Q4 2021 NuVasive Inc Earnings Call

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Speaker 1: Thank you. Good afternoon everyone. Joining me today are Chris Berry, Chief Executive Officer, and Matt Harbo, Chief Financial Officer.

Thank you good afternoon, everyone. Joining me today are Chris Barry Chief Executive Officer, and Matt Harbaugh, Chief Financial Officer.

Speaker 1: Chris will provide an overview of Novasive's fourth quarter and full year 2021 business results and trends.

Chris will provide an overview of innovations fourth quarter and full year 2021 business results and trends.

Speaker 1: And Matt will review our detailed financial results and our 2022 financial guidance. And then we'll host a question and answer session.

And Matt will review, our detailed financial results and our 2022 financial guidance.

Then we will host a question and answer session.

Speaker 1: The earnings release, which we issued earlier this afternoon, is posted on the IR section of our website and has been filed on Form 8K with the SEC.

The earnings release, which we issued earlier. This afternoon is posted on the IR section of our website.

It has been filed on form 8-K with the SEC.

Speaker 1: We have also posted supplemental financial information on our IR website.

We have also posted supplemental financial information on our IR website.

Speaker 1: As a reminder, this call is being recorded and an archive will be available on our IR site later today.

As a reminder, this call is being recorded and an archive will be available on our IR site later today.

Speaker 1: Before we get started, I'd like to remind you that our comments during this call will include forward-looking statements which are based on current expectations and involve risks and uncertainties, assumptions, and other factors.

Before we get started I'd like to remind you that our comments. During this call will include forward looking statements, which are based on current expectations and involve risks and uncertainties assumptions and other factors.

Speaker 1: which if they do materialize or prove to be correct, could cause actual results to differ materially from those expressed or implied by such forward-looking states.

Which if they do materialize or prove to be correct could cause actual results to differ materially from those expressed or implied by such forward looking statements.

Speaker 1: The factors that could cause actual results to differ materially are described in the invasive news release and periodic filings with the...

The factors that could cause actual results to differ materially are described in invasive news release and periodic filings with the SEC.

Speaker 1: Except as required by law, we assume no obligation to update any forward-looking statements or information which speak as of their respective date.

Except as required by law, we assume no obligation to update any forward looking statements or information, which speak as of their respective date.

Speaker 1: In addition, this call will include certain non-GAAP financial measures. Reconciliations of these measures to the most directly comparable GAAP financial measures are included in today's earnings release and in the supplemental information, both of which are accessible from the IR section of NUVACIN's website. And now I'd like to introduce Chris Berry. Thank you.

In addition, this call will include certain non-GAAP financial measures reconciliations of these measures to the most directly comparable GAAP financial measures are included in today's earnings release and in the supplemental information both of which are accessible from the IR section of Nuvasive website.

And now I'd like to introduce Chris Barry.

Thank you Juliet and good afternoon, everyone.

Speaker 2: Earlier today, we reported our fourth quarter in full year 2021 financial results.

Earlier today, we reported our fourth quarter and full year 2021 financial results.

Speaker 2: On today's call, I'll provide an overview of 2021 and why I'm excited about 2022, including product innovation updates and our commercial progress to deliver growth.

On today's call I'll provide an overview of 2021 and why I'm excited about 2022.

Clothing product innovation updates.

Commercial progress to deliver growth and shareholder value.

Speaker 2: Matt will share additional details on the fourth quarter and full year 2021 performance, as well as 2022.

Matt will share additional details on the fourth quarter and full year 2021 performance as well as 2022 financial guidance.

Speaker 2: Our progress during the fourth quarter and in 2021 reflects how our market leading product portfolio and new product introductions are advancing the company's strategy.

Our progress during the fourth quarter and in 2021 reflects our market leading product portfolio and new product introductions are advancing the company's strategy.

Speaker 2: I'm excited about how our investments over the past three years have positioned us to accelerate growth in 2022 and beyond.

I'm excited about how our investments over the past three years have positioned us to accelerate growth in 2022 and beyond.

Speaker 2: For the full year, our 2021 net sales came in at $1,139,000,000, an increase of 8.4% on a reported basis, or 8.1% on a constant currency basis, compared to the prior year.

For the full year, our 2021 net sales came in at $1 billion $139 million, an increase of eight 4% on a reported basis or eight 1% on a constant currency basis compared to the prior year.

Speaker 2: In a challenging environment, we grew our US spinal hardware and US surgical support business lines and delivered strong performance in our international business.

In a challenging environment, we grew our U S spinal hardware in U S surgical support business lines and delivered strong performance in our international business.

Speaker 2: Specifically, our CoreSpine business in Asia Pacific, Europe , and Latin America delivered double-digit growth for the year.

Specifically, our core spine business in Asia Pacific Europe , and Latin America delivered double digit growth for the year.

Speaker 2: which reflects our progress to globalize our business in key strategic markets.

Which reflects our progress to globalize our business in key strategic markets.

Speaker 2: As I've shared before, we have multiple vectors to drive growth.

As I've shared before we have multiple back just to drive growth.

Speaker 2: And during the fourth quarter, you saw us make progress on our strategy to extend our leadership position in less than a year.

And during the fourth quarter, you saw us make progress on our strategy.

To extend our leadership position in less invasive surgery.

Speaker 2: Take share in subsegments where we historically had underrepresented market share.

It takes share in sub segments, where we historically had underrepresent in market share.

Speaker 2: deliver differentiated innovation in enabling technology, and grow our international business.

Deliver differentiated innovation, and enabling technology and grow our international business.

Speaker 2: In lesson-based spine surgery, we have continued to invest into comprehensive, procedurally-integrated solutions.

And less invasive spine surgery, we have continued to invest into comprehensive procedurally integrated solutions that provide surgeons the flexibility to treat any patient pathology with any procedural offering all from new bases.

Speaker 2: to provide surgeons the flexibility to treat any patient pathology with any procedural offering, all from NuVase.

Speaker 2: Our clinically validated solutions help address the interior and post-eurocolum from a lateral or prone position.

Our clinically validated solutions help address the interior and post your column from a lateral or proposition.

Speaker 2: We are well positioned to extend our market leadership in a $900 million and period and $1.6 billion post-series fines up second.

We are well positioned to extend our market leadership in the $900 million interior and one $6 billion post steroid response sub segments.

Speaker 2: Port-of-Axelus, the industry's only lateral procedure proven with 15 years of clungol evidence.

In support of ex left the industry's only lateral procedure proven with 15 years of clinical evidence we're.

Speaker 2: We're excited about mod XXX-LIF. Our next generation expandable inner body for lateral spine surgery.

We're excited about Mod ex excellent our next generation expandable inner body for lateral spine surgery.

Speaker 2: This expandable inner body is manufactured with the latest technology for advanced material science, research and development team. And we will begin cleaning.

This expandable inner body is manufactured with the latest technology from advanced materials Science research and development team.

We will begin clinical evaluations in 2022.

Speaker 2: And key focus area within our X360 portfolio for single position lateral surgery is our XA-LIT

A key focus area within our X 360 portfolio for single position lateral surgery is or ex Ayliffe procedure.

Speaker 2: We've seen continued growth from XA-LIF through increased access surge and training in new product introductions, including modules A-LIF, and we are now the market leader in A-LIF.

We've seen continued growth from xa lift through increased access surgeon training and new product introductions, including modulus a list and we are now the market leader and a list.

Speaker 2: We also expect growth from our T-LIF portfolio. And we're expanding our offerings in 2022 to feature new technology.

We also expect growth from our chiller portfolio and we're expanding our offerings in 2022 to feature new technologies.

Speaker 2: Mod XPL, our next generation Xpanel antibody for posterior lumbar procedures, will begin clinical evaluations in 2022.

MA X P O. Our next generation expandable antibody for post area of lumbar procedures will begin clinical evaluations in 2022.

Speaker 2: The Navasive Tube System, a tubular retractor system designed to support less invasive posterior decompression and fusion procedures is scheduled to launch in the second half of 2022.

And the base of tube system, a tubular retractor system designed to support less invasive posterior decompression and fusion procedures is scheduled to launch in the second half of 2022.

Speaker 2: These technologies help extend our market leading T-LIF portfolio.

These technologies help extend our market leading to lift portfolio.

Speaker 2: Our investments deliver growth and the $2.6 billion cervical sub-segment paid off in 2021.

Our investments to deliver growth in the $2 $6 billion cervical subsegment paid off in 2021.

Speaker 2: Our C360 portfolio delivered double digit growth in both the fourth quarter and four year 2021. Led by the new base of Simplify cervical disc and the new base of interior column plating system. The Simplify disc has been...

Our seed 360 portfolio delivered double digit growth in both the fourth quarter and full year 2021.

Led by the new base of simplify cervical disc and innovative anterior column plating system.

The simple like this has been well received by our surgeon partners and.

Speaker 2: And I'm pleased to announce we exceeded our initial expectations for net sales in 2021.

And I am pleased to announce we exceeded our initial expectations for net sales in 2021.

Speaker 2: With the simplified disk now integrated into our supply chain, we've expanded capacity and expect future growth for this high differentiated technology. Our investments to create a world-class manufacturing facility have provided a unique capability to integrate current and future technologies into our global operations.

With a simplified desk now integrated into our supply chain, we've expanded capacity and expect future growth for this highly differentiated technology, our investments to create a world class manufacturing facility and provide a unique capability to integrate current and future technologies into our global operations.

Speaker 2: We received a initial FDA, EMA approval to move simplified manufacturing to our Ohio facility.

We received initial F D. A PMA approval to move simplify manufacturing to our Ohio facility and.

Speaker 2: And we have additional PMA approvals needed for assembly and packaging, which we expect in late 2020.

And we have additional PMA approvals needed for assembly and packaging, which we expect in late 2022.

To further extend our cervical portfolio, we expect to launch <unk> cervical or next generation posterior cervical fixation system.

Speaker 2: And further extend our cervical portfolio, we expect to launch Reline cervical, our next generation posterior cervical fixation system, in the third quarter of 2022.

In the third quarter of 2022.

Speaker 2: Reliance cervical builds off the Reliance fixation system. One of the spines most comprehensive fixation systems on the market. Offering procedural versatility and compatibility with the both flats.

Relapsed cervical builds off the reliance fixation system wants spines, most comprehensive fixation systems on the market offering procedural versatility and compatibility with the pulse platform.

Speaker 2: With our ACP system, simplified disk and reliant cervical, we anticipate continued strong performance from the industry's most innovative cervical portfolio.

With our ACP system simplify disk and realigned cervical we anticipate continued strong performance from the industry's most innovative surgical portfolio.

Speaker 2: Moving to an avalanche technology, the POST platform continues to achieve key milestones following its commercial launch in the third quarter of 2021.

Moving to enabling technology. The pulse platform continues to achieve key milestones following its commercial launch in the third quarter of 2021.

Speaker 2: with customer sites up and running across the United States and our first European commercial contracts received in the first quarter of 2022, hospitals and surgeon partners see the unique value of Pulse's software ecosystem that integrates multiple hardware technologies into a single platform.

With customer sites up and running across the United States and our first European commercial contracts received in the first quarter of 2022 hospitals in surgeon partners see the unique value of both the software ecosystem that integrates multiple hardware technologies into a single platform.

Speaker 2: Paul Sassemos workflow provides surging the ability to utilize multiple technologies in a single procedure.

Pulse is seamless workflow provides surgeons the ability to utilize multiple technologies in a single procedure.

Speaker 2: providing utility in 100% of spine surgery cases and helping to deliver improved operational, financial and clinical outcomes.

Providing utility and 100% of spine surgery cases, and helping to deliver improved operational financial and clinical outcomes.

Speaker 2: Operationally, the Post-platform is a single unit of capital equipment with two fixed screens, wireless device connectivity, and multiple integrated software technology.

Operationally the pulse platform as a single unit of a capital equipment with two fixed screens wireless device connectivity and multiple integrated software technologies.

Speaker 2: The reduced foot brand in the operating room provides increased efficiency for the surgeon and staff.

The reduced footprint in the operating room provides increased efficiency for the surgeon and staff.

Speaker 2: Financial aid pulses extensible nature maximizes the hospital's investment.

Financially pulses extensible nature maximizes the hospital's investment.

Speaker 2: Through an initial purchase, providers can add future surgical applications from new VASIV and third party partners that will integrate with the plan.

Through an initial purchase providers can add future surgical applications from Nuvasive and third party partners that will integrate with the platform.

Speaker 2: And clinically, our internals testing shows navigation accuracy error rates are significantly lower than other leading navigation systems on the mark.

And clinically our internals testing shows navigation accuracy error rates are significantly lower than other leading navigation systems on the market.

Speaker 2: RR&D teams are completing the next system level software release for the pulse platform, launching in the second quarter of 2022.

Our R&D teams are completing the next system level software released with the pulse platform launching in the second quarter of 2022.

Speaker 2: The upcoming software release will include further integration with Siemens Healthineers COSPIN 3D Mobile CR and additional capabilities to improve remote system upgrades and support of customer go live up.

The upcoming software release will include further integration with Siemens Health and your C O spin <unk> mobile C arm.

And additional capabilities to improve remote system upgrades in support of customer go live efforts.

Speaker 2: Both increases the procedure of value across our entire spine portfolio.

Pulse increases the procedure of value across our entire spine portfolio.

Speaker 2: The value proposition of the platform is reflected in the growing global commercial pipeline in the United States, Europe , and Asia-Pacific.

Your proposition of the platform is reflected in the growing global commercial pipeline in the United States, Europe and Asia Pacific.

Speaker 2: As the ex-lipp procedure divine much of our past success, the pulse platform will help redefine who we are today and has the potential to change the future of spine care.

As the excellent procedure to mind much of our past success. The pulse platform will help redefine who we are today and has the potential to change the future of spine care.

Speaker 2: International continues to be a significant growth contributor for the company through discipline, commercial operations and execution.

International continues to be a significant growth contributor for the company through disciplined commercial operations and execution.

Speaker 2: We expect to see continued growth from our international course blind business in 2022, led by our teams in Europe , Japan, and Asia Pacific, as well as from our new VASIS Specialized Orthopedics portfolio, which we are...

We expect to see continued growth from our international core spine business in 2022 led by our teams in Europe , Japan and Asia Pacific.

As well as from our Nuvasive specialized orthopedics portfolio.

Which we are continuing to return to market in key geographies.

Speaker 2: And as we grow globally, we know that we must be mindful of the impact we have on the world around us.

And as we grow globally, we know that we must be mindful of the impact we have on the world around us.

Speaker 2: To support our social responsibility efforts, we've recently published the company's first environmental, social, and government report, which outlines our commitment to make...

Our social responsibility efforts, we recently published the company's first environmental social and governance report.

Which outlines our commitment to make a difference around the world.

Speaker 2: In our ESG report, we discuss our mission to manage our business ethically in response.

In our ESG report, we discuss our mission to manage our business ethically and responsibly and the many actions we've taken to keep our employees safe and healthy minimize our environmental impact and give back to our communities.

Speaker 2: In the many actions we've taken to keep our employees safe and healthy, minimize our environmental impact and give back to our communities. We recognize

We recognize we have more work to do and we will continue to lay the foundation to advance our sustainability efforts.

Speaker 2: and we will continue to lay the foundation to advance our sustainability up.

Speaker 2: In closing, I believe we are well positioned to win. When I joined the company three years ago, we were primarily focused on a single sub-segment of spine. We are now set up with...

In closing I believe we are well positioned to win.

When I joined the company three years ago, we were primarily focused on a single subsegment of spine.

We are now set up with multiple vectors of growth.

Speaker 2: and possess the industry's most comprehensive portfolio of procedurally integrated solutions.

And possess the industry's most comprehensive portfolio of procedurally integrated solutions.

Speaker 2: We've evolved as a company and our evolution will continue in 2022 and beyond. As we help define your

We've evolved as a company and our evolution will continue in 2022 and beyond.

As we help define the future of spine surgery.

Speaker 2: We have made purposeful investments to ensure that our portfolio is highly differentiated in interior, posterior, and cervical spine surgery and further complemented by enabling technology.

We've made purposeful investments to ensure that our portfolio is highly differentiated and anterior posterior cervical spine surgery.

And further complemented by enabling technology.

Speaker 2: Our R&D marketing and commercial efforts are aligned to target subsegments where we have to historically been under-represent.

Our R&D marketing and commercial efforts are aligned to target sub segments, where we have historically been underrepresented.

Speaker 2: R&D pipeline reflects an increasing shift or software related and break the renovation.

Our R&D pipeline reflects an increasing shift towards software related and breakthrough innovation.

Speaker 2: and our commercial organization has the leadership and infrastructure in place to increase customer density.

And our commercial organization has the leadership and infrastructure in place to increase customer density.

I'm proud of our company's response through another challenging year.

Speaker 2: While we can't control the macro environment, as the potential future impact of COVID-19 continues to be unknown, we can control how we lead our organization through these critical times.

While we can't control the macro environment as the potential future impact of COVID-19 continues to be unknown, we can't control, how we lead our organization through these critical times.

Speaker 2: To that end, I believe our strategic plan and investments are paying off through the successful mark response to the C364 portfolio, growing utilization and commercial pipeline of the Pulse Platform.

To that end I believe our strategic plan and investments are paying off through the successful market response to the <unk> 360 portfolio.

Growing utilization in commercial pipeline of the pulse platform and.

Speaker 2: and best in class product introductions in 2022 across each spine subsec.

And best in class product introductions in 2022 across each spine subsegment.

Speaker 2: We remain focused on executing on our strategic plan to deliver growth and shareholder value in 2022 and for years to come.

We remain focused on executing on our strategic plan to deliver growth and shareholder value in 2022 and for years to come.

Now I'll turn the call over to Matt.

Speaker 3: Thanks Chris and good afternoon everyone. Today I will focus my comments on our fourth quarter and full year 2021 financial results in drivers.

Thanks, Chris and good afternoon, everyone. Today, I will focus my comments on our fourth quarter and full year 2021 financial results and drivers beginning with a high level overview and commentary of our major product lines. I will also walk you through our 2022 financial guidance, our detailed financial results have been <unk>.

Speaker 3: with a high level overview and commentary of our major product lines. I will also walk you through our 2022 Financial Guide.

Speaker 3: Our decal financial results have been provided in today's press release.

In today's press release during my remarks, I will be discussing both GAAP and non-GAAP measures and refer you to our press release for non-GAAP reconciliations.

Speaker 3: During my remarks, I will be discussing both GAAP and non- GAAP measures and refer you to our press release for non-GAP reconciliation.

Speaker 3: Total fourth quarter net sales were $302.1 million, an increase of 3.5% as reported, and 4.5% on a constant currency basis compared to the prior year period.

Total fourth quarter net sales were $302 1 million, an increase of three 5% as reported and four 5% on a constant currency basis compared to the prior year period.

Speaker 3: Full year 2021 net sales were $1 billion, $139 million, an increase of 8.4% as reported, and 8.1% on a constant currency basis, compared to $1 billion, 51 million in the prior year. Both fourth quarter and full year 2021 net sales reflected the continued impact of COVID-19 on elected procedures and hospital staffing shortages in particular.

Full year 2021, net sales were $1 billion $139 million, an increase of eight 4% as reported and eight 1% on a constant currency basis compared to $1 $51 million in the prior year, both fourth quarter and full year 2021 net sales reflect.

The continued impact of COVID-19 on elective procedures and hospital staffing shortages in particular.

Speaker 3: Despite these headwinds, we still continue positive momentum for a new product introduction.

Despite these headwinds we saw continued positive momentum for new product introductions, including the pulse platform in our cervical portfolio led by the simplify cervical disc I will provide additional color on the performance of these innovative products a bit later.

Speaker 3: including the pulse platform and our server portfolio led by this simplified server of disk. I will provide additional color on the performance of these innovative products a bit later.

Speaker 3: International net sales of $71.9 million in the fourth quarter of 2021 grew 3.9% as reported and 7.9% on a constant currency basis compared to the prior year period. These results were driven by Asia Pacific, primarily Japan, and Latin America posting double-digit growth.

International net sales of $71 $9 million in the fourth quarter of 2021 grew three 9% as reported and seven 9% on a constant currency basis compared to the prior year period. These results were driven by Asia Pacific, primarily Japan, and Latin America posting.

Double digit growth euro.

Speaker 3: Europe declined slightly during the fourth quarter of 2021 compared to the prior year period due to COVID-related restrictions on elective surgery.

Europe declined slightly during the fourth quarter of 2021 compared to the prior year period due to COVID-19 related restrictions on elective surgeries.

Speaker 3: International net sales for the full year 2021 were $269.2 million. An increase of 15.3% as reported and 13.7% on a constant currency basis compared to $233.6 million in the prior year.

International net sales for the full year 2021 were $269 2 million an increase of 15, 3% as reported and 13, 7% on a constant currency basis compared to $233 $6 million in the prior year.

Speaker 3: Notably, due to our continued growth outside the United States, our international business is now nearly a quarter of our total company, NutSales.

Notably due to our continued growth outside the United States. Our international business is now nearly a quarter of our total company net sales.

Speaker 3: During our third quarter earnings call, we discussed how new VASIS specialized orthopedics product availability, negatively impacted our NETS fails for the quarter, particularly outside of the United States.

During our third quarter earnings call, we discussed how nuvasive specialized orthopedics product availability negatively impacted our net sales for the quarter, particularly outside of the United States.

Speaker 3: During the fourth quarter, we began returning precise titanium products to market, and I'm pleased to report that we are now back in the majority of our key geogers.

During the fourth quarter, we began returning precise titanium products to market and I am pleased to report that we are now back in the majority of our key geographies.

Speaker 3: Now I'd like to share some key highlights from our US product one.

Now I'd like to share some key highlights from our U S product lines U S. Spinal hardware net sales were $165 million in the fourth quarter of 2021, representing a three 4% increase compared to the prior year period full year net sales were $610 $8 million and.

Speaker 3: US final hardware net sales were $106.5 million in the fourth quarter of 2021, representing a 3.4% increase compared to the prior year period. Full year net sales were $610.8 million, an increase of 7.4% compared to the prior year.

Kris of seven 4% compared to the prior year within U S. Spinal hardware. Our cervical franchise was a continued bright spot with net sales growth of 30% in the fourth quarter compared to the prior year period for the full year surgical net sales grew 23, 7% and we are.

Speaker 3: In the US final hardware, our cervical franchise was a continued bright spot with net sales growth of 30% in the fourth quarter compared to the prior year period. For the full year, cervical net sales grew 23.7%. We are very pleased to report we exceeded our original full year net sales expectations for the simplified cervical disc.

Very pleased to report we exceeded our original full year net sales expectations for the simplify cervical disc.

Speaker 3: US surgical support net sales were $69.7 million in the fourth quarter, which represented growth of 3.4 percent compared to the prior year period, primarily due to sales of the adverse bone cry of urine or increased oxygen during reduction in Survival.

U S surgical support net sales were $69 $7 million in the fourth quarter, which represented growth of three 4% compared to the prior year period, primarily due to sales of the pulse platform.

Speaker 3: Notably, the fourth quarter was the first full quarter since we commercialized the pulse platform.

Notably the fourth quarter was the first full quarter since we commercialized the pulse platform.

Speaker 3: pulse perform well during Q4 and exceeded our full year expectations for net sales. Importantly, we are building a strong global net sales pipeline for future growth as Chris mentioned.

Pulse performed well during Q4 and exceeded our full year expectations for net sales importantly, we are building a strong global net sales pipeline for future growth as Chris mentioned previously.

Speaker 3: Turning out operating highlights, non-GAP gross profit in the fourth quarter was $219.1 million compared to $208.9 million in the prior year period.

Turning now to operating highlights non-GAAP gross profit in the fourth quarter was $219 1 million compared to $208 $9 million in the prior year period.

Speaker 3: For the full year, non-Gap Rose Prophet was $832.8 million, an increase of approximately 14%, compared to $730.7 million in the prior year.

For the full year non-GAAP gross profit was $832 8 million, an increase of approximately 14% compared to $737 million in the prior year.

Speaker 3: Non-Gabbrose Margin for the fourth quarter of 2021 was 72.5%, an increase of 90 basis points compared to 71.6% in the prior year period.

non-GAAP gross margin for the fourth quarter of 2021 was 72, 5% an increase of 90 basis points compared to 71, 6% in the prior year period the year over year improvement was primarily driven by a decrease in inventory charges.

Speaker 3: year over year improvement was primarily driven by a decrease in inventory charts.

Speaker 3: Fourth quarter, 2021, non-gap operating expenses were $180.3 million, an increase of 10.7%, compared to $162.8 million in the prior year period. The year-over-year increase was primarily driven by investments in our commercial channel, higher labor costs, and increase freight and travel expense.

Fourth quarter 2021, non-GAAP operating expenses were $183 million, an increase of 10, 7% compared to $162 $8 million in the prior year period. The year over year increase was primarily driven by investments in our commercial channel higher labor costs and increase free.

<unk> and travel expenses.

Speaker 3: NONGAF R&D expenses in the fourth quarter of 2021 increase to $23.1 million as we continue to invest in the Pulse Platform, Pulse Robotics, and our core spine portfolio. This compared to $20.3 million in the prior year period.

non-GAAP R&D expenses in the fourth quarter of 2021 increased to $23 $1 million as we continue to invest in the pulse platform pulse robotics, and our core spine portfolio this compared to $23 million in the prior year period.

Speaker 3: On a full-year basis, non-gap operating expenses were $687.3 million compared to $614.1 million in the prior year.

On a full year basis, non-GAAP operating expenses were $687 $3 million.

Compared to $614 $1 million in the prior year.

Speaker 3: On a gap basis for the fourth quarter of 2021, we reported operating margin of negative 9.4% compared to positive 6.9% operating margin in the prior year period.

On a GAAP basis for the fourth quarter of 2021, we reported operating margin of negative nine 4% compared to positive six 9% operating margin in the prior year period.

Speaker 3: During the fourth quarter of 2021, we recorded a charge of $46.6 million associated with an increase in the contingent consideration liabilities for the Simplify Medical Acquisition, which in turn had a negative impact on our gap operating expenses and gap operating.

During the fourth quarter of 2021, we recorded a charge of $46 $6 million associated with an increase in the contingent consideration liabilities for the simplify medical acquisition, which in turn had a negative impact on our GAAP operating expenses and GAAP operating margin.

Speaker 3: Our acquisition of simplified medical included upfront consideration as well as future milestone.

Our acquisition of simplify medical included upfront consideration as well as future milestone payments. The remaining milestone payments are based on net sales from products incorporating the simplify medical technology and are payable in each of the years 2023, 2024 and 2025.

Speaker 3: The Meaning Milestone payments are based on net sales from products incorporating the Simplify Medical Technology and are payable in each of the years 2023, 2024 and 2025. As Chris indicated, we are very pleased with the commercial performance and sales prospects for the Simplify cervical disc.

As Chris indicated we are very pleased with the commercial performance since sales prospects for the simplify cervical disc.

Speaker 3: we updated our future sales forecast for this innovative technology accord.

And we updated our future sales forecast for this innovative technology accordingly.

Speaker 3: On a full-your-basis Gap operating margin declined by 480 bases.

On a full year basis, GAAP operating margin declined by 480 basis points to negative one 1% compared to positive three 6% in the prior year.

Speaker 3: negative 1.1% compared to positive 3.6% in the prior year.

Speaker 3: Fourth quarter, 2021 non-GAAP Operating Margin, was 12.9%, a decrease of 290 basis points from 15.8% in the prior year period.

Fourth quarter 2021, non-GAAP operating margin was 12, 9% a decrease of 290 basis points from 15, 8% in the prior year period.

Speaker 3: Your overyear decline was primarily driven by costs from the addition of simplified medical as well as continued investments in infrastructure, R&D and commercial, which were partially offset by supply chain efficiency.

Year over year decline was primarily driven by costs from the addition of simplify medical as well as continued investments in infrastructure, R&D and commercial which were partially offset by supply chain efficiency gains.

Speaker 3: On a full-year basis, non-gab operating margin increased by 170 basis points to 12.8% compared to 11.1% in the prior year.

On a full year basis, non-GAAP operating margin increased by 170 basis points to 12, 8% compared to 11, 1% in the prior year.

Speaker 3: Non-gap other income and expense increased in the fourth quarter to $8.8 million of expense compared to $6.3 million of expense in the prior year period. The year over your increase was primarily attributable to higher unrealized foreign currency losses. Primarily in Latin.

non-GAAP other income and expense increased in the fourth quarter to $8 $8 million of expense compared to $6 $3 million of expense in the prior year period. The year over year increase was primarily attributable to higher unrealized foreign currency losses, primarily in Latin American currencies.

Speaker 3: For the full year, 2021, non-GAP other income and expense was $28.2 million of expense.

For the full year 2021, non-GAAP other income and expense was $28 2 million of expense.

Speaker 3: Non-Gap tax expense in the fourth quarter of 2021 was $9.3 million compared to $9.4 million in the prior year period.

non-GAAP tax expense in the fourth quarter of 2021 was $9 $3 million compared to $9 $4 million in the prior year period.

Speaker 3: resulting in an effective tax rate of 31%, versus the prior year tax rate of 23.6%. Primarily due to losses in jurisdictions without associated tax benefits.

The resulting in an effective tax rate of 31% versus the prior year tax rate of 23, 6%, primarily due to losses in jurisdictions without associated tax benefits.

Speaker 3: For the full year 2021, our effective tax rate was 25.1%.

For the full year 2021, our effective tax rate was 25, 1%.

Speaker 3: On a gap basis, we reported a fourth quarter net loss of $36.7 million or diluted net loss per share of 71 cents compared to net income of $1.7 million or diluted earnings per share of 3 cents in the prior year period. This was largely driven by the increase in the contingent consideration liabilities for the Simplify Medical Acquisition as discussed earlier.

On a GAAP basis, we reported a fourth quarter net loss of $36 7 million or diluted net loss per share of <unk> 71.

Compared to net income of $1 $7 million or diluted earnings per share of <unk> in the prior year period. This was largely driven by the increase in the contingent consideration liabilities for the simplify medical acquisition as discussed earlier on.

Speaker 3: On a non-gap basis, we reported fourth-quarter net income of $20.7 million or diluted earnings per share of 40.

On a non-GAAP basis, we reported fourth quarter net income of $20 7 million or diluted earnings per share of <unk> 40 <unk>.

Speaker 3: and compare to net income of $30.4 million, or the Luted Erning's Pershera $59 cents in the prior year period.

Compared to net income of $30 4 million.

Our diluted earnings per share of <unk> 59 in the prior year period.

Speaker 3: For the full year 2021, we reported a gap net loss of $64.1 million or diluted loss per share of $1.24 compared to a net loss of $37.2 million or diluted net loss per share of 72 cents in the prior year. The 2021 gap net loss was largely driven by the Simplify Contingent Consideration Liability Inc-

For the full year 2021, we reported a GAAP net loss of $64 1 million or diluted loss per share of $1 24, compared to a net loss of $37 2 million or diluted net loss per share of <unk> 72 in the prior year. The 2021 GAAP net loss was largely driven by the <unk>.

Simplify contingent consideration liability increase.

Speaker 3: as well as inventory charges associated with NSO product withdrawals as discussed on our third quarter earnings call.

As well as inventory charges associated with NSO product withdrawals as discussed on our third quarter earnings call.

Speaker 3: On a non-gap basis, we reported full year 2021 net income of $87.8 million or diluted earnings per share of $1.68 compared to net income of $63.8 million or diluted earnings per share of $1.23 in the prior year.

On a non-GAAP basis, we reported full year 2021, net income of $87 8 million or diluted earnings per share of $1 68, compared to net income of $63 8 million or diluted earnings per share of $1 23 in the prior year.

Speaker 3: Turning to cash flow, our free cash flow for the fourth quarter of 2021 was $11.9 million versus $44.8 million in the prior year period.

Turning to cash flow, our free cash flow for the fourth quarter of 2021 was $11 $9 million versus $44 8 million in the prior year period. The decrease was primarily driven by lower net income and working capital timing.

Speaker 3: Decrease was primarily driven by lower net income and working capital.

Speaker 3: For the full year 2021, we generated free cash flow of $71.1 million compared to $80.2 million in the prior year.

For the full year 2021, we generated free cash flow of $71 $1 million compared to $80 $2 million in the prior year.

Speaker 3: Our balance sheet remains strong in 2021, with cash and cash equivalents of $246.1 million as of December 31, 2021. Our $550 million revolving credit facility remains undrawn.

Our balance sheet remains strong in 2021 with cash and cash equivalents of $246 $1 million as of December 31, 2021, or $550 million revolving credit facility remains undrawn.

Speaker 3: Turnied to our full year 2022 financial guidance.

Turning to our full year 2022 financial guidance.

Speaker 3: I'm pleased to say we have great confidence in our business and expect the investments we have made over the past three years to come to fruition. At the same time, we recognize the volatile environment in which we're operating with COVID and related healthcare staffing issues as well as increasing inflationary pressure.

I am pleased to say, we have great confidence in our business and expect the investments we've made over the past three years could come to fruition at the same time, we recognize the volatile environment in which we're operating with Covid and related health care staffing issues as well as increasing inflationary pressure.

Speaker 3: Given those factors, we are guiding for worldwide net sales growth of between 5-8% compared to the full year 2021 on a reported basis.

Given those factors we are guiding for worldwide net sales growth of between 5% to 8% compared to the full year 2021 on a reported basis.

Speaker 3: currently expect negative foreign currency impact of approximately a hundred basis points for the full year on a constant

We currently expect negative foreign currency impact of approximately 100 basis points for the full year on.

On a constant currency basis, we expect 6% to 9% growth in 2022.

Speaker 3: we expect 69% growth in 2022.

Speaker 3: Drilling down a bit further. From a phasing perspective, we expect the year to be more back half waited due to typical first quarter seasonality, which historically has been five to 10% sequentially lower than fourth quarter levels.

Drilling down a bit further from.

From a phasing perspective, we expect the year to be more back half weighted due to typical first quarter seasonality, which historically has been 5% to 10% sequentially lower than fourth quarter levels.

Speaker 3: This is inclusive of pulse and simple vignette sales ramping throughout 2022 after their product launches last year.

This is inclusive of pulse and simplify net sales ramping throughout 2022.

After their product launches last year.

Speaker 3: We expect fellow growth in our international business and to realize the benefit of NSO products returning to market, especially in the seasonly, strong third quarter.

We expect solid growth in our international business and to realize the benefit of NSO products, returning to market, especially in the seasonally strong third quarter.

Speaker 3: Also, we will continue to invest in R&D to drive innovation, competitive differentiation and top line growth in 2022 and beyond.

Also we will continue to invest in R&D to drive innovation competitive differentiation and topline growth in 2022 and beyond.

Speaker 3: Turning to non-gap operating margin, which we expect in the range of 13 to 14 and a half percent, reflects a return to a normalized level of spending, particularly in travel and surgeon training, as well as inflation-related impact.

Turning to non-GAAP operating margin, which we expected in the range of 13% to 14, 5% reflects a return to a normalized level of spending, particularly in travel and surgeon training as well as inflation related impacts.

Speaker 3: Finally, we expect non-gap rings per share in the range of $2.05 to $2.35.

Finally, we expect non-GAAP earnings per share in the range of $2 five to $2 35.

We believe our guidance is appropriately conservative as.

Speaker 3: We believe our guidance is appropriately conservative, as it assumes that COVID and related healthcare staffing shortages will remain with us in 2022, but gradually improved throughout the year.

It assumes that Covid and related health care staffing shortages will remain with us in 2022, but gradually improved throughout the year.

Speaker 3: The high end of our guidance range assumes modest impact to our supply chain from inflation and normalized operating costs.

The high end of our guidance range assumes modest impact to our supply chain from inflation and normalized operating costs.

Speaker 3: We remain focused on improving our operating margins to return to pre-COVID levels. Beyond that, we intend to grow our operating margins over time and will provide updated targets at our 2022 analyst day.

We remain focused on improving our operating margins to return to pre COVID-19 levels beyond that we intend to grow our operating margins over time, and we will provide updated targets at our 2022 analyst day.

Speaker 3: To conclude, despite macro conditions, we believe we have positioned the company for growth in 2022 with our full-line spine portfolio, including innovations such as the Pulse Platform and C36.

To conclude despite macro conditions, we believe we have positioned the company for growth in 2022, with our full line spine portfolio, including innovations such as the pulse platform and see 360, we're.

Speaker 3: We are excited about the market opportunities in front of us, and we appreciate the continued dedication and contribution from the new invasive team to help us achieve our mission to change a patient's life every minute. Operator.

We are excited about the market opportunities in front of us and we appreciate the continued dedication and contribution from the new base of team to help us achieve our mission to change a patient's life every minute.

Operator, we're ready to begin the Q&A session.

Speaker 4: At this time, we'll be conducting a question and answer session. If you would like to ask a question, please press star one on your telephone keypad. A confirmation someone will indicate your line is in the question queue. You might press star two if you would like to remove your question from the queue. For participants using speaker equipment, maybe necessary for you to pick up your hands up before pressing the star keys. In the interest of time, please limit yourself to one question only, one moment, while we pull for questions.

At this time, we'll be conducting a question and answer session. If you would like to ask a question. Please.

Star one on your telephone keypad, a confirmation tone will indicate your line is in the question queue. You May Press Star two if you would like to remove your question from the queue for participants using speaker equipment may be necessary for you to pick up your handset before pressing the star keys in the interest of time, please limit yourself to one question only one moment.

We pull for questions. Our first question comes from the line of Josh Jennings with Cowen You May proceed with your question.

Speaker 4: Our first question comes line of Josh Jennings with Kown when you may proceed with your question.

Speaker 5: All right, good afternoon. Thanks for taking the questions and appreciate the detailed download and guidance for 2022. I do questions on pulse. Chris wanted to just, you know, you mentioned some of the software upgrades that were on tap and wanted to just better understand any other kind of upgrades to the system in front of the robotics module, including, you know, procedural integration.

Hi, good afternoon, thanks for taking the questions and I appreciate the detailed download and guidance through 2022.

Two questions on pulse.

Just wanted to just I know you mentioned some of the software upgrades that were.

On tab and I wanted to just better understand any other kind of upgrades to the system in front of the robotics module.

Including procedural integration, such as X 360, and how that kind of road map shapes up this year and I had one follow up.

Speaker 5: such as X360 and how that kind of roadmap shapes up this year and I had one follow up. Yeah, thank you.

Yeah. Thanks, Josh.

Speaker 3: I'm excited about the progress we made on Paul's and obviously some of their early feedback.

Excited about excited about the progress we made on pause and obviously some of the early feedback from the get go. We were we were in a series of software upgrades that will go on and somewhat in perpetuity as we move forward as we look to add value of the system are ahead of us are are more instrumentation.

Speaker 3: From the get go we were in a series of software upgrades that will go on in somewhat in perpetuity as we move forward as we look to add value to the system.

Speaker 3: But ahead of us are more instrumentation, or more navigated instrumentation.

Our more navigated and instrumentation potentially then.

Speaker 3: potentially then integrating it as your point more procedural road maps within the software upgrade. So we'll likely do a software upgrade on an annual basis.

Integrating as you as your point more procedural roadmap within the software upgrades. So we'll likely do a software upgrade on an annual basis and add a lot of new functionality into the system first of all will happen. Later this year, we will talk more about it at that time and then from there we'll continue to add in software and hardware.

Speaker 3: and add a lot of new functionality into the system. First one will happen later this year. We'll talk more about it at that time, and then from there we'll continue to add in software, and hardware related applications to move forward.

It related applications as we move forward.

Speaker 5: And then just to follow up on Pulse, the thing about the pipeline and the early success you've had on the very early days of the launch, can you not understand the mix of, are you placing these systems or is the pipeline filling up with, you get the loyalist, new base of surgeons, or are you, is Pulse attracting new surgeon customers?

Great and then just a follow up on pulse this thinking about the pipeline and the early success you've had on the very early days of the launch.

Can you help us understand the mix of our U, placing new systems or is the pipeline is filling up with I guess, the loyalist new base of surgeons or are you is pulse attracting.

New surgeon customers.

Speaker 5: And it's just that on top of that, how should we think about the hardware pull through effect that the polls could deliver in 2022? I mean, our assumption that the low-hanging fruit is new to loyalist surgeons and shouldn't be in early launch days in the hill effect or pull through effect will really occur in 2023 and beyond. But just curious how you guys are thinking about that in 2022 with the guidance that was set here today. Thanks so much for taking the questions. Yeah.

And then just on top of that how should we be thinking about kind of the hardware pull through effect at pulse could deliver in 2022, I mean, our assumption that the low hanging fruit is as <unk> loyal surgeons and it's still going to be an early launch days and the halo effect or a pull through effect will really occur in 2023 and beyond but just curious how you guys are thinking about that with <unk>.

'twenty two with the guidance that was set here today. Thanks. Thanks, so much for taking the questions.

Thanks, Josh.

Speaker 3: Early days, I've said all along, we want to be as flexible as possible to create an opportunity for our customers to access this technology. That being said, the majority of what we've seen so far are primarily been sales. It's a little early to really calculate pull-through.

Early days.

I've said, all along we want to be as flexible as possible to create an opportunity for our customers to access this technology.

That being said the majority of what we've seen so far primarily been sales.

It's a little early to really calculate.

Speaker 3: So to that end, we're trying to get a better sense. We're clearly measuring and monitoring every system placed and seeing what the hair will affect the look like. We know it's there, but it's a little early to comment on. I don't know if Matt did anything else on that. Yeah, Josh, we are going to track it internally, stating the obvious, but just so everyone's clear out there, you know, in the US support, that's where it pulls.

Pull through.

So to that end, we're trying to get a better sense for clearly measuring and monitoring every system placed in seeing what the Halo effect will look like we know it's there, but it's a little early to comment on I don't know if you have anything else on that yes, Josh we are going to track it internally, stating the obvious but just so everyone's clear out there in the U S support that's where pulses.

Speaker 3: going. Any pull-through that we're going to get, though, is going to go through US spinal hardware. So, you know, we're tracking both of those numbers and at least for Q4 and last year.

This is going.

Any pull through that we're going to get those going to go through U S. Spinal hardware. So we're tracking both of those numbers and at least for Q4 and last year.

Speaker 3: It's not enough for our conversation, but we hope that changes as we get throughout the

Enough for our conversation, but we hope that changes as we get throughout this year.

Speaker 5: Great. And any detail on just the mix of Surgeon data either ordered or are in the pipeline rather than oil is to be Yeah, it's primarily been on the front side It's been a lot of folks that have been involved in the past. So it has been some oil. I would say the pipeline though reflects a little bit different story We're introducing the technology to new users. We're looking to bring in new users to to experience the pulse in our labs

Great and then any details on just the mix of.

Surgeons that are either ordered or are in the pipeline.

Yeah, Yeah, it's primarily been on the front side, it's been a lot of folks that have been involved this in the past. So it has been some wireless I would say the pipeline now reflects a different story.

We're introducing the technology to new users were looking to bring in new users to to experience. The pulse on our labs. So early early adopters and early our early folks that were that were familiar with the project have been some of our first customers are first users for a good reason because we want to really test the system as we have done over the last couple of <unk>.

Speaker 6: So early adopters and early folks that were familiar with the project have been some of our first customers, our first users for good reason, because we want to really test the system as we've done over the last couple of months. But as we go forward, it's more of a mix of both existing and new customers. So it'll evolve as we move forward the next couple of quarters, but that's what we've paid today. So let's get started.

But as we go forward there.

It's more of a mix of both existing and new and new and new customers. So it'll evolve as we move forward. The next couple of quarters, but that's what we see today.

Great I appreciate it thanks.

Speaker 4: Our next question comes from the line of Matt O'Brien with Piper Sandler you may proceed with your question.

Our next question comes from the line of Matt O'brien with Piper Sandler You May proceed with your question.

Speaker 7: I had a good afternoon. This is Geron for Madden and thank you for taking the questions.

Hi, Good afternoon. This is drew on for Matt and thank you for taking the questions.

Speaker 7: You know, just looking at the guidance you're providing today, you're providing a pretty wide range and both the top line and the bottom line. So I'm assuming you have a couple of different scenarios based indeed, part of the range there. I know you touched on a little bit as far as the bottom line goes, but maybe you could walk us through, you know, how you're thinking about each end of that range and maybe the base case assumptions around COVID and staffing shortages and all that kind of stuff that you've assumed in that range.

Just looking at the guidance, you're providing today, you're providing a pretty wide range on both the topline and bottomline.

Assuming you have a couple of different scenarios baked into each part of the range there.

I know you touched on a little bit as far as the bottom line goes, but maybe you could walk us through how you're thinking about each end of that range and maybe the base case assumptions.

Around COVID-19 and staffing shortages and all that kind of stuff that you've assumed in that range.

Speaker 6: Thanks, Jura. I'll take an hour to turn over and math to go on a little more specifics. But we came out of the last quarter with a solid. We believe a very solid 21 performance. We continue to make a lot of progress against our strategic plan, as we talked a lot about, developing multiple vectors of growth. Now we're ready to execute on those things.

Thanks, Joe I'll take it I'll turn it over to Matt to go into more specifics, but we came out of out of the last quarter or for the solid we believe a very solid 21 performance. While we continue to make a lot of progress against our strategic plan, but as we've talked a lot about developing multiple vectors of growth now we're ready to execute on those things we've continued to progress.

Speaker 3: We've continued to progress against our international runway, made significant progress in our last couple years, and I think our guidance reflects those growth opportunities that we've developed.

Against our international runway made significant progress over the last couple of years and I think our guidance reflects those growth opportunities that we've developed but it also reflects the reality, which is we haven't had a non COVID-19 impacted quarter since Q4 of 2019, and although I see the infection rates somewhat subsided.

Speaker 3: But it also reflects the reality, which is we haven't had a non-COVID-impacted quarter since Q4 2019.

Speaker 2: And although I see the infection rates somewhat subside, I'm really looking for durability in the volumes, and that's a function of staffing shortages, inflationary pressures, things that I can pay to the infection rate drop, but I don't know how these other situations that have been sort of a byproduct of COVID.

Really look at the durability and the volumes and that's a function of staffing shortages inflationary pressures things that are contained in infection rate drop, but I don't know how these other how these other situations at a better sort of a byproduct of Covid play out over the next couple of quarters. So I think our I think our guidance reflects that.

Speaker 2: play out over the next couple quarters. So I think our guidance over reflects the positives of what we've developed, but the reality of what we're still facing in the environment. So a little uncertainty, but Maddie, have any? Yeah, I would just add that the guidance gave a six to nine percent on a constant currency basis, which is really how we look at the numbers.

Positives of what we develop but the reality of what we're still facing in the environment. So low uncertainty, but Matt do you have any yeah I would just add that the.

The guidance, we gave of 6% to 9% on a constant currency basis, which is really how we look at.

The numbers internally.

Speaker 3: You know, plus or minus I'd say we're expecting about half of the growth in that 6 to 9% to come from new product introductions. And, you know, that would include obviously simplifying polls. But, you know, Chris talked about it in the prepared remarks. Modulus ALIF, cohere X-LIF, cohere T-LIF. He also talked about a number of other new products that we're launching this year. Small net sales this year, but we hope to grow those in future years. So about half from new product introduction.

Plus or minus I would say, we're expecting about half of the growth in that 6% to 9% to come from new product introductions and that would include obviously simplify impulse, but.

Chris talked about in the prepared remarks modulus, a lift cohere ex lift cohere T. Lift you also talked about a number of other new products that we're launching this year small net sales this year, but we hope to grow those in future years, so about half from new product introductions.

Speaker 3: And then the other half is from continued international execution, some growth in US course fine, and then the NSO return, which really is a third quarter of that.

And then the other half is from continued international execution.

Some some growth in U S core spine and then the NSO return, which really is a third quarter event.

Speaker 3: So that's kind of how we're thinking about the guidance. The one thing I do want to highlight though is that for Q1 specifically, we did say in the prepared remarks that we think will be down 5 to 10% sequentially. We had a tough January like a lot of other issuing companies did. And so we were not immune to that, but we will see, you know, pickups in future quarters, particularly in the back after the year.

So that's kind of how we're thinking about the guidance. The one thing I do want to highlight though is that for Q1, specifically, we did say in the prepared remarks that we think will be down 5% to 10% sequentially.

We had a tough January like a lot of other issuing companies did and so we were not immune to that but we will see.

Hiccups in future quarters, particularly in the back half of the year.

Thank you.

Speaker 4: Our next question comes from the line of Matthew Blackman. When seep will you may proceed with their question.

Our next question comes from the line of Mathew Blackman with Stifel. You May proceed with your question.

Speaker 8: Good afternoon, everybody. Thanks for taking my questions. Maybe one to start mad on on the operating margin guide. Is there any way to quantify how much of a drag the supply chain and inflation is baked into the guide and these are directional color and how to think about where you expect to get the year over year leveraged. Is it balanced across GhostGhost margin and S-GNA or is it more concentrated on in one of those line items more so than others than being too big for you? Sure, so Matt, will we...

Hi, good afternoon, everybody. Thanks for taking my questions.

Maybe one to start Matt on on the operating margin guide is there any way to quantify how much of a drag that supply chain and inflation is baked into the guide and maybe sort of directional color on how to think about where you expect to get the year over year leverage does it is it balanced across gross margin and SG&A or is it more calm.

<unk>.

One of those line items more so than others didn't I've got one follow up.

Sure So Matt what we saw last year.

Speaker 3: We talked about this in previous calls was we did see enough taking pre-cost and we've accounted for that in the guidance that we've given here.

We talked about this in previous calls was we did see an uptick in freight cost.

We've accounted for that in the guidance that we've given here.

Speaker 3: But the key here is is that we were able to absorb that through efficiencies in our supply chain. So you really didn't see it if you were looking at our gross profit or gross margin as a percent of sales. Throughout last years, you know we came in for this quarter at 73% which was notable. So as I'm kind of running through the P&L mat, I would say...

But the key here is is that we were able to absorb that through efficiencies in our supply chain. So you really didn't see it. If you were looking at our gross profit or gross margin as a percent of sales throughout last year. As you know we came in for this quarter at 73%, which was notable so as I'm kind of running through the P&L, Matt I would say.

Speaker 3: We're still anticipating a bit of a gross margin improvement. Obviously, we're keeping close watch on inflationary pressures, but we still think we're going to be able to offset some of those costs.

<unk>.

We're still anticipating a bit of a gross margin improvement.

Obviously, we're keeping a close watch on inflationary pressures, but we still think we're going to be able to offset some of those costs.

Speaker 3: From an SGNA perspective, remember we're still on a lot of product launches. We still have the lingering COVID uncertainty and we see that manifested self in our SGNA profile. And then we are certainly seeing inflationary pressure as it relates to compensation for our employees. And so all of those we think we've accounted for in the guidance we've given.

From an SG&A perspective, remember, we're still in a lot of product launches, we still have the lingering COVID-19 uncertainty and we see that manifest itself in our in our SG&A profile and then we are certainly seeing inflationary pressure as it relates to.

Compensation for our employees and so all of those we think we've accounted for in the guidance we've given.

Speaker 3: But that's the reason why we gave a large range because we want to make sure we give ourselves some room here since it's early on in the year. The final line item you're probably curious about is R&D. And it's not going to be growing to the same degree that it has in past years, but it'll still be higher. You can probably take the 23 million we did in the first quarter here and multiply it by four and you're in the zone.

But that's the reason why we gave a large range because we want to make sure we give ourselves some room here since it's early on in the year.

The final line item Youre, probably curious about as R&D and it's not going to be growing to the same degree that it has in past years, but it will still be higher.

You can probably take the <unk>.

$23 million, we did in the first quarter here and multiply it by four and Youre in the zone.

Speaker 8: And then my follow up at Chris Wheat. We've spent a lot of time talking about simplify for obvious reasons.

I appreciate that and then my follow up Chris. We we spent a lot of time talking about simplify for obvious reasons I was hoping you got a little bit more color on the performance of the broader <unk> hundred 60 portfolio. So any way to talk to what growth in the portfolio is excluding simplify or even if just generally how the portfolio is performing.

Speaker 8: So I'm hoping to do a little bit more color on the performance of the broader C364 portfolio. So do you want to talk to what growth in the portfolio is excluding, simplify, or even if just generally how the portfolio is performing, you know, is attracting to where you thought it'd be at this point? Does any color on the rest of the C364 portfolio be helpful? Thanks. I don't exclude it, but I would just say that, you know, the sum is greater than the parts. We're seeing now good.

Tracking to where you thought it would be at this point does any any color on the rest of the <unk> hundred 60 portfolio would be helpful. Thanks, I don't exclude it but I would just say that the sum is greater than the parts.

Seeing now.

Good doors open through simplified to the broader seek to receive 360 portfolio and as we've talked about we'll be introducing relying surgical later this year. So all in all we think we've got a durable growth perspective that we've talked about some of the prepared remarks, we're looking forward to executing against that up over the course of this year simplify specifically.

Speaker 2: through a simplified to the broader C3364 folio. And as we talked about, we'll be introducing your line cervical later this year.

Speaker 2: So all in all, we think we've got a durable growth perspective that we talk about some of the very marks.

Speaker 2: We're looking forward to executing against that over the course this year, symbolify specifically. Has been a highlight. It's been what we've received by our customers. We've now, as I've talked about earlier, made it completed some of the supply chain integration that we plan to do from the get-go. And we're at a schedule. So at the end of the day, we feel very good about the cervical portfolio. We've got a lot of opportunity. We've got to execute, but the broad portfolio we think plays very well. And we believe it's the most competitive cervical portfolio in the market.

It's been a highlight it's been well received by our customers, we know as I've talked about earlier mainly.

<unk> completed some of the supply chain integration that we had planned to do from the get go and we're ahead of schedule. So the end of the day, we felt very good about the surgical portfolio. We've got a lot of opportunity, but we've got to execute but but the broad portfolio. We think plays very well and we believe it is the most competitive cervical portfolio in the market.

Speaker 3: Yeah, Matt, the only other thing I would add to that is it's quite amazing how a year can change the landscape on the fourth quarter earnings call last year we were being asked by the analysts about, you know, why is cervical struggling?

Yes, Matt the only other thing I would add to that is its quite amazing how a year can change the landscape on the.

The fourth quarter earnings call last year, we were being asked by the analysts about why is cervical.

Speaker 3: And as we said in the prepared remarks, but worth repeating, you know, on a full year, year-over-year basis for the cervical cord ployo, we were up 23.7%, but for the fourth quarter alone, we were up 30%. And part of that is...

Struggling.

As we said in the prepared remarks, but worth repeating.

Full year year over year basis for the cervical portfolio, we were up 23, 7%, but for the fourth quarter alone we were up 30% and part of that is all of these coming in tandem together.

Speaker 3: all of these coming in tandem together to deliver those results.

Deliver those results and yes simplify is in there but.

Speaker 3: and yes, simplify is in there, but 30% for that portfolio is absolutely fantastic.

But 30% for that portfolio is absolutely fantastic and.

Speaker 3: You know, I would not have predicted 30% in one quarter back a year.

I would not have predicted 30% in one quarter back a year ago.

Speaker 4: Our next question comes in line of Matt Mixik with Credit Suisse. You may proceed with their question.

Our next question comes from the line of Matt Mexican with Credit Suisse. You May proceed with your question.

Speaker 9: Hey, good evening. Thanks so much for taking the question and congrats on really pretty impressive quarter on a bunch of different drivers. So just one question if I could on your comments, Chris, on A-LIF, and then I had to follow up on Pulse.

Hey, good evening. Thanks, so much for taking the question and congrats on really pretty impressive quarter on a bunch of different.

A bunch of different drivers so.

Just one question if I could on your comments, Chris on a lift and then I had a follow up on pulse.

Speaker 9: So on ALF, I mean, it is notable your leadership there, what's been happening, I guess, driven apart by X360. Could you talk about what else is driving that and what kind of runway you have to expand on that? I guess pun intended, but what sort of runway that part of your business has and I mentioned one follow-up.

So on a lift I mean it is notable.

Your leadership, there what's been happening I guess driven in part.

By <unk> hundred 60, <unk> could you talk about what else is driving that and what kind of runway you have to explore.

Expand on that I guess, I guess unintended but.

What's your runway that bit that part of your business has mentioned one follow up.

Speaker 2: yeah thanks math uh... you know we're as i've been talking about you know the evolution of the company has been from sort of that early stage disruptor with x-lift to broadening our our portfolio to be much more of a comprehensive spine player you know that the most near adjacent to your ex-lip procedure was a-lip e

Yes, Thanks, Matt.

As I as we've been talking about the <unk>.

Evolution of the company has been.

Sort of that early stage disruptor with X lift to broadening our our portfolio to be much more of a comprehensive spine player.

The most near adjacency to our excellent procedure was Ala.

Obviously, we've kind of how is that all of the interior space $900 million subsegment.

Speaker 6: So really, I think a lot of familiarity with certain surgeons that have used us on X-Lift now move.

So really I think a lot of familiarity with certain surgeons that have used us on X lift now moved over to the Ala procedure, obviously mattila play to play to a very pronounced part our focus on training education dealing with access surgeons I think play to impressive part in our growth and as I look forward. We've got we've got more launches coming on.

Speaker 6: Over to the ALA procedure, obviously my ALA played a very pronounced part. Our focus on training education dealing with access surgeons, I think, played an impressive part in our growth.

Speaker 2: Now, to look forward, you know, we've got more launches coming on this year. Mod XXX, I think, will be a key invigorator to the XXL procedure as well as launching the Prone lateral approach over the course of the year. So we've got a lot coming in the interior space. We are by no means, and I'll make sure everybody understands this by no means. Are we moving away from our leadership perspective in interior? We're compiling that with posterior and cervical, and obviously introducing enabling to enable and check the complement I brought up for folio. But, uh...

This year ex excellent I think will be a key invigorated to the extra procedure as well as launching the <unk> lateral approach over the course of the year. So we've got a lot coming in the anti aerospace we are by no means and I'll make sure everybody understands is by no means are we moving away from our leadership perspective anterior we're accomplishing that were posted.

<unk> in cervical and obviously, introducing enabling tech to complement our broader portfolio.

Speaker 6: We're very bullish on our ability to continue to lead and take share in the interiors.

We're very bullish on our ability to continue to.

Lead and take share in the interior space.

Speaker 9: That's great. And then just a follow up on pulse, you know, a couple of things about the launch that you know, we talked about a few times and you've got a lot of questions on. It had a launch for things like, you know, what will be the preferred sort of economic, you know, pricing contracting model for this.

That's great and then just a follow up on pulse a couple of things about the launch that we talked about a few times and she's got a lot of questions on ahead of the launch with things like.

What will be the preferred sort of economic pricing contracting model for this.

Speaker 9: you know purchase or or contracting and then the other being you know What's the what is the lead?

Purchase or contracting.

And then the other being <unk>.

What is the lead driver here you know there is a.

Speaker 9: driver here. There's lots of folks with navigation, not many, maybe not any other companies out there with navigation and technology to reduce x-ray exposure. And I'm just love to get a sense of how what you think the key pull is in addition to obviously being integrated navigations.

Lots of folks with navigation not many.

Not any other companies out there with navigation and technology to reduce X ray exposure and I would just love to get a sense of how the what you think the key pool is around is in addition to obviously being.

The integrated navigation system.

Speaker 2: Yeah, so, you know, I don't know that we have enough to say we have a preferred model. Clearly, somebody wants to buy it from us will definitely take the direct purchase. I mean, we're clearly looking at, kind of, came from the other question from Josh around what's the poultry scenario? That'll help us better understand the financial models that we think are most beneficial to our company.

Yes, so I don't know that we have enough to say we have a preferred model clearly somebody wants to buy from us will definitely take the the outright purchase I mean, we're clearly looking at kind of came from the earlier question from Josh around what's the bolter scenario that will help us better understand the financial models that we that we think are most beneficial to our.

Speaker 6: But so it's early days again, you know, our goal is to get quilts installed to be used in a hundred percent of spine cases.

Company, but so it's early days again, our goal is to get plus install to be used in 100% of spine cases, so we want to make it easy for people to access the technology.

Speaker 6: So we want to make easy for people to access this technology. We'll know more over the next couple quarters of sort of the financial models that that are probably most beneficial to us in over a period of time. As far as the

No more over the next couple of quarters of sort of the financial models that that are probably most beneficial to us and over what period of time as far as the driver.

Speaker 6: You know, I've had a chance to talk to several surgeons over the last week and it really comes down to workflow and the energy and the accessibility of the technology.

I've had a chance to talk to several stores over the last week and it really comes down to workflow and the synergies.

And the accessibility of the technology.

Speaker 6: Navigation, Lestray, Bendini, all incorporated into a thinker user interface as we described has resonated with our customers. We still have more work to do and more application that we can add on, which I think is further exciting and actually starts to, you know, as we talk about extensible, extend the value proposition of what this technology is.

Navigation less rate than dini, all incorporated into a single user interface as we described.

<unk> has resonated with our customers, we still have more work to do and more applications that we can add on.

Which I think is further exciting and actually starts to as we talk about extensible extend the value proposition of what this technology represents that's been the main driver I mean, clearly you have certain you have certain surgeons that love.

Speaker 6: represents. That's been the main driver. Me clearly, you have certain surgeons that love, that love Lesre, certain surgeons that really love the Bendini aspect of it. So there's differing voices coming from different components, but almost universally the integration of technology seems to resonate with the customers and we continue to to hear that from our customers.

Love less ray certain asserted that really loved the <unk> aspect of it so theres differing different voices coming from different components, but almost universally the integration of technology seems to resonate with the customers and we continue to hear that from our customers.

Speaker 4: Our next question comes from a line of Shagun Singh with RBC Capital Marketing. You may proceed with your question.

Our next question comes from the line of Vishal <unk> with RBC capital markets. You May proceed with your question great. Thank you so much.

Speaker 10: Great, thank you so much. So guys, just curious what the PULT and simplify sales were in Q4. What are you assuming in your guidance? I think you mentioned, you know, half of it is new product introductions, but it includes, you know, other items as well. And then I'm curious about the backlog, you know, by our math, NewVasive had, you know, one of the largest backlog or loss sales coming out of 2020 and 21, relative to other companies that we track. So what are you assuming in your guidance for that? And just lastly on inflation, I didn't hear you quantify the impact of inflation on margins. If you could do that, that would be helpful.

So guys just curious what the boats and simplify sales were in Q4, what are you assuming in your guidance I think you mentioned half of it is new product introductions, but it did include <unk>.

Other items as well.

And then I'm curious about the backlog.

<unk> had one of the largest backlog lost sales coming out of 2020 in 'twenty one relative to other companies that we track. So what are you assuming in your guidance for that and just lastly on inflation I didn't hear you quantify the impact of inflation on margins. If you could do that that would be helpful.

Speaker 3: Sure, so I'll take this shot here and then Chris feel free to jump in. With regard to pulse and simplify, early last year we were clear to say that the goal that we put out externally was to achieve 5 million in net sales for each of those products.

Sure. So I'll take a shot here and then Chris feel free to jump in.

With regard to pulse and simplify.

Early last year, we were clear to say that the goal that we put out externally was to achieve $5 million in net sales for each of those products, we exceeded that on both of those for pulse really if you look at <unk>.

Speaker 3: We repeated that on both of those. For Pulse, really, if you look at US surgical support, that's where you're gonna see Pulse for the fourth quarter in the coming years. That's where that growth is manifesting itself.

U S surgical support that's where youre going to see pulse for.

For the fourth quarter, and the coming years, Thats, where that growth is manifesting itself with simplify rather than talk about simplify because what we know is that if youre only modeling simplify and youre missing the whole point of <unk> hundred 60, and ACP and things like that youre not going to really fully appreciate the growth rates that were post.

Speaker 3: with simplify rather than talk about simplify because what we know is that if you're only modeling simplify and you're missing the whole point of C360 and ATP and things like that, you're not gonna really fully appreciate the growth rates that we're posting in cervical. And so...

Being in cervical and so.

Speaker 3: That's how I would encourage you to think about it because buried in that 30% was a lot more than just simplify. And so you need to be thinking about that as you're modeling.

That's how I would encourage you to think about it because buried in that 30% was a lot more than just simplify.

And so you need to be thinking about that as you're modeling it.

Speaker 3: With regard to backlog, our forecast does not include a huge bolus of surgeries coming back. It is very hard to predict. Therefore, we have some modest recovery in there, but some of that's muted with hospital staffing shortages and COVID.

With regard to backlog our forecast does not include a huge bolus of Av.

Surgeries coming back at.

It is very hard to predict.

Therefore, we have some modest recovery in there, but some of that's muted with hospital staffing shortages in Covid.

Speaker 3: And then we didn't put a specific number out there, shotgun on inflation impact on margins. But what we did do is give ourselves a very wide range, as I said earlier, to make sure we can navigate inflationary pressure. But we certainly are seeing it on compensation costs. We saw it on freight last year, and we expect that trend to continue. But it's a dynamic environment. That's why we won with the wide range.

And then we Didnt put a specific number out there shotgun on inflation impact on margins.

But what we did do is give ourselves a very wide range as I said earlier to make sure. We can navigate inflationary pressure, but we certainly are seeing it on compensation costs we.

We saw it on freight last year, and we expect that trend to continue but it's a dynamic environment. That's why we went with the wide ranges.

Speaker 2: Yeah, I don't think I had a- I'll just sound the backlog, you know, with WES-

Yes, I don't think at all just on the backlog.

Weeks.

Speaker 2: We've seen, you know, quarter to quarter, cuter isn't an example last year. We saw a ball, we saw it were down roughly 10%. Now, if it's hard to tell, and the mix is a little different, some of the non-acute care, the ACA, ASC type of procedures may have gotten done.

We've seen.

Quarter to quarter Q3, as an example last year, we saw volumes down roughly 10%.

But it's hard to tell on the mix is a little different than some of the non acute care of the Acs ASC type of procedures may have gotten done.

Speaker 2: Some of the more complex cases or trauma obviously may have gotten done. Some of the DGN cases that were more elective in nature may have been what the impact was on us. We started to see those come back but it's been to Matt's point more gradual and with some of the...

One of the more complex cases or trauma, obviously may have gotten done some of the DJ and cases that were more elective in nature may have been what the impact was on us we.

We see that we starting to see those come back, but it's been to Matt's point more gradual and with some of the.

Speaker 6: Constraints now with some of the staffing shortages in hospital Clinical staff. I don't see the opportunity at least not yet for an acceleration or a ketchup if you will I think it'll happen gradually over the next several quarters, you know if that changes will Obviously see it and feel it and talk about it, but at this point that's sort of the prediction

Constraints now with some of the staffing shortages in hospital clinical staff I don't see the opportunity at least not yet for an acceleration or a catch up if you will I think it will happen gradually over the next several quarters if.

If that changes, we'll obviously see it and feel it and talk about it but at this point, that's sort of the protection and Chuck and just to be Crystal clear my comment around pulse units, we placed last year, where in the U S. So.

Speaker 3: Yeah, and Shaggen just to be crystal clear, my comment around pulse units we placed last year were in the US, so that the math is clear there. We do have one European commercial contract that we've received in Q1, so more to come on that, but just to be clear. Our next question.

The math is clear there.

We do have one European commercial contract that we've received in Q1, so more to come on that but just to be clear.

Our next question comes from the line of Jason.

Speaker 4: What is with loop capital you may proceed with your question? Hi, thanks for the question. I just want to know if there's a, on surgical solutions, maybe a discussion of the what's going on outside of Pulse. I mean, you sort of answered it. It seems like most of the growth within that business, if you're saying Pulse exceeded 5 million was from Pulse. So just curious to know just kind of what the broader implications is for the remainder of the search solutions business.

<unk> with loop capital you May proceed with your question.

Hi, Thanks for the question I just wanted to know if there's any on surgical solutions maybe.

Discussion of the what's going on outside of pulse I mean, you sort of answered it sounds like most of the growth within that business, if youre, saying pulse exceeded $5 billion was was from pulse.

So just curious to know just kind of what the broader implications as for the remainder of the surgical solutions business.

Speaker 2: Yeah, I mean, the surgical solutions has been roughly flat for us over the last several. We have the NCS business housed there as well as our biologic business. The NCS was clearly a reflection of the volume and it's very much volume related on the NCS. Biologics has been a little choppy for us. We feel like we're in a stable position. But generally speaking, we sort of consider the US surgery support as with the market. And right now the market still flatish and are at least what we see today.

Yes, I mean, its surgical solutions has been roughly flat for us over the last several we have in the NCS business.

How is there as well as our biologics business and NCS was clearly.

A reflection of the volume and its very much volume related on the NCS biologics has been a little choppy for us we feel like we're in a stable position, but generally speaking.

We sort of consider the U S. Surgical support is as with the market and right now the market's still flattish and or at least from what we see today.

Speaker 2: So the implication is that, and that's going to match that, is that the reflux, you know, the pulse.

So the implication is that and that's what our Matt said is that the right.

The pulse success are there are the units that we're selling more flat into the U S sort of spot business. So that's kind of how we're all set a barometer on it.

Speaker 6: success or the units that we're selling more reflect into the US sort of sport business. So that's kind of how we're set up around.

Speaker 11: Okay, thank you. And just a quick follow up. Is there an update on the robotic arm timing?

Okay. Thank you and just a quick follow up is there an update on the robotic arm timing.

Speaker 6: Yeah, there is. Actually, well, maybe not a big update, but some update. So, you know, I've gone through this before in the robotic world and there's like those in the robotic program, not just the arm, but software, instrumentation, in-car electronics, the end-effector work you do, and the good news is we made progress in each of these areas over the last several quarters over the last couple of years.

Yeah.

Actually well, maybe not a big update but some update so.

I've gone through this before in the robotic world.

A lot goes into the robotic program and not just the arm, but software instrumentation and card electronics. The end effector work you do and the good news is we made progress on each of these areas over the last several quarters or last couple of years and there is no. While there is no change to our previously communicated timeline I will say we've continued to invest in.

Speaker 6: And while there's no change to our previous the community timeline, I will say we've continued to invest in our new resources. We've completed a significant number of labs internally over the last couple quarters and made progress against our design development process. And we do have a key milestone in Q2 that we believe will give us very good insights to our clinical ready.

R&D resources, we've completed significant number of labs internally over the last several quarters and make progress against our design development process and we do have a key milestone in Q2 that we believe will give us very very bad.

Good insights to our clinical readiness. So stay tuned we are starting to really track in now the anticipated first in first in man.

Speaker 6: So stay tuned. We are starting to really track in now the anticipated first in man. We've got a critical milestone that will be coming up in Q2 and we'll inform you in that time frame kind of where we are.

Got a critical milestone that will be coming up in Q2, and we will inform you.

And in that time frame kind of where we are.

Speaker 4: Our next question comes from the line of Craig Beiju with Think of America you may proceed with your question.

Our next question comes from the line of Craig Bijou with Bank of America. You May proceed with your question.

Speaker 12: Thanks guys for taking the question. Let me start with simplify. And I wanted to see if you guys could provide maybe a little bit more color on how you see it being being used. You know, is it? I know it's early days, but is it one level, two level? And then just the surgeons that are using it are they, maybe newvo loyalists or surgeons that are using

Thanks, guys for taking the questions.

Let me start with simplify and I wanted to see if you guys could provide maybe a little bit more color on how you see it in the news.

I know, it's early days, but it's a one level two level and then just the surgeons that are using it are they.

Maybe nouvel loyalist or surgeons that are using.

Speaker 12: other other products of yours or are they more competitive surgeons that were disguised and, you know, were prior previously using other types of dis.

Are there other products of yours.

Where are they.

More competitive surgeons that were disguise.

Prior.

Previously using other types of <unk>.

Speaker 2: Thanks Craig. You know, we are excited about the simplified technology, obviously broader cervicalism as Matt talked about. Is it one level or two level? It's both. It's been early days. Demand has clearly outstripped our supply, but we're catching up and we talked about with me and a better supply possession over the course of this year.

Thanks, Craig.

We are we are excited about simplify.

Technology, obviously, a broader cervical as Matt talked about.

Is it one level two level. It's both it's been early days demand has clearly outstripped our supply, but we're catching up and we've talked about being a better supply position over the course of this year.

Speaker 2: It's a mix of surgeons, both current and competitive surgeons, but I would say that it's attracting new surgeons to our company. You know, many surgeons will do both Thorntel-Umbar and new cervical. Some surgeons are more specialized.

It's a mix of surgeons, both current and competitive surgeons, but I would say that it's attracting new surgeons to our company.

Many surgeons will do both Oracle lumbar and cervical with some surgeons are more specialized in those searches that were more specialized maybe haven't haven't seen our cervical portfolio. So it's definitely a door opener for us.

Speaker 6: When those searchers are more specialized, maybe haven't seen our several portfolio. So it's definitely a door opener for us. It's different to technology. We've got the unique four millimeter option where the only four millimeter on the market. We've had folks comment on...

Its differential technology, you've got the unique four millimeter option.

Only four millimeter on the market, we've had folks comment on actual individual employees on ours I've had this procedure done that.

Speaker 6: actual individual employees on ours that have had this procedure done that had the four millimeter option in their surgical procedures. So we've...

<unk> had the four millimeter option.

And their surgical procedures. So we've.

Speaker 2: We're seeing both current and competitive surgeons, but I would say I'm excited about how this attracts new surgeons to invasive. It's a cervical space as we talked about. We've been underrepresented there, less than 5% share, so we're excited about going after introducing new surgeons to invasive, and potentially as I said, my prepared remarks, driving more density and more customer adoption at the hospital level.

We're seeing we're seeing both current and competitive surgeons, but I would say.

I am excited about how this attracts new surgeons to innovate.

Cervical space as we talked about we've been underrepresented there less than 5% share. So we're excited about going after introducing the new starts to invasive and potentially as I said in my prepared remarks, driving more density and more customer adoption at the hospital level.

Speaker 12: Got it. That's helpful. Thanks, Chris. And maybe a second question on the NSO business. You've talked a lot about it today. You haven't necessarily talked a lot about it historically. So just wanted to, you know, maybe see if you guys could provide a little bit of color on the size of that business.

Got it that's helpful. Thanks, Chris.

And maybe a second question on the NSO business, you've talked a lot about it today, you haven't necessarily talked a lot about it historically.

Just wanted to.

Maybe see if you guys could provide a little bit of color on the size of that business.

Speaker 12: you know, maybe the impact or the growth impact that it could have in 22. And then even the prospects for that going forward, giving that you are coming out of, you know, pulling it off the market and then getting it back on.

Maybe the impact or the growth impact that it could have in 'twenty, two and then even the prospects for that going forward given that you're coming out of that.

Pulling it off the marketing and getting it back on.

Speaker 2: Yeah, you know, we haven't talked a lot about it. It hasn't been overly material to us. Looking back, but I can tell you I'm excited about the highly differentiated technology. It's a...

Yes, we haven't talked a lot about it and it hasn't been overly material to us.

Looking back, but I can tell you I'm excited about the highly differentiated technology.

Speaker 6: taking the magic, extenuating rod and applying them to new applications. And we've done a lot of work on the portfolio. Clearly we've done a lot of work for the last year to get it back to market.

It's taking the magic extenuating.

Rod and applying them to new applications and we've done a lot of work on the portfolio clearly without a lot of work over the last year to get it back to market.

Speaker 2: But we are continuing to really look at ways to accelerate this business. So we haven't talked about it because it hasn't been over material and it's been something that we've sort of grown in the background, you know, really complimentary to the magic technology, but something you'll probably hear us talk more about. I'll turn it in a minute and talk about the immediate.

But we are continuing to really look at ways to accelerate this business. So we.

We haven't talked a lot about it because it hasn't been material and it has been something that we've sort of grown in the background.

Really complementary to the magic technology, but something you'll probably hear us talk more about I'll turn over to Matt to talk about the immediate.

So impact this year.

Speaker 3: Yeah, so I mentioned in the prepared remarks that we're happy to be back on the market. We still have a few more markets we're working through.

So like we mentioned in the prepared remarks that we're happy to be back on the market.

Still have a few more markets we're working through.

Speaker 3: But, you know, the reality is, is the reason we wanted to bring it up, as you guys are putting your models together, is that Q3, there was a significant impact last year. We believe we'll get that 10 to 15 million and that's fails back this year, with about two-thirds of that being international and a third being domestic. So, you're thinking about it, that's how we're thinking about NSO.

But you know.

The reality is is the reason we wanted to bring it up is you guys are putting your models together is it Q3.

There was a significant impact last year, we believe we will get that 10% to $15 million in net sales back.

This year.

With about two thirds of that being international and the third being domestic so as you're thinking about it that's how we're thinking about NSO.

Speaker 4: Our next question comes from the line of Alan Gong with JP Morgan, you may proceed with their question.

Our next question comes from the line of Allen Gong with Jpmorgan. You May proceed with your question.

Hi, This is actually wrote in on for Alan.

Speaker 13: I just want to get a better sense of the COVID situation in the quarter and into Q1. So at the Jake Memorial conference, you kind of distinguish between the Omicron waves and prior ones.

I just wanted to get a better sense of the COVID-19 situation in the quarter and into Q1.

At the Jpmorgan conference you kind of distinguish between the omicron wave than prior ones.

Speaker 13: and that many patients were kind of forced to quarantine if members of their household are super positive, and this is causing an abnormal amount of delays and procedures for the quarter. So given this dynamic, and I guess a pretty robust recovery over the last several weeks, the commentary.

Patients, who are kind of forced to quarantine if members of their household that's a positive and this is causing an abnormal amount of delays in procedures for the quarter.

So given this dynamic and I guess, a pretty robust recovery over the last several weeks since the commentary can you give your outlook on procedures for Q1 and better quantify maybe how many of those deferred procedures will ultimately scheduled.

Speaker 13: Can you give your outlook on procedures for Q1 and better quantify maybe how many of those deferred procedures were ultimately scheduled? And how this recovery is also contemplated in guidance.

And how this recovery is also contemplated in guidance.

Thanks.

Speaker 2: Yeah, it's still a little tough to say that, you know, coming out of Q3 and Q4, we saw better Q4 than a Q3 and clearly Q3 is where you had the Delta bearing really hit heavily in September . We also started hearing staffing shortages hit around that time.

Yeah, it's a it's still a little tougher to I'll, just say that coming out of Q3 into Q4 and we saw.

Better Q4 than in Q3, and clearly Q3 is where you have the delta.

It really hit heavily in September we also started hearing staffing shortages hit around that time.

Speaker 6: Improvement through Q4 with the Omnichran coming in in the late November , early December , and accelerating in the January where we saw another real...

Improvement through Q4.

With the omicron coming in in the late late November early December and accelerating in January where we saw another real.

Speaker 6: Depression in our volumes in January , good news is February has improved and we continue to see improvement. Now...

Depression in our volumes in January good news as February has improved and we continue to see improvement.

Now we don't know what the staffing shortages will have on if there is a ceiling. If you will of what the hospitals in the in the clinical settings can take on and Thats reflected in our guidance, it's a bit of uncertainty.

Speaker 6: We don't know what the staffing shortage will have on if there's a ceiling, if you will, of what the hospitals and the clinical settings can take on. And that's reflected in our guidance. It's a bit of uncertainty. We are, as I said before,

We are as I said before.

Speaker 6: bullish on what we've developed in the events we've made and how that plays out over the year. We're still allowed in certain on the underlying base business and how quickly we get back to pre-COVID-Ball and that'll play out. We hope through margin into April where we get more durability. You know, my hope is to get a durable quarter where we can truly say we didn't have a COVID impact.

Bullish on what we've developed and the investments we made and how that plays out over the year, we're still a little uncertain on the underlying base business and how quickly we get back to pre COVID-19 volumes that will play out we hope through margin into April where we get more durability.

My hope is to get a durable quarter, where we can truly say, we didn't have a COVID-19 impact.

Speaker 6: I don't know when that is. It's not this quarter and it may not be next quarter, but we hope it is for the

I don't know when that is it doesn't it's not this quarter and it may not be next quarter, but we hope it is before the end of the year.

Speaker 4: Our next question comes from a line of Samuel Burdowski with truest he may proceed with their questions.

Our next question comes from the line of Samuel Brodowski with choice. You May proceed with your question.

Okay.

Speaker 12: I think we're taking the question or running up on time. So I'll just do one on on simplifying and thanks for the color you gave earlier on the call around the manufacturing shift to Bell Hi.

Alright, thanks for taking the question.

So.

I'll just do one.

Hi, and thanks for the color you gave earlier on the call around the manufacturing shift too.

Hi, I was just.

Speaker 12: Trying to get a better idea, we can get a little more granular in how that transition is going and how long we should think about simplify being supporting strain through this year. You talked about the assembly impact and getting approval late in the years. That should we think about it more not being supporting strain into the 2023 or can it still substantially grow through 2022. Thank you.

Kind of trying to get a better idea if we can get a little more granularity how that transition is going and how long we should think about simplified.

All I can say through this year and you talked about the assembly and packaging and getting approved late in the year is that should we think about it more not being supply constrained into 2023 or can it still sequentially growth through 2022. Thank you.

Speaker 2: Thanks for the question, Sam. Let me make sure I clarify. We took two pathways. We optimized the existing supply chain that we took upon the acquisition of simple bi-medical. That yield, a significant higher level of supply through the first few quarters of this year. We've also taken the path that I've mentioned in my prepare remarks around moving manufacturing.

Thanks for the question, Sam Let me make sure I clarify.

Sort of two pathways, we optimize the existing supply chain that we that we took upon the acquisition of simplify medical that yields a significant higher level of supply through the first few quarters of this year. We've also taken the path that I've mentioned in my prepared remarks around moving manufacturing to Ohio.

Speaker 2: to Ohio. It also requires us to do the assembly and packaging PMA approvals to fully complete the process. But the good news is we have increasing supply through Q1, Q2, Q3.

It also requires us to do the assembly and packaging PMA approvals to fully complete the process, but the good news is we have increasing supply through Q1, Q2 Q3 within a second phase of supply increased by moving into West Carrollton.

Speaker 2: within a second phase of supply increase by moving into West Carrollton. The complete story here is we don't believe we'll be in a supply constrained environment. We think demand will ramp over the course of the year as our supply ramps and we feel like we'll be in a good supply state over through the course of the year.

The complete story here is we don't believe we'll be in a supply constrained environment, we think demand will ramp over the course of the year as our supply ramps and we feel like we'll be in a good supply stayed all through the course of 2022.

Speaker 4: Ladies and gentlemen, we have reached the end of today's question answer session. I would like to turn this call back over to Mr. Chris Barry for closing remarks.

Ladies and gentlemen, we have reached the end of today's question and answer session I would like to turn this call back over to Mr. Chris Barry for closing remarks.

Speaker 2: Thank you and thank you all for joining us for our early call today. We'll continue to focus on executing our strategic plan to deliver growth and share over value in 2022 and beyond. And could have likely worked together to help transform surgery, advance care, and change lives. I look forward to speaking with you all after the first quarter. Thank you.

Thank you and thank you all for joining us for our earnings call. Today, we will continue to focus on executing our strategic plan to deliver growth in shareholder value in 2022 and beyond and.

Luckily worked together to help transform surgery advanced care and change lives.

Look forward to speaking with you all after the first quarter. Thank you.

Speaker 4: This concludes today's conference. You may disconnect your lines at this time. Thank you for your participation or the rest of your...

This concludes today's conference you may disconnect. Your lines at this time. Thank you for your participation and do the rest of your day.

[music].

Speaker 14: The.