothly. So outside of these we believe that we should be okay.
That's great. Thank you.
Thank you once again Thats star one for questions.
Our next question on current line, Jim Sidoti from Sidoti and company.
Maybe again good morning. Good morning can you hear me Hey.
Yes, I imagine you guys medically feeling pretty good right now you've got a lot accomplished and listen very difficult circumstances, and maybe assay report.
Second quarter, and a month or so you can actually took a day off.
That would be nice.
First question on reporting.
Just a meal, Nick I would it be labor day off [laughter].
[laughter].
Mechanics so.
With the OEM business part of operations now I assume that the when you report the second quarter. The OEM business will be included in continuing operations, but by the.
The September quarter, OEM any residual OEM sales will be reported as a discontinued operation is that correct.
Yes, the from a GAAP accounting perspective the.
The triggering.
Band is the shareholder vote, which will occur obviously after the end of the second quarter. So youve accurately portrayed how it will be represented in the financial statements.
All right and can you spend a minute just to describe the sales force now you've made some some pretty significant changes to management.
Are you are you, making changes at the direct sales level are you expanding that number and are there any changes independent rep firm.
Yes look I mean at the under the day.
We're looking at the efficiency and effectiveness of our channel.
Right now we have been.
Really driving an existing structure that has two channels one for novel therapies and one for established therapies.
Because the novel therapies require more hand, holding and more support than more reimbursement et cetera.
We're continuing to stay in tune with that.
There might be an opportunity where you guys. We hear back from certain customers. They have multiple people coming up them and there might be an opportunity to too.
Consider having merging the two together and being more synchronize.
More of a an account orchestra conductor and then bringing product specialists underneath that that's something under consideration right now, but basically we don't differentiate much between.
Our direct employees and our distributors, we turn to focus more about the accounts, we serve and how do we do that most effectively and train everybody who.
Handles our products and represents our products and our therapies to be competent and to have the same customer care philosophy that we have as a company.
And in terms of this size or you have you probably don't add.
Yes, I mean look we don't disclose that Jim, but our opportunity is as we grow the business and as we look forward to the double digit we're going to be reaching Max.
In certain territories, and we're going to be opening new territories and so yes, we do expect to have.
Strategically aligned ads as Terry and team.
Evaluate the best.
The best path forward on the growth.
Just one business.
There are I'll, let me just summarize it this way there are a lot of opportunities for growth that we see it we have highlighted we believe again with the inside Terry is bringing to the spine organization.
That maintenance the state some realignment and how we go to market.
And that could very well be nor territories more people.
But thats something that is going to come as we mentioned earlier as we think through how do we want to execute the phase two is the growth.
Alright, Thank you and enjoy your labor day.
Thanks, Joe.
Thank you once again at star one for questions.
Our next question comes online.
Thanks Kelly.
JMP Securities you may begin.
Good morning, guys.
Can you maybe for you just to start off.
Followed the spine world for long time I'm. Just curious is their size, maybe a sales run rate in your mind that you think you need to be to be successful long term.
Given some of the big guys out there given maybe contracts. They have just thoughts on that market and what size you kind of aim RTL to be overtime.
Look we have.
Oh structure my answer around or on three.
Three.
Parts. The first part is we've come a long way from being number or whatever 14 15 to be in in the top then.
So we do believe that size matters in this environment.
At the same time, we also know what our size is and what we tried to due to the point that you were talking about on how do you get on contract is we try to assemble the pretty unique platform.
On the spine side, whether it is with the decor to occasion with the acquisition of Zytiga, whether it is with the Threed technology and touch refuse informally or in my bone and the stem cell.
Slide as well as the Pmeight that we have had with conflicts.
All of these have been helpful for us to what I'm going to cold stay relevant in an environment in which we operate.
We have enough scale I don't think so our strategy continues to be one of scale and differentiation as we exit phase one.
As our spine business now is about $120 million globally, we're looking to us through what is the best way the dry forward and I will tell you. It it will continue to be differentiation on sale.
However, I am sorry, and scale and then the reality. However is we got to we've got to stay relevant and whether that is around the product itself whether that is around the data or the photo procedure. These are the things that dairy is bringing to.
Our leadership team and helping us bias the direction of where we're going to go but clearly it will continue to be about scaling differentiation as to what does the ideal size I don't know, but I would say at least it would be double where we are today would be our direction from a strategic.
Perspective, as we see it.
Thank you for that.
Hey, as a quick follow up you mentioned a new products.
Can you tell us they talked about what's most exciting you had.
A number biologics internally developed some from partners you've had some view metal implants, you've got it.
I know, there's a lot happening.
And also.
Tissue products I'd, just love your thoughts on is there any sort of that needle movers that we're looking at.
In 2021, Thanks look what you sure look I would say that if you were to.
Look back we've come from a dry land of product development and if I take you back to 2017, we basically but everything on four to link.
And that was my my way of trying to assess whether the.
Organization capabilities can do something that is unique and different and then we said after that.
We were working on our product pipeline and our worldwide product plans and that we needed a couple of years to bring these to market. So we spent 2018 on the four platforms I just mentioned in spine and now you're seeing the benefits of of what we have.
Around the platforms.
Are there anything that is going to be radically different to to the products that are on the markets were partly trying to stay competitive and continue to gain an agile little bit in where we are we're factoring in our customer input.
In many of the areas, where they may have a preference towards the type of material, but they love our design and we leverage the same instruments, but give them their choice. That's one part of what you see.
Coming out on the decor occasion.
Everybody loves the principal of also Dcs in what we have but they tell us that we needed to simplify the procedure, so you're going to see us move into.
A couple of more iterations now that we have also clinical data that fully supports how good that therapy is that we have and now we're kind of simplifying the procedure and making got easier on the biologic side.
I think.
We are little bit we were little bit behind on the on the DBM side, and we're going to be catching up on that and then really accelerating and we have a very exciting roadmap. So what I would say right. Now there is nothing that would be totally disruptive to the market, but a lot of enhancements that are overdue.
In navigation of instruments in extending our platforms and refreshing some of our product lines that were doing what we're doing a lot of that and I would be very surprised if we had less than a dozen of these.
Come Q4 that already.
And in in our Salesforce Sands.
Got it you pick back taking back to 2017, you can take me back to 2003, if you like.
Hey, guys I'm looking forward to the close.
Thank you very much the.
Thank you and as a reminder that style one for questions.
Our next question on cost line, Brandon spoke from Cantor Fitzgerald.
And again.
Hi, Thanks for taking my question, Greg Congratulations on getting the findings that today and firstly just decline you called out the recovery and revenue you saw in May June can you just elaborate if you saw this at Costco portfolio.
Any specific products driving exit cap rate.
And perhaps maybe.
Can you talk a little but about capital allocation priorities post spin I know you talked about investing for the next phase of growth how should we see that versus bringing in additional product and then losses just to follow on earlier question regarding the FCC investigation.
That's all part of any risk to delay in closing the transaction.
And just to confirm is that staying with the spine Curt will get it goes.
In business it with some sort of desiccation agreement. Thank you.
Sure.
Let me take the first part as I think John is probably better suited.
To address the the second part.
If your question so Brendan like we said the OEM business typically we get orders that are firm.
Head of time, and so the second quarter impact for the OEM business were pretty limited I would say.
There were some impact, but nothing really of significance. So the return to the procedures that we saw.
And the uptake that we've seen in May and June is more specifically in our more what we're calling the direct business. So it's more the spine and it's more of the Prs business and the sports business that we basically have.
So thats the answer too so that first question, yes, I think we might also be seen a higher level procedures being performed in the SD Rxrna hospitals, because I think what youre seeing is the surgeons want to do surgery. So there ill use the term shopping there procedure to find a location that will allow them to serve patient.
Because we still have people in pain.
And so that's the other.
Trend that we're seeing.
And that impact than to a lesser degree product choice.
From a recovery perspective, and then the last comment I'd say international we were surprised to see Europe come back.
In the second part of June.
Was much more much stronger than we thought.
In that space.
Regarding your capital from a capital allocation perspective, we'll close the transaction.
With somewhere we say between 100 125, probably between 150 to 125 million in cash.
And it's really our priority is aligned with what we outlined at the areas focus so building out.
Spine specific infrastructure.
It's a little bit different than what we've historically experienced when we talked about that because we will be essentially virtual with most of our manufacturing provided by third party providers and we will have outsourced.
Our distribution.
So when we talk about building it out its really technology, both in support of procedure based selling.
And systems to manage the business.
And then as we talked about.
Clearly focused on continuing investment in innovation.
We've got tremendous design center in Germany that we got in conjunction with design acquisition that we intend to continue to support as well as building out a spine specific innovation competency.
Under Terry's.
In the team to these buildings leadership.
And then finally I think certain aspects of our strategy will be best.
Pursued through acquisition.
And so we'll continue to maintain.
Hi, some portion of our capital reserved for.
The more aggressive growth.
Investments that we intend to make to move the business forward.
And then your final question around the risk of the SEC investigation, So our DIY Holdings, Inc.
Which is the public company that is under investigation will continue to exist post the transaction, we're just selling off a material portion of the assets in so the investigation, although relates to activity within the business that we're selling is of the publicly traded entity that will be continued.
To be our DIY Holdings, Inc. So we will.
You will still be responsible for being responsive and maintaining the dialogue with the FCC to move them through the investigation and hopefully bring that to resolution.
Great. Thanks, very much and congratulations again on getting everything up today.
Thanks, Thanks Ren.
And once again, let's start worn for questions.
Next question will come from the line Lee Cooperman from Omega family Office.
We began to.
Add my congratulations you accomplishments, let me ask a question, which I think is really very much at odds with the presentation.
When you say that were eight in the top 10 spine.
The company.
Based on most industries I know the good industries don't have 10.
Important competitors, so has the board or the management thought about see advisability of de risking shareholders by becoming part of a larger company.
In terms of the improving our ability to compete Debbie one question and that related to that you mentioned that to be relevant you thought you'd have a double your sales base. How long do you think would take few to double your sales base exclusive of acquisitions and in the last question is can you details in terms of the convertible preferred.
Is it callable, which conversion price.
What flexibility you have to deal with it. Thank you very much and good luck.
Thank you.
Regarding the.
Yes around the top than the way we looked at the market is there our tier one companies and cold.
From Globus up to the fewer Medtronic.
And then that what I would refer to as Vic tier one and then there is a gap between that tier one and the tier two where you see us play in that and lets call. These in the range of 102 200 million.
Tier two we have and our strategy at least through phase one and as we're continuing to.
Finalize and fine tune, our our phase two.
On a go forward basis is to become the destination for the independent distributor in that phase in that year to group.
We continue to amass very unique.
Technologies and therapies and procedures.
In order to differentiate ourselves.
That will create value I think whether we're a tier two or not we don't have a goal or an intent as our strategy to be part of another company. However, when that presents itself just like it did on the OEM side, we're not making the right decision to unlock value for our shareholders.
But we believe that we've made the right moves we will continue to make the right moves and.
To be a part of our strategy as I said.
We can be standalone through differentiation and scale, we have strong balance sheet that will allow and support to do that.
But if there is a conversation where we feel we can serve more patients and better.
Through a different combination we would be very open to that at that time should it presents itself.
Regarding the second question on the organic growth our target organically is to continue to drive growth consistently as we have said, we anticipate I can tell you easily into short term in the next couple of years, it will easily be double digit growth for.
For the steam driving with innovation.
And in a lot of focus on productivity and number of patients treated.
Without products.
Regarding the last on the converts yes, just direct you to the public.
Disclosures because I think there. These are yes, I can give you had a summary level, but I think it the question warrants review of our public documents because it's a it's not it's a it's a sophisticated.
Instrument that has a number of different provisions in sight, rather you just I think its best suited to just re directly through our public disclosures.
Thank you for your responses.
Okay, great. Thank you.
Well again I'm not showing any further questions at this time.
The call back over to Mr. flat for closing remarks, thanks Victor.
Thank you for your ongoing interest in our T.I. surgical despite the tumultuous environment, we find ourselves in today.
We are very proud of what we've been able to accomplish over the last few years and what the future holds for RTL.
Clearly the sale of the OEM business is a fantastic outcome. One that allows the company to shift its focus to drive the acceleration of growth as a pure play global spine business leveraging gets fundamental market position and balance sheet strength, we look forward to updating you on our ongoing progress.
Our next quarterly call. Thank you and have a great day.
Ladies and gentlemen, this concludes today's conference call. Thank you.
Participating.
Now disconnect.
[music].