Q4 2023 Orthofix Medical Inc Earnings Call
Unknown Executive: Good afternoon, and welcome to Orthofix Medical's Q4 and full year 2023 earnings call. All participants are in a listen-only mode.
Good afternoon, and welcome to Arthur fix medical Q4, and full year 2023 earnings call.
All participants are in a listen only mode. After the speaker's remarks, we will have a question and answer session.
Unknown Executive: After the speaker's remarks, we will have a question and answer session. To ask a question, you'll need to press star followed by the number one on your telephone keypad. To withdraw any questions, please press star 1 again. As a reminder, this conference call is being recorded. I would now like to turn the call over to Louisa Smith, Vice President of Gilmourton Group. Thank you.
To ask a question press star followed by the number one on your telephone keypad.
So what's driving questions. Please press star one again.
As a reminder, this conference call is being recorded.
I would now like to turn the call over to Luisa Smith, Vice President of Gilmartin group. Thank you. Please go ahead.
Louisa Smith: Good afternoon, everyone. Welcome to the Orthofix fourth quarter 2023 earnings call. Joining me on the call today are President and Chief Executive Massimo Calciore and Chief Financial Officer Julie Andrews. During this call, we will be making forward-looking statements that involve risks and uncertainty. All statements, other than those as historical facts, are forward-looking, including any earnings guidance we provide and any statements about our plans, beliefs, strategies, expectations, goals, and objectives. Investors are cautioned not to place undue reliance on such forward-looking statements, as there is no assurance that the matters contained in such statements will occur. The forward-looking statements we will make on today's call are based on our beliefs and expectations as of today, March 5th, 2020.
Louisa Smith: Good afternoon, everyone welcome to the orchids bank's fourth quarter 2023 earnings call.
Louisa Smith: Joining me on the call today are president and Chief Executive Masimo, urine, and Chief Financial Officer Julie.
Louisa Smith: During this call we will be making forward looking statements involve risks and uncertainties.
Louisa Smith: All statements other than that of historical facts are forward looking statements.
Louisa Smith: Any earnings guidance, we provide and any statements about our plans.
Louisa Smith: Strategies.
Louisa Smith: <unk> calls our objectives.
Louisa Smith: Investors are cautioned not to place undue reliance on such forward looking statements and there is no assurance that the matter can key in such statements will occur to forward looking statements. We will make on today's call are based on our beliefs and expectations.
Louisa Smith: By March.
Louisa Smith: 2024.
Louisa Smith: We do not undertake any obligation to revise or update such forward-looking statements. Some factors that could cause actual results to be materially different from the forward-looking statements made by us on the call include the risk factors disclosed under the heading Risk Factors in our Form 10-K, filed this afternoon, March 5, 2024, for the year ended December 31, 2023, as well as additional SEC filings we make in the. In addition, on today's call, We believe that in order to properly understand our short-term and long-term financial trends, investors may wish to review these matters as a supplement to the financial measures determined in accordance with U.S. GAAP. Please refer to today's news release announcing our fourth quarter 2023 results for reconciliations of these non-GAAP financial measures to our U.S. GAAP financial report. At this point, I will turn the call over to Massimo. Thank you, Louisa.
Louisa Smith: We do not undertake any obligation to revise or update such forward looking statements.
Louisa Smith: Factors that could cause actual results to be materially different from the forward looking statements made by us on the call.
Louisa Smith: Factors described under the heading risk factors in our Form 10-K filed this afternoon March 2024, and the year ended December 31, 2023, as well as additional SEC filings we make.
Louisa Smith: In addition on today's call, we will refer to various non-GAAP financial measures. We believe that in order to properly understand our short term and long term financial trends investors may wish to review these matters as a supplement and our financial measures.
Louisa Smith: In accordance with U S GAAP.
Louisa Smith: Refer to todays news release announcing our fourth quarter 2023 results for a reconciliation of these non-GAAP financial measures to our U S GAAP financial results.
Louisa Smith: I will turn the call over to Mark.
Mark: Thank you Lisa and thank you everyone for joining us this afternoon.
Massimo Calafiore: And thank you everyone for joining us this afternoon for my first quarterly earnings call as Orthofix CEO. I'll begin by saying how happy I am to be part of Orthofix and this impressive organization. The company has strong fundamentals, and I believe it has great potential for future value creation. This is why I joined Orthofix.
Mark: Yes.
Mark: For my first quarterly earnings call.
Mark: Perfect CEO.
Mark: I'll take you by saying that our <unk> to be part of our service and this impressive organization.
Mark: The company has strong fundamentals.
<unk> already propane sharp for future price appreciation.
Speaker Change: This is Wyatt John Arthur peaks.
Massimo Calafiore: Yes, the company has been through much change in the last 12 months, but our business fundamentals have remained strong, and our talented leaders and committed employees have executed exceptionally well for a quarter performance was not accepted. We executed against our guidance, gained momentum, and accelerated strategic initiatives. Despite that prediction otherwise, we also expanded our distribution network in our USA Spine sales channel. I'm so pleased to be part of the Orthofix team.
Speaker Change: Yes.
Speaker Change: Company has been through might change in the last 12 months.
Speaker Change: Part of our business fundamentals have remained strong.
Speaker Change: Our talented leaders.
Speaker Change: As employees.
Speaker Change: Thank you the next section as well.
Speaker Change: For the quarter performed months were no exception.
Speaker Change: We executed against our guidance, gaining momentum and accelerating strategic initiatives.
Speaker Change: Despite that predictions otherwise, we also expect that our distribution network.
Risk based spine sales channel.
Speaker Change: I'm, so pleased to be part of their strategic steamer.
Massimo Calafiore: And I will work to build on past successes, leverage our current momentum, and unlock future value-creating opportunities. During the last eight weeks, I've had the chance to speak to many stakeholders, and I am more encouraged than ever about the opportunity for growth and value creation that is in front of us. I joined Orthofix having admired the company and its innovative solutions, and my early insights have affirmed those long-held beliefs. I want to spend some time on this call sharing my initial thoughts and observations about our business and highlighting some areas we prioritize throughout the year. Then I'll turn the call over to Julie to provide a more in-depth look at our fourth quarter performance and financial results.
Speaker Change: And that we work to build the combustor successes leverage our current momentum and unlock future value creating opportunities.
Speaker Change: During the eight weeks I've had the chance to speak to many stakeholders.
And I'm more encouraged than ever about the opportunity for growth and value creation.
Speaker Change: Trumped of us.
Speaker Change: I jumped Arthur peaks, having that in mind, the complex and its innovative solutions and my early insights and affirm dose lung feeds.
Speaker Change: I want to spend some time from this call sharing my initial thoughts and observations about our business and highlighting some and yes, we prioritize throughout the year, then ill turn the call over to Julie to provide a more in depth look at our fourth quarter first of all months.
Julie: And financial results.
Massimo Calafiore: First and foremost, I've observed that the company has remained stable throughout the recent periods of transition, demonstrating our durable business model. I have spent a great deal of time understanding internal operations as well as how Orthofix fits into the markets where we are competing. I'm confident in our fundamental strategy across orthopedics, spine, biologics, and Bone Growth Therapy.
Julie: First and foremost I hope that the company has remained stable throughout the recent PBX system session, demonstrating our durable business model.
Julie: I have spent a great deal of time understanding depends on operations.
Julie: Wireless how arm to fixed fees into the markets, where we are competing.
Julie: I am confident in our fundamental strategy across orthopedics spine, biologics and bone growth therapies.
Massimo Calafiore: There should be no misgivings about the ability of this company to serve the evolving clinical needs of surgeons and patients while also delivering strong growth combined with improved operational efficiency. We performed well throughout 2023, gaining market share and maintaining a relationship with our partners. Disruption and consolidation within the spinal market, specifically, have created commercial opportunities in spine and orthopedics. We have taken advantage of this opportunity, continuing to build out our network. I want to quell any notion that Orthofix is losing distributors. We are adding high-value relationships while optimizing our existing sales charts. In the fourth quarter alone, 8% of USA's final implant sales were attributed to new distributors alone.
Julie: There should be not misgivings or the ability of this company to set up the amount of interest income needs.
Julie: Surgeons and patients.
While also delivering strong growth.
Julie: Bind with improved operational efficiencies.
Julie: We performed well throughout 2023.
Julie: Gaining market share and maintain good relationship with our partners.
Julie: Disruption and consolidation within the spinal market specifically.
Julie: <unk> commercial opportunities in spine and orthopedics.
Julie: We have taken advantage of these opportunities continuing to build out our bank to work at home.
Julie: <unk> any nausea lithography, losing the steep dose.
Julie: Our AD didn't get high value relationship, while optimizing our existing sales channel.
Julie: In the fourth quarter or one 8% of all Usa's spinal implant sales were attributed to new distributors. So long.
Massimo Calafiore: Additionally, it's important to note that our merger thesis remains intact, with Last Generous Business Combination, Orthofix brought together uniquely complementary best-in-class portfolios to create a compelling product platform across spine and orthopedic. We are well positioned to capture value within specialized markets. And I have already seen the inherent cross-selling benefit of being able to leverage our portfolios as a whole. I want to highlight that spine surgery progresses towards data-driven solutions. A gap remains in detecting changes in the operating environment. Translating a surgical plan to reality requires real-time information, with the flexibility and tools to adapt. Orthofix is the leader in this space, and we plan to fully leverage the 7D flash navigation.
Julie: Sorry.
Julie: Welcome to network with our merger thesis remains intact.
Julie: We last January business combination.
Julie: Pittsburgh together uniquely complementary best in class portfolio.
Julie: To create a compelling product platform across spine and orthopedics.
Julie: We are well positioned to capture value within specialized market.
Julie: And they have already seen.
Julie: Thanks inherent cross selling benefit of being able to leverage our portfolio as a whole.
I want to highlight the dates of spinal surgery progresses towards data driven solutions.
Julie: <unk> remains in detecting changes in the operating room.
Julie: Calculating a surgical planner to reality.
Julie: Orders for the <unk> targeted formation with different excipient in towards to adopt <unk>.
Julie: <unk> is a leader in this space and we plan to fully leverage the 70.
Julie: Navigation system.
Massimo Calafiore: Third, growth within the orthofix spine segment has been supported by a 29% increase in our global 7D installations over the past year. With continued investment, our next generation advancements in enabling technology and hardware will build upon this unique foundation and establish a Department of Choice for surgeons seeking real-time data-driven interoperative solutions in orthopedic spine. The merger between Orthofix and C-Spine also created a biologics business unit with best-in-class products in the three of the most significant bone-substitute sectors: Cellular Borne Matrices, the Mineralized Bond Matrices, and Synthetic Bond Software.
Julie: The growth with the orthopedics and spine segment.
Julie: Been supported by a 29% decrease in our Thrombosed 70 installations over the past year.
Julie: We've continued investment our next generation advancements in enabling technology.
Julie: We've built Dupont is unique foundation.
Julie: And establish us as the partner of choice for Surgeons.
Julie: Speaking of the uptime based entity venue in fabric solutions.
Speaker Change: <unk> bye.
Speaker Change: The merger between <unk> and <unk> also created a biologics business unit with best in class products in the three of the most significant bond substitute juice segments.
Speaker Change: <unk> ballroom mattresses.
Speaker Change: That mineralized bought mattresses as synthetic bond substitutes.
Massimo Calafiore: The breadth of our biologics portfolio enables Orthofix to meet surgeon preference and procedure-specific requirements. Furthermore, Biologics is a capital efficiency unit, ultimately driving cash and EBITDA gains for the company. As it relates to platform synergies, biologics remain an integral part of our overall spine and orthopedic service strategy, carrying with them a diverse offering with the associated clinical data to broaden IDN and GPO access that helps attract and retain spine distribution
Speaker Change: The breadth of our biologics portfolio enable also fix to meet surgeon preference and procedure specific requirements. Furthermore, biologics is that capital is featured in June.
Speaker Change: Ultimately driving cash and EBITDA gains of the company.
Speaker Change: As it relates to transform CNET.
Speaker Change: Biologics remain an integral part of our overall spine and orthopedics outlet strategy.
Speaker Change: We did that of ourselves I think group with the associated clinical data to broadband at IBM and GPO axis.
Speaker Change: Subtract the repays spine distributors.
Massimo Calafiore: Moving to Bond Gross Therapies, or BGT, this business is well positioned to continue growing the market and taking share. We have the industry's only cervical indication and are the only company to offer both liposuction and TEMP solutions for fracture healing. In addition, the opportunity to support acute trauma with our Excel STEAM solution is propelling the growth of this franchise to well-above-mark. Throughout 2024, we expect to accelerate the cross-selling of BGT through our spine and orthopedic cells channel. The orthopedic business has an impressive portfolio and pipeline of highly specialized internal and external solutions for complex limb reconstruction and deformity correction. It is uniquely positioned to lead pediatric and adult limb deformity correction, and we are just starting to tap into its potential in the United States. Additionally, we have recently rolled out Orthonext, our case planning software platform for use with our orthopedic products, and will be extending the Orthonext application to incorporate many of our products across Vector.
Speaker Change: Moving to <unk> gross debt a piece or BGP.
Speaker Change: This business is well positioned to continue growing into the market and take share.
Speaker Change: We have the industries are reset a little indication.
Speaker Change: That already qualified to offer both <unk> and payment solutions, our fracture healing.
Speaker Change: In addition, the opportunity to support acute trauma without what <unk> sells theme. So some is propelling the growth Toby to strategize to wearable market.
Speaker Change: While the 2024, we expect to accelerate the cross selling of BGP drew our spine and orthopedic sales channels.
Speaker Change: <unk> business as our investment portfolio and pipeline of highly specialized internal and external solutions for complex sleep vertical structure and department of correction.
Speaker Change: It is uniquely positioned to lead pediatric and adult deformity correction.
Speaker Change: And we are just starting to tap into its potential within the United States.
Speaker Change: Additionally, we have recently rolled out our sonics.
Speaker Change: Our case planning software platform for use with our therapeutic products will.
Speaker Change: We expanded our select applications to incorporate many of our progress.
Speaker Change: Across segments.
Massimo Calafiore: Moving to the key priorities for 2024. First off, our mandate is to grow the company and grow it properly. A key part of the merger thesis was to combine Six Pines' Innovative Growth Engine with the Capital Efficiencies of Orthofix. Throughout 2023, we have been able to do just that.
Speaker Change: Moving to the key priorities for 2024 first stops our mandate is to grow the company and growing profitably.
Speaker Change: Key part of the merger thesis was to combine.
Speaker Change: Despite this innovative growth ended June with a capital accretion to Silvar cervix.
Throughout 2023, we haven't been able to do just that.
Massimo Calafiore: We have sequentially improved adjusted EBITDA every quarter, and we are effectively managing cash flow to exit 2024 cash flow positive. We believe that profitable growth will be a key differentiator for orthofix amongst our peers and will ultimately be a driving force in creating Schroeder Valley. We will not subscribe to growth of a low-cost mind.
Speaker Change: Sequentially improved adjusted EBITDA every quarter, and we are effectively managing cash flow.
Speaker Change: 2020 for cash flow positive.
Speaker Change: We believe.
Speaker Change: Profitable growth will be a key differentiator for our firm.
Speaker Change: Amongst our peers.
Speaker Change: And we ultimately be a driving force in creating shareholder value.
Speaker Change: We will not subscribe to a growth of all cost mindset, and we intend to use to monitor our topics. Greg This trends and my second key area of focus our balanced portfolio platform to accomplish that goal.
Massimo Calafiore: And we intend to use one of Orthofix's greatest strengths and my second key area of focus, our balanced portfolio platform, to accomplish that goal. As stated, the second priority is to further leverage our technologies and sales channels across all product sectors. We are not a pure play spine company, nor is Orthofix a commodity products orthopedics company. Orthofix occupies a unique corner of the end market itself, and we intend to highlight the entire portfolio platform as the key driver of further market share gain. In addition, we believe enabling technology is critically positioning us for long-term sustainable growth and future success. The capabilities of 7D to redefine image-guided surgery within spinal endorphins are an increasingly important aspect of how we fuel growth.
Speaker Change: As stated in Saco.
Speaker Change: Priority is to further leverage our technologies and sales channels across all product segments. We are not a pure play spine company, nor a commodity product subsidies come button.
Speaker Change: Also fixed occupies a unique corner of the end market et cetera.
Speaker Change: And we tend to highlight the entire portfolio platform as the key driver of further market share gains.
Speaker Change: In addition, we believe enabling technology is critical in positioning gas part of long term sustained growth and future success.
Ability sub 70 to redefine the image guided South Jersey, we do spine and orthopedics is an increasingly important aspect of.
Massimo Calafiore: Adding to that, the application of Rex Fracture and Spine Indication for our BGT business, layered in with integration of a surgeon preference market for biologics across spine and orthopedics, the complementary nature of our portfolio becomes even more evident. Our products work together to create a best-in-class office, each improving the performance of the other and enabling growth through a cross-selling opportunity. As I've just noted, 7D is a key contributor to our growth engine. We anticipate that the combination of 7D with our spinal hardware will strengthen our position in selected market segments, especially in spine deformities, where we expect to emerge as a formidable contender.
Speaker Change: With fuel growth.
Speaker Change: Adding to that.
Speaker Change: Allocation of fixed structure and spine indication for our beauty business lagged.
Speaker Change: <unk>.
Speaker Change: The integration of our surgeon preference market for biologics.
Speaker Change: <unk>.
Speaker Change: The complementary nature of our portfolio becomes even more evident our products work together to create a best in class offering each improving the performance of <unk>.
And then enabling growth through cross selling opportunities.
Speaker Change: And finally.
Speaker Change: Priority is our commitment to innovation.
Speaker Change: As I've just noted 70 is a key contributor to our growth engine.
Massimo Calafiore: We will also continue to commit to developing high-value initiatives that will enable profitable growth and market share gain. In recent years, the decision to invest more heavily in BGT by seeking a fresh structure indication for Axel Steel and select one president that grows in the franchise. We have delivered four consecutive quarters of double-digit growth, and the traction in BGT is a direct result of reallocating investments to a high-growth business. Similarly, the investment in the FITBOND platform and the best-in-class TrueLock circular frame platform are driving growth well above historical norms for the business. The current and planned pipeline within orthopedics should take this business to a market-leading position in complex limb deformity correction.
Speaker Change: We ended the Asia, that's a combination of 70 with our spinal hardware, we strengthen our position in selected market segments, especially the spine deformities.
Speaker Change: Expect to a merger as a formidable content there.
Speaker Change: We will also continue to compete for resources.
Speaker Change: I love being the highest value initiative.
Speaker Change: We then enable profitable growth and market share gains.
Speaker Change: Investment years.
Speaker Change: The decision to invest more heavily in BGP by seeking a price fracture indication for our sales team.
Speaker Change: So led to unprecedented growth in the franchise.
Speaker Change: We have delivered four consecutive quarters of double digit growth and reduction in BGP is a direct result of reallocating investments to a high growing business.
Massimo Calafiore: We will continue to invest strategically across the entire portfolio and put resources behind products where we can create or deepen market segments and drive above-market growth without burdening the bottom line. I'm very pleased with the team's performance over the last several months and incredibly encouraged by my initial findings. Orthofix is a very solid product, and I anticipate being able to share increasingly meaningful updates about key opportunities as we move into the next chapter of our story. With that, I will now turn the call over to Julie for further detail on our fourth quarter and full year results. Thank you, Massimo, and good afternoon, everyone.
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Speaker Change: Our driving growth well above historical norms.
Speaker Change: Chris.
Speaker Change: A carbon plant pipeline within orthopedics.
Speaker Change: Take this business to a market leading position in complex deformity correction.
Speaker Change: We will continue to invest strategically across the entire portfolio.
Speaker Change: And put the resources behind <unk> products, where we can create or deepen market segment and drive above market growth without our lending the bottom line.
Julie Andrews: Like Massimo, I'm very happy to join Orthofix at this important time and look forward to contributing to the company's future success. Before I begin, I'd like to remind you to please refer to our press release published earlier today for information regarding our non-GAAP results, including our reconciliation of these results to our GAAP results. Additionally, all percentage changes discussed will be on a year-over-year basis, and revenue growth rates will be on a pro forma constant currency basis unless otherwise noted. Additionally, all results of operations that I refer to in my prepared comments will be on a non-GAAP, as-adjusted basis, and comparisons to the prior year will be on a pro-forma basis, including the combined results of Orthofix and T-Spin Starting in Q1, we will annualize the impact of the merger and no longer refer to pro forma growth. As noted earlier in the call, Orthofix finished the year with a strong fourth quarter.
Speaker Change: I am very pleased with the teams are far months in the last several months ending.
Speaker Change: And incredibly encouraged by Magnesia findings.
Speaker Change: Also.
Speaker Change: Very solid footing.
Speaker Change: And then dissipate being able to share increasingly meaningful updates about key opportunities as we move into the next chapter of our story.
Speaker Change: I will now turn the call over to jewelry for further detail on our fourth quarter and full year results.
Jewelry: Thank you Marc and good afternoon, everyone.
Jewelry: Now I'm very happy to join orthopedics at this important time and look forward to contributing to the company's future success.
Jewelry: Before I begin I'd like to remind you to please refer to our press release published earlier today for information regarding our non-GAAP results, including a reconciliation of these results to our GAAP results. Additionally, all percentage changes discussed will be on a year over year basis and revenue growth rates will be on a pro forma constant.
Julie Andrews: Operating performance remained on track, and we were pleased to deliver net sales above the high end of the range provided in our third quarter call. For my commentary, I'll go through each of our business units and review financial results for the quarter and for the full year, as well as provide guidance for 2024. Total company net sales were $200.4 million in the fourth quarter of 2023, up 6.9% over the prior year. For the full year 2023, net sales were $746.6 million, growing 8.1% on a pro forma constant currency basis and normalizing for a one-time stocking order that occurred in the third quarter of 2022 prior to Ceasefire's exit from the European market. Bone Growth Therapy's revenue grew 15.3% to $58.8 million in Q4 and delivered 13.5% growth for the full year 2020. The fourth quarter marked four consecutive quarters of double-digit growth for the BGD franchise.
Jewelry: Currency basis, unless otherwise noted.
Jewelry: In addition, all results of operations referred to in my prepared comments will be on a non-GAAP and adjusted basis and comparisons to prior year will be on a pro forma basis, including the combined results of orthopedics and spine and 2022, unless otherwise stated.
Jewelry: Starting in Q1, we will annualize the impact of the merger and no longer refer to pro forma growth.
Jewelry: As noted earlier in the call or the fixed finished with a strong fourth quarter operating performance remained on track and we were pleased to deliver net sales above the high end of the range provided in our third quarter call for my commentary other three each of our business units and our new financial results on the quarter and for the full year.
As well as provide guidance for 2024.
Jewelry: Total company net sales were $200 4 million in the fourth quarter of 2023 up six 9% over prior year for the full year 2023, net sales were $746 6 million growing eight 1% on a pro forma constant currency basis.
Jewelry: And normalizing for one time stocking where it occurred in the third quarter of 2022 privately financed from the European market.
Julie Andrews: This growth was driven by above-market performance in both the spine and fracture channel. We have seen great performance with the Excel STEM product and from our continued investment in a focused sales channel for the Fracture Market, with growth of 23.6% in the fourth quarter. The Fracture Market is a $200 million plus market, and we are just getting started. Global Spinal Implants, Biologics, and Enabling Technologies grew 4% this quarter and 6.3% for the full year 2023. As mentioned above, we're normalizing for a one-time stocking order that occurred in the third quarter of 2022 prior to C-Spine's exit from the European market. U.S. fine fixation revenue grew 13.5% in the quarter, which is well above market growth rates.
Jewelry: Bone growth therapies revenue grew 15, 3%.
Jewelry: The $8 8 million in Q4, and delivered 13, 5% credits for the full year 2023, and fourth quarter marked four consecutive quarters of double digit growth.
Jewelry: The BTG franchise.
Jewelry: This growth was driven by above market performance in both the spine and fracture channel we have seen great performance with the <unk> product and from our continued investment in our focused sales channel and a fraction market with growth of 23, 6% in the fourth quarter.
Jewelry: The fastener market is a 200 million plus market and we are just getting started.
Jewelry: Global spinal implants, and biologics and enabling technologies grew 4% this quarter and six 3% full.
Jewelry: Full year 2023 as mentioned above when normalizing for one time stocking order that occurred in the third quarter of 2020, you prior to <unk> exit from the European market.
Julie Andrews: To clarify, this excludes motion preservation and is a metric we will be providing in future quarters. As we saw in Q3, the performance was driven in large part by more exclusive distributor partnerships, cross-contract access, and an increased focus on cross-sales. New distributor partners added since July 2023 contributed approximately 8% of revenue for U.S. final implants in Q4. We are pleased we have been able to maintain existing and build new relationships with our key distributor partners. The global orthopedics business grew 2.7% in the fourth quarter and 5.2% for the full year.
Jewelry: Spine fixation revenue grew 13, 5% in the quarter, which is well above market growth rates to clarify. This excludes motion preservation is a metric we will be providing in future quarters.
We saw on Q3, the performance was driven in large part by more exclusive distributor partnerships cross contract asset and an increased focus on cross selling your distributor partners and since July 2023 contributed approximately 8% of revenue for U S. Spinal implants in Q4, we.
Jewelry: We're pleased that we have been able to maintain existing and build new relationships with our key distributor partners.
Julie Andrews: Full year growth was led by the U.S. with 11.1% growth driven by strong performance with our new TrueLock Evo and our trauma solutions, as well as distributor expansion and sales channel investments that were made in 2022 and 2023 and a best-in-class surgeon education program. Now moving on to some detail below the field. Beginning with our Q4 non-GAAP adjusted gross margins, we delivered 72.2% for the quarter, a 330 pro forma basis point improvement over Q4 2022. For the full year, non-GAAP adjusted gross margins were 71.4% compared to 68.7% for the full year 2022, a 270 basis point improvement on a pro forma basis. These increases were primarily due to product. Due to differences in allocation methodologies and classification of operating expenses between legacy orthofix and legacy c-spine, prior year pro forma numbers are not available.
The global Orthopedics business grew two 7% in the fourth quarter and five 2% for the full year full.
Jewelry: <unk> full year growth was led by the U S with 11, 1% growth driven by strong performance with our new <unk> Evo and our trauma solutions as well as distributor expansion and sales channel investments that were made in 2022, and 2023 and best in class surgeon education programs.
Jewelry: Now moving on to some detail below the sales line.
Jewelry: With our Q4 non-GAAP adjusted gross margin, we delivered 72, 2% for the quarter of 330 pro forma basis point improvement over Q4 2022 for the full year non-GAAP adjusted gross margins were 71, 4% compared to 68, 7%.
Jewelry: For the full year, 2022, and 270 basis point improvement on a pro forma basis. These increases were primarily due to product mix.
Jewelry: Due to differences in allocation methodologies and classification and operating expenses between legacy <unk> and legacy spine. Prior year pro forma numbers are not available as a result of this my comment on line item operating expenses will be on a GAAP basis, both Q4 and full year of <unk>.
Julie Andrews: As a result of this, my comments on line item operating expenses will be on a gap basis for both Q4 and full year 2023 compared to gap results for the prior year. Gap sales and marketing expenses were 48.8 percent of net sales for the fourth quarter and 51.7 percent for the full year 2023 compared to 48.5 percent and 49.7 percent of net sales for Q4 and full year 2022, respectively. The increase in gap sales and marketing expenses for the quarter and full year is primarily driven by integration-related severance, retention costs, and stock-based compensation associated with the merger and higher commissions as a result of the achievement of certain sales objectives. GAAP general and administrative expenses were 17.2% of net sales for Q4 2023, down from 20.8% in the same quarter the previous year.
Jewelry: <unk> 23, compared to GAAP results for the prior year.
Jewelry: GAAP sales and marketing expenses were 48, 8% of net sales for the fourth quarter and 51, 7% for the full year 2023, compared to 48, 5% and 49, 7% of net sales for Q4 and full year 2022, respectively.
Jewelry: The increase in GAAP sales and marketing expenses for the quarter and full year is primarily driven by integration related severance and retention costs and stock based compensation associated with the merger and higher commissions as a result of the achievement of certain sales objectives.
Jewelry: GAAP General and administrative expenses were 17, 2% of net sales our Q4 2023 down from 28% in the same quarter. Prior year. The decrease is due to merger related synergies a reduction in stock based compensation and a lower level of onetime merger related costs.
Julie Andrews: The decrease is due to merger-related synergies, a reduction in fact-based compensation, and a lower level of one-time merger-related costs, partially offset by legal and investigation costs during. For the full year, GAAP general and administrative expenses were 19.4% of net sales, up from 17.4% for the prior year. This increase is due to merger and integration-related expenses, an increase in share-based compensation due to the merger, and legal and investigation GAAP R&D expenses were 9.5% for the quarter compared to 10.8% for the prior year. The decrease in GAAP R&D expenses was primarily driven by lower spend related to EU MDR readiness and realization of merger-related synergies, which were slightly offset by higher stock-based compensation.
Jewelry: Partially offset by legal and investigation cost can be important.
Jewelry: For the full year GAAP general and administrative expenses were 19, 4% of net sales.
17, 4% for the prior year this increase in our merger and integration related expenses and an increase in share based compensation due to the merger and legal and investigation costs.
Jewelry: GAAP R&D expenses were nine 5% for the quarter compared to 10, 8% for the prior year quarter. The decrease in GAAP R&D expenses was primarily driven by lower spend related to EU MDI readiness and realization of merger related synergies, which were slightly offset by higher stock based.
Jewelry: <unk> expenses.
Julie Andrews: GAAP R&D expenses for the full year 2023 were 10.7%, which was flat compared to the prior year; merger-related synergies were offset by severance and retention expenses related to the merger and development milestone payment that was achieved during the. For the quarter, non-GAAP-adjusted EBITDA was $19.6 million, or 9.8% of net sales, a 96% increase over Q4 2022 on a For the full year, non-GAAP-adjusted EBITDA was $46.3 million, or 6.2% of net sales, a 230 basis point improvement driven by higher gross margins and merger-related synergies. This represented a 41% drop through on incremental revenue dollars. We are encouraged by these results as we are seeing the impact of merger-related synergies materialize. From a cash standpoint, our total cash balance, including restricted cash, at the end of Q4 was approximately $37.8 million. During the fourth quarter of 2023, we entered into a four-year, $150 million financing arrangement, and as of the end of the year, we had $100 million in borrowings outstanding under this arrangement. We subsequently borrowed an additional $15 million in January 2020.
Jewelry: GAAP R&D expenses for the full year, 2023, or 10, 7%, which was flat to prior year.
Jewelry: Roger related synergies were offset by severance and retention expenses related to the merger and development milestone payment that was achieved during the year.
Jewelry: For the quarter non-GAAP, adjusted EBITDA was $19 6 million or nine 8% of net sales a 96% increase over Q4 2022 on a pro forma basis.
Jewelry: For the full year non-GAAP adjusted EBITDA was $46 3 million or six 2% of net sales of 230 basis point improvement driven by higher gross margins and merger related synergies.
This represented a 41% drop through on the incremental revenue. We are encouraged by these results and we are seeing the impact of merger related synergies materialize.
Jewelry: From a cash standpoint, our total cash balance including restricted cash at the end of Q4 was approximately $37 8 million.
Jewelry: During the fourth quarter of 2023, we entered into a four year $150 million financing arrangement and ended the end of the year, we had $100 million in borrowings outstanding under this arrangement.
Jewelry: We subsequently borrowed an additional $50 million in January 2024.
Julie Andrews: Overall, we are pleased with our fourth quarter and 2023 results. The business showed resilience during a time of transition with growth across all business lines, demonstrating the strength of our portfolio. We sequentially improved Adjusted EBITDA every quarter and exited the year with an Adjusted EBITDA expansion of 440 basis points as we saw the realization of cost centering. This gives us confidence in our ability to deliver profitable revenue growth as we move into 2025. Now moving on to 2024 full-year guidance. We are providing guidance for full-year net sales to range between $785 million and $795 million, representing implied growth of 5 to 7 percent year-over-year on a constant currency basis.
Jewelry: Overall, we are pleased with our fourth quarter and 2023 results.
Jewelry: And then just showed resilience during a time of transition with growth across all business lines, demonstrating the strength of our portfolio.
Jewelry: We sequentially improved adjusted EBITDA every quarter and exited the year with adjusted EBITDA expansion of 440 basis points as we saw the realization of cost synergies.
Jewelry: This gives us confidence in our ability to deliver profitable revenue growth as we move into 2024.
Jewelry: Now moving on to 2020 for full year guidance, we are providing guidance for full year net sales to range between 785, and $795 million, representing implies growth of 5% to 7% year over year on a constant currency basis.
Julie Andrews: Please note that our expectations are based on the current foreign exchange rates and do not account for rate changes that may occur throughout 2024. Our outlook for full year 2024 non-GAAP adjusted EBITDA is $62 to $67 million. From a non-GAAP adjusted EBITDA perspective, we expect to deliver approximately 8% EBITDA margin, which represents a 42% drop through of 2024 incremental revenue. At the midpoint of our guidance, our 2024 non-GAAP adjusted EBITDA guidance represents more than 400 basis points of EBITDA margin improvement over the first two years, 2023 and 2024, post-close of the merger. This is a result of the $32 million in annualized synergies we have achieved to date and a progression toward delivering $50 million in synergies three years post-close of the merger. It is also worth noting that we will no longer be adjusting out MDR-related expenses as the initial wave of implementation is complete, and we believe the current cost represents the ongoing expense to remain in the European market.
Jewelry: Please note our expectations are based on current foreign exchange rates and do not account for rate changes that may occur throughout 2024.
Jewelry: Our outlook for full year 2024, non-GAAP adjusted EBITDA of $62 million to $67 million from our non-GAAP adjusted EBITDA perspective, we expect to deliver approximately 8% EBITDA margin, which represents 42% drop through 2020 for incremental revenue.
Jewelry: At the midpoint of our guidance, our 2024 non-GAAP adjusted EBIT guidance represent more than 400 basis points of EBIT margin improvement over the first two years 2023, and 2024 post close of the merger.
Jewelry: This is a result of the $32 million in annualized synergies, we have achieved to date and our progression toward delivering 50 million in synergies three years post close of the merger. It is also worth noting that we will no longer be adjusting out MBR related expenses as the initial wave of implementation is complete and we believe.
Jewelry: The current cost represents the ongoing expense to remain in the European market.
Julie Andrews: And finally, we are reiterating our commitment to exit the fourth quarter of 2024 being cash flow positive. While we are not providing quarterly guidance, I do want to provide you with some directional comments on the expected cadence of our business to assist you in modeling our quarterly performance. We expect Q1 and Q2 revenue to be slightly below our full year growth guidance range due to the timing of stocking orders in 2023. Additionally, we expect Q3 to reflect the highest year-over-year growth rate due to disruption in the prior year as we close the quarter.
And finally, we are reiterating our commitment to exit the fourth quarter of 2024 being cash flow positive.
While we are not providing quarterly guidance I do want to provide you with some directional comments on the expected cadence of our business to assist you in modeling our quarterly performance.
Jewelry: We expect Q1, and Q2 revenue to be slightly below our full year growth guidance range due to the timing of stocking orders in 2023. Additionally, we expect Q3 to reflect the highest year over year growth rate due to disruption in prior year as we closed the quarter.
Julie Andrews: Now, for some specifics on the individual line items on the P&L. First, on gross margin. For 2024, we are expecting growth margins to be in the 71% range, in line with 2023. Additionally, we expect operating expenses to decrease approximately 200 to 300 basis points through leverage on incremental sales and additional costs. Before we move to line items below the Operating Income line, to assist you with modeling EBITDA, I want to provide you with our outlook for depreciation expense, which for the full year 2024 is in the range of approximately $36 to $37 million as compared to $33 million in 2023. Stock-based compensation expense is anticipated to be in the range of $30 million to $32 million.
Jewelry: Now for some specifics on the individual line items on the P&L first on gross margin for 2024, we are expecting gross margin to be in the 71% range in line with 2023.
Jewelry: We expect operating expenses to decrease approximately 200 to 300 basis points through leverage on incremental sales and additional cost synergies.
Jewelry: Before we move to line items below the operating income line to assist you with modeling EBITDA I want to provide you with our outlook for depreciation expense, which for the full year 2024 is in the range of approximately $36 million to $37 million as compared to $33 million in 2023.
Jewelry: Stock based compensation expense is anticipated to be in the range of 30 million to 32 million.
Julie Andrews: Now let's touch briefly on the items below the operating income. Our expectation for interest and other is approximately $5 million. We expect our adjusted EBITDA margin improvement of 200 basis points to be weighted more toward the first half of the year as we annualize prior years. We expect the bulk of our remaining synergies to be focused on gross margin improvement and be realized during 2025. To touch briefly on cash, we anticipate cash use to be front and loaded with the magnitude of investment in Q1, with Q2 stepping down relative to Q1, and the second half of the year progressing toward break-even with Q4 exiting positive. In 2023, we will use approximately $108 million of cash for operating and capital expenses.
Jewelry: Now, let's touch briefly on the items below the operating income line.
Our expectation for interest and other is approximately 5 million per quarter.
Jewelry: We expect our adjusted EBITDA margin improvement of 200 basis points.
Jewelry: Weighted more towards the first half of the year as we annualize prior year synergies, we expect the bulk of our remaining synergies to be focused on gross margin improvement and be realized during 2025.
Jewelry: To touch briefly on cash we anticipate cash use to be front end loaded with the magnitude of investment in Q1 with Q2 stepping down relative to Q1 in the second half of the year progressing towards breakeven with Q4 exiting positive in 2023, we used approximately $108 million of cash.
Jewelry: For operating and capital expenditures a significant portion of this was driven by onetime merger related expenses and outsized investments in inventory and instrument sets to drive above market growth in U S. Spinal fixation, which we are realizing our ability to utilize these assets to drive growth in 2020 for NV.
Unknown Executive: A significant portion of this was driven by one-time merger-related expenses and outsized investments in inventory and instrument sets to drive above-market growth in U.S. fine fixation, which we are realizing. Our ability to utilize these assets to drive growth in 2024 and beyond underlie our belief that we will exit 2024 cash flow positive. At this point, we will open the line for questions. As a reminder, to ask a question, please press star followed by the number one on your telephone.
Jewelry: Beyond underlie our belief that we will exit 2020 for cash flow positive.
Speaker Change: At this point, we will open the line for questions.
As a reminder to ask a question. Please press star followed by the number one on your telephone keypad.
Unknown Executive: In the interest of time, we ask that you please limit yourself to one question and one follow-up. Thank you. Our first question will come from Matthew Blackman from CFO. Please go ahead.
Speaker Change: In the interest of time, we ask that you. Please limit yourself to one question and one follow up thank you.
Speaker Change: Our first question will come from Matthew Blackman from Stifel. Please go ahead. Your line is open alright.
Mathew Justin Blackman: Your line is open. All right. Good afternoon, everybody.
Mathew Justin Blackman: Alright, good afternoon, everybody. Thank you so much for taking my questions.
Massimo Calafiore: Thank you so much for taking my questions. Maybe, Masumoto, to start with you, let me just help us understand what your marching orders are from the board. What's on the table and what's not in terms of your ability to drive value creation here, divestitures, more M&A, et cetera. Does that help you?
Mathew Justin Blackman: Maybe to start with you let me just help us understand what your marching orders are from the board and what's on the table and what's not in terms of your ability to drive value creation here divestitures more M&A et cetera, if theres any help there and then I've got one follow up for Julie.
Massimo Calafiore: And then I've got one follow-up. Yeah, thank you. Thank you, Matt, for the question. Look, the marching order right now is to create value for the company and focus on profitable growth. So my team and I would be solely focused right now on driving the company, creating, let's say, accelerating market growth. There are a lot of opportunities out there. And really take care of the full portfolio that we have. You know, like Orthofix is not just a spine company. We have a lot of levers to use in spine, biologics, orthopedics, PGT, enabling technology. So, you know, reiterating what I said in my comment, profitable growth and value creation, leveraging the full portfolio and keeping working on innovation. Leveraging the great technology that we have in 7D.
Speaker Change: Thank you. Thank you Mark for the question look the marching northern right now.
Speaker Change: To create value for the company focus on profitable growth so.
Speaker Change: My team and I say by my team and I would be sorry default was so right now on driving the company.
Speaker Change: He didn't get let's say accelerating market growth that is a lot of opportunities out there and really take care of the full portfolio that we have.
Speaker Change: Also because it's not just the spine companies, we have the 11th to use it in spine biologic orthopedics, BGP and enabling technology. So what.
Speaker Change: Iterating.
And mighty market appropriate double growth value creation, leveraging the full portfolio and keep working on innovation leveraging.
Speaker Change: The technology that we have in 17 so.
Julie Andrews: So right now, focus on... Got it. I appreciate that. And Julie.
Speaker Change: Right now focus on execution.
Speaker Change: Got it I appreciate that and Julie if I'm looking at it correctly I think that 2023 MTR add back was about $9 $5 million is that right and does that mean, we should be looking at this 24 guidance sort of on an apples to apples basis approaching mid $70 million is that sort of the right way to think about it and then if I could just tack.
Julie Andrews: If I'm looking at it correctly, I think the 2023 MDR ADVAC cost about $9.5 million. Is that right? And does that mean we should be looking at this 24 guidance sort of on an apples-to-apples basis approaching mid-$70 million? Is that sort of the right way to think about it? And then, if I could just add on there, it would be helpful if you could maybe just describe your guidance philosophy in general. Are these ranges and the ranges you'll provide in the future ranges you have high conviction in a meeting and there's some upside, or no? We should take it literally. Help us frame that, and then I'll get back to you. Sure, thanks, Matt. Yeah, so the MDR expenses for 2023 were $9.5.
Speaker Change: On there would be helpful. If you could maybe just describe your guidance philosophy in general are these ranges in the ranges you will provide in the future ranges you have high conviction in the meeting and there is some upside or no. We should take literally just help us frame that and then I'll get back in queue. Thank you.
Speaker Change: Sure. Thanks, Matt Yeah, so the MTR expenses for 2023.
Speaker Change: <unk> hundred 95.
Julie Andrews: You know, we expect that to ramp down. I think our expectation is that it ramped down to around $3 million, and that's kind of the ongoing run rate that we'll see in the business. So if you think about that, that's included in our adjusted EBITDA guidance going forward. In terms of, you know, our philosophy on guidance, we've set the guidance at a number that we're confident in.
Speaker Change: We expect that to ramp down I think our expectation is that it ramped down to around $3 million and thats kind of the ongoing run rate that we'll see in the business. So if you think about that that's included in our adjusted EBITDA guidance.
Speaker Change: <unk> borrowings.
Speaker Change: In terms of.
Speaker Change: <unk> be an add on guidance, we set the guidance at a number that we're confident and we believe that we can deliver.
Julie Andrews: We believe that we can deliver. And, you know, that's our commitment. We want to be prudent.
Speaker Change: And.
Speaker Change: That's our commitment we want to be prudent masimo and I are both two months into the job.
Julie Andrews: Mossimo and I are both two months into the job, but our estimates are informed by what we've seen in the pipeline. And, you know, I've also tried to provide some parameters around the quarterly cadence as well. But we believe we've set it where we're confident that we can execute.
Speaker Change: But our estimates are informed of what we've seen in the pipeline and I've also tried to provide some parameters around the quarterly cadence as well but.
Speaker Change: But we believe we said it we were confident that we can execute against it.
Ryan Benjamin Zimmerman: Thank you. Our next question comes from Ryan Zimmerman from BTIG. Please go ahead. Your line is open. Good afternoon. Can you hear me okay? Jared.
Speaker Change: Got it thank you so much.
Speaker Change: Our next question comes from Ryan Zimmerman from BTG. Please go ahead. Your line is open.
Ryan Benjamin Zimmerman: Good afternoon can you hear me okay.
Yes.
Unknown Executive: Hey guys, first off, congrats on your first quarter here at Orthofix, your first earnings call, I should say. I have a bunch of questions. I want to follow up on one of Matt's points, but I want to start maybe with segment expectations. And Julie, I really appreciated all the color you gave on quarterly pacing and so forth. But when you think about kind of the business segments, and specifically within that, when we think about kind of legacy C Spine versus legacy Orthofix, I mean, the spine business of C Spine was kind of putting up, you know, kind of low double-digit type numbers, and you know you're guiding the five to seven. I'm wondering kind of how that splits out in terms of kind of your expectations for growth, be it BGT or Any commentary there would be would be appreciated, and I have a couple follow-ups.
Ryan Benjamin Zimmerman: Hey, Hey, guys first off congrats on.
Ryan Benjamin Zimmerman: Yes first quarter here at Oracle fix.
Ryan Benjamin Zimmerman: First earnings call I should say.
Ryan Benjamin Zimmerman: I've got a bunch of questions I wanted to follow up on the math, but I want to start maybe with.
Ryan Benjamin Zimmerman: Segment expectations in jewelry I really appreciated all the color you gave.
Ryan Benjamin Zimmerman: On a quarterly pace and so forth, but when you think about kind of the business segments.
Ryan Benjamin Zimmerman: And specifically within that.
Ryan Benjamin Zimmerman: When you think about kind of legacy spine versus legacy or the fix.
Ryan Benjamin Zimmerman: The spine business and satisfied with kind of putting up kind of low double digit type numbers.
Ryan Benjamin Zimmerman: And you're guiding the five to seven and I'm wondering kind of how that splits out.
Ryan Benjamin Zimmerman: In terms of kind of your expectations for growth via BGP or.
Ryan Benjamin Zimmerman: Orthopedics versus the core spine any commentary there would be would be appreciated and then I have a couple of follow ups. Thank you.
Julie Andrews: Thank you. Sure, Ryan. So we're not breaking out specific product line guidance today, but, you know, but I think, generally speaking, you can, we talked about the US fine fixation market or our growth at 13 and a half percent for the quarter. And so, you know, we feel really good about that, but we're not breaking out specific line item guidance. Okay, fair enough. Sorry, Massimo, did you want to chime in? I don't know.
Sure Ryan So we're not breaking out specific product line guidance today.
Ryan Benjamin Zimmerman: So, but I think generally speaking.
Ryan Benjamin Zimmerman: Talked about U S spine fixation market.
Ryan Benjamin Zimmerman: Growth at 13, 5% for the quarter.
Ryan Benjamin Zimmerman: And so we feel really good about that but we're not breaking out specific line item guidance.
Ryan Benjamin Zimmerman: Okay.
Ryan Benjamin Zimmerman: Sheridan.
Sorry, Massimo did you want to Jonathan.
Ryan Benjamin Zimmerman: Nope.
Unknown Executive: Okay. All right. I'll keep rolling.
Ryan Benjamin Zimmerman: Okay.
Speaker Change: I'll keep rolling.
Unknown Executive: So I want to ask another question, which is about segment profitability. And if you look at the 10K, you can see where most of the profit's coming from, from a segment perspective. And there's not a lot of profit coming from orthopedics.
Speaker Change: So I wanted to ask another question, which is about segment profitability and if you look at the 10-K you can see.
Speaker Change: See where most of the profit is coming from from a segment perspective, and theres not a lot of profit coming from orthopedics.
Speaker Change: Why why we remain committed to that business.
Massimo Calafiore: Why remain committed to that business at this point? And what can you do to potentially drive that growth higher? And, frankly, is it worth keeping that business, given the profitability it ascribes to the company? Yeah, look, this is a great question. But you know, we need to remember one foundational thing about Orthofix. Orthofix is the DNA of the organization.
Speaker Change: At this point and what can you do substantially drive that growth higher.
Speaker Change: And frankly that was keeping that business.
Speaker Change: Given the profitability it describes some of the country.
Speaker Change: Yes. This is a great question, but we need to remember one foundation of fees for all subjects in orthopedics is the DNA of our deal with <unk> and if you think out of the business is structure right.
Massimo Calafiore: And if you think how the business is structured right now, it's totally skewed towards Europe, where we are, you know, at a level of maturity that is very, very high. I think what we see in front of us is an enormous opportunity in the United States, where we have a very small market share. So there is a lot of focused investment that right now we're making in the specific market, not just around marketing and sales but also innovation. So what you should expect that over time, with the market, let's say we start to share the market between the United States and Europe, the US market grows much faster, you will see automatically a much higher profitability.
Speaker Change: Right now we still believe skewed on the in Europe, where we are at the level of maturity that is very very high I think what we see in front of us.
Speaker Change: Enormous opportunity in the United States when do we when we have a very small market share. So that is that I'll also focus investment that right now we are making in this specific market.
Just around the marketing and sales, but also in Malaysia. So.
Speaker Change: What you should expect that over time with the market, let's say if you could share the market between United States and Europe with the United States market that grows much faster you will see automatically a much higher profitability. So as I say, we are very excited about all of the opportunities.
Massimo Calafiore: So, as I said, we are very excited about all of the opportunities that we have in all of the different market segments; Orthofix is one of them. Appreciate that. And if I could squeeze one more in just to follow up on Matt's question, you know, Julie, if I look at kind of operating expenses dropping 200 to 300 basis points, I think it's, you know, in the range of around 610, maybe call it, you know, let's say Euro NDR costs come down a little bit. Where else do you feel like you have the opportunity to kind of manage those costs? And just your thoughts there would be appreciated.
Speaker Change: Opportunities that we have in all of the different market segment, the ESOP because one of them.
Speaker Change: Understood appreciate that and if I could squeeze one more in just a follow up to Matt's question, Julie if I look at kind of operating expenses dropped in 200 300 basis points I think it's in the range of around <unk> 10, maybe call it.
Julie: Let's say euro MTR costs come down a little bit where else do you feel like you have opportunity to kind of manage those costs.
Julie: Just your thoughts.
Julie: There would be appreciated.
Julie Andrews: Yeah, so we're going to be, you know, still annualizing the synergies that we achieved in 2023. And, you know, we talked about last year that the majority of that was coming from headcount. So we'll see, you know, that go down in 2023, or excuse me, in 2024, as we fully annualize those. In addition, you know, part of it is just that it's creating leverage on our incremental revenue growth, where we don't believe that we need to invest at the same rate. You know, G&A and R&D were holding flat to revenue.
Julie: Yes, so we're going to be.
Julie: Still annualizing our synergies that we are.
Julie: <unk> in 2023, and we talked about last year that the majority of that was coming from head count that we will see.
Julie: That go down.
Julie: In 2023, excuse me 2024, as we fully annualize those.
Julie: In addition.
Julie: Part of it is creating leverage on our incremental revenue growth, where we don't believe that we need to invest at the same rate.
G&A.
Julie: R&D, we're holding flat to revenues, though.
Julie Andrews: So that's what we're looking at for our leverage point. Okay. Well, thank you both for taking the questions. I very much appreciate it.
Julie: That's what we're looking at our leverage point.
Speaker Change: Okay, well. Thank you both for taking the questions of much appreciate it.
Speaker Change: Sure.
Speaker Change: Yes.
Jeffrey Scott Cohen: As a reminder, to ask a question, please press star followed by the number one on your telephone keypad. Our next question comes from Jeff Cohen from Lattenberg Thalmann. Please go ahead. Your line is open. Hi, this is actually Destiny on for Jeff.
Speaker Change: As a reminder to ask a question. Please press star followed by the number one on your telephone keypad.
Speaker Change: Our next question comes from Jeff Cohen from Ladenburg Thalmann. Please go ahead. Your line is open.
Destiny: Hi, This is actually destiny on for Jeff. Thank you for taking the questions I wanted to quickly talk about the <unk> segment can you describe some of the drivers that are really helping you grow within this growing market and how your growth rate is comparing to the overall market and a special shout out to Jason forgot.
Unknown Caller: Thank you for taking the questions. I wanted to quickly talk about the BGT segment. Can you describe some of the drivers that are really helping you grow within this growing market and how your growth rate is compared to the overall market? And a special shout out to Jason for getting a promotion. Do you see him adjusting the strategy?
Speaker Change: Adding a promotion.
Speaker Change: Do you see him.
Massimo Calafiore: Are you as part of your marching orders, as was previously asked, is BGT growth really central to it? Look, this is a great question, you know, like, we are very excited about this segment for, you know, for many reasons that I'm sure that you're familiar with, but if you see how the BGT business is divided, we have market leadership, market leadership is good, where we have not just an advantage from the technology perspective but also from the infrastructure perspective. I think what Jason did and the team built up a great system to convert all of the orders that we have to cash. So the idea is that, okay, how can we bring all this know-how that we have to different markets?
Speaker Change: Adjusting the strategy are you as part of your marching orders that was previously asked is is bvt growth really central to it.
Speaker Change: Look this is a great question.
Speaker Change: Very excited about this segment.
Speaker Change: For many reasons that I'm sure that.
Speaker Change: But if you see how the BTT businesses device that we have we have <unk>.
Speaker Change: Get the leadership.
Speaker Change: Our market leadership in spine, where we have but not just an advantage from the technology perspective, but also from the infrastructure perspective at the envelope to what Jason and the team has built up.
A great system to convert all of the order that we have cash. So the idea is that okay. How can we bring both this knowhow that we have on the prime market than than that right. Now we are focusing on the fracture market, where we have a very a very good opportunity right now.
Massimo Calafiore: And then right now, we are focusing on the fractured market, where we have a very, very great opportunity right now with a very small market share. And so you will see us really focused on the fracture, keep growing well above market, and bringing, let's say, all of the EBITDA and the gross margin positive that we see from BGT. So, let's say, a great... A great focus, let's say, a great focus on creating value in a digital market that's fine right now.
Speaker Change: <unk>.
Very small market share.
Speaker Change: And so you will see us really focused on their structure keep growing well above market.
Speaker Change: But anything let's say all of the EBITDA and the gross margin the positive that we see from BTT.
Speaker Change: Or let's say a great.
Speaker Change: A great focus at I'd say, a great focus on creating value on additional market in spine right now.
Julie Andrews: Excellent. Okay. And then, Julie, one for you.
Speaker Change: Excellent Okay, and then Julie one for you I really appreciate the commentary around the synergies, especially on the top line and how it will affect adjusted EBITDA I'm wondering if you could just give us an update on the current head count and how the synergies impacted that.
Julie Andrews: I really appreciate the commentary around the synergies, especially on the top line, and how they will affect adjusted EBITDA. I'm wondering if you could just give us an update on the current headcount and how the synergies impacted that. I think most of the headcount action was taken last year.
Julie: So I think most of the head count action was taken last year.
Julie Andrews: And we don't expect to have much more headcount impacted or more headcount impacted this year. You can see in our K, I believe, our headcount numbers. Okay, perfect. I love it. Excellent. That does it for me.
Julie: And we don't expect to have.
Julie: Much more head count.
Julie: Impacted our more headcount impacted this year.
Julie: You can see in our.
Julie: <unk> I believe.
Julie: Our head count numbers.
Julie: So Luke Eric Joseph.
Speaker Change: Excellent that does it for me thank you.
Jason Witts: Our next question comes from Jason Witts from Roth MKM. Please go ahead, your line is open. Jason, your line is open, please go ahead. Hi, can you hear me now? I apologize. I think I was muted.
Speaker Change: Our next question comes from Jason Wittes from Roth and Kam. Please go ahead. Your line is open.
Jason Wittes: Jason Your line is open. Please go ahead.
Jason Wittes: Hi can you hear me now I apologize.
Unknown Caller: Hello, we can hear you. Yes, we can hear you. Oh, okay. Thank you very much. Hi. I know you're not giving line-by-line guidance by division, but... The numbers do look somewhat conservative. Is this just a reflection of sort of, I think, your stated goals, Massimo, when you started, which were, you know, profitable growth versus growth, high growth, or growth with heavy investment? Is that the way you should be thinking about it, or is it just a combination of conservatism?
Jason Wittes: I think I estimated hello.
Jason Wittes: So yes, we can hear you okay. Thank you very much.
Jason Wittes: Yes, I know youre, not giving line by line guidance by Division, but.
Jason Wittes: The numbers do look somewhat conservative is this just a reflection of sort of I think your stated goals. That's why when you started which were.
Jason Wittes: Profitable growth versus growth high growth or growth that with heavy investment is.
Jason Wittes: Is that the way you should we think about it or is it just a combination of conservatism.
Julie Andrews: Just conservatism, but, generally speaking, the business trends look pretty good. Yeah, I mean, this is Julie. I'll take that. You know, our business trends look good. We're expecting all of our businesses, while we're not giving line item detail, to grow at or above market. And, you know, like I said earlier, Massimo and I are two months into the job. We want to set, you know, guidance where we have confidence that we can execute against it and deliver on that commitment. And that's what we believe we've done with the guidance that we've provided. And then I don't know if you said it mentioned anything on 7D.
Speaker Change: Just conservatism, but generally speaking the business trends look pretty good.
Speaker Change: Yes. This is Julie I'll take that our business trends look good we're expecting all of our businesses, while we're not giving line item detail to grow at or above market and.
Julie: I said earlier, Massimo and I are two months into the job.
To set guidance, where we have confidence that we can execute against it and deliver on that commitment and that's what we believe we have done with the guidance that we've provided.
Speaker Change: Understood and then.
Speaker Change: Don't know if you mentioned anything on <unk> could you give us some color in terms of placements or kind of what the outlook is for 70.
Massimo Calafiore: Could you give us some color in terms of placements or what the outlook is for 7D? Look, as Julie said, we're not giving, let's say right now, a specific forecast for the market segment, but I said, I said during, Something is important to notice is that Seventeen has been a great contributor to the success of the Spine franchise. Even the last year, like we had, We had 29%, if I remember correctly, of the overall revenue that came from 7D, and you know that all of our competitors have been successful leveraging enabling technology, and you will see us really focus on a platform that is unique in the marketplace. So we are pretty excited about the contribution of 7D in 2023 and what we can achieve together in 2024. Okay, thanks. Maybe just one follow-up question. You kind of addressed this, but I'm just curious about kind of what the outlook is, and that is on distributors. It sounds like it's stable and you're adding.
Speaker Change: Luke.
Speaker Change: Julie said, we're not giving good let's say right now.
Speaker Change: <unk> a specific forecast for market segment, but I've said I've said tooling.
Speaker Change: Something is important to notice is that.
Speaker Change: <unk> being a great contributor of the of the success of the spine franchise, even in the last year.
Speaker Change: We had to.
Speaker Change: We had 29% if I remember all of the overall revenue that came from from 70 and you know that the all of the all of our competitors have been successful deleveraging.
Speaker Change: Enabling technology and that you would see us really focus on our platform.
<unk> in the marketplace. So.
Speaker Change: We are pretty excited about what the contribution of 73.
Speaker Change: Yes.
What we can achieve together.
Speaker Change: Sure.
Speaker Change: Okay, Thanks, and maybe just one follow up.
Speaker Change: Kind of addressed this but I'm just curious kind of what the outlook is and that is on distributors. It sounds like it's stable and youre, adding can we anticipate that youll continue to add.
Massimo Calafiore: Can we anticipate that you'll continue to add high-quality distributors throughout the year, particularly in Spine? Yeah, yeah, thank you for the question. Look, there is a lot of excitement about what we're doing today around spine and orthopedics, and we have a very healthy pipeline. So, you know, the spine market always goes through fluctuations.
Speaker Change: High quality distributors throughout the year, especially particularly in spine.
Speaker Change: Yes, yes. Thank you for the question look there is a lot of excitement about what we're doing today.
Speaker Change: Spine and orthopedics and we have a very healthy pipeline. So despite a market that always go through fluctuation youll see youll see what's happened in the last few years spot right now.
Massimo Calafiore: You see, you know, what's happened in the last few years. But, you know, right now, given the recent mergers, there is even a greater opportunity for reps and distributors to go get it. Look, we are fully capitalized to do that, and, you know, like the results in Q4 helped us just to show that the thesis of the quality of our product is there. So, I think towards the end of the year, you see, we will be able to keep adding high-quality distributors that are going to merit our vision around what we want to accomplish in our business. So, a lot of dealable opportunities out there.
Speaker Change: Given the recent mergers that is even greater opportunity.
Speaker Change: And that distributor.
To go get fully capitalized to do that.
Speaker Change: And.
Speaker Change: That is also in Q4.
Speaker Change: Just to show that the thesis of the quality of our product is there.
Speaker Change: I think towards the year Youll see we would be able to keep adding high quality just due to that distributor that has gone up.
Speaker Change: That marries our vision around what we want to accomplish in orthopedics. So.
Unknown Caller: Wonderful. I appreciate the color. Thanks. I'll jump back into the queue. Yeah. And just to amplify and clarify what Massimo said, we had 25% revenue growth in enabling technology. Black, and Q4, I'm sorry.
Speaker Change: Ill stop deal of opportunities out there.
Speaker Change: Wonderful I appreciate the color thanks, I'll jump back in queue.
Speaker Change: And just to amplify and to clarify on what Michael said, we had 25% revenue growth and enabling technology last year.
Speaker Change: In Q4 Im sorry.
Unknown Executive: We have no further questions. I would like to turn the call back over to Massimo Calafiore for any closing remarks. Look, as I said earlier, I will close today by reiterating my enthusiasm to be part of our team and my optimism about the company. My first two months have really underscored the stability of Orthofix's foundation and the breadth of its portfolio offering. I would also like to thank all of our employees worldwide for their commitment to us and their initiative in maintaining momentum across our whole portfolio. We are going to continue building a dynamic organization dedicated to collaboration, innovation, and patient care. 2024 will be a great opportunity for growth and value creation, and I look forward to providing more granularity on specific initiatives in future updates.
Speaker Change: We have no further questions I would like to turn the call back over to Massimo CRA for any closing remarks.
Massimo: Thank you Luke.
Massimo: I said earlier, our close today by reiterating my enthusiasm to be part of orthopedics.
Massimo: <unk> the company future.
Massimo: My first two months have really underscore the stability lots of fixed fund base fundamentals.
Massimo: The portfolio offering.
Massimo: I would also to thank all of our employees worldwide for their commitment dwarfs effects and that initiative in maintaining momentum across our whole portfolio. We are going to continue building <unk>.
Massimo: Amick organization.
Massimo: Dedicated to collaboration innovation and passion and patient care 2024 would be a great opportunity for growth and value creation, and I look forward to providing market and minority on specific kinesis initiatives in future updates.
Speaker Change: Thank you.
Speaker Change: This concludes today's conference call. Thank you for your participation you may now disconnect.
Massimo Calafiore: Thank you. This concludes today's conference call. Thank you for your participation. You may now disconnect.
Speaker Change: Please wait the conference will begin shortly.
Speaker Change: Sure.
Speaker Change: Okay.
Speaker Change: Okay.
Speaker Change: Okay.
Speaker Change: Understood.
Speaker Change: Yes.
Unknown Executive: Please wait. The conference will begin shortly. Please wait. The conference will begin shortly.
Speaker Change: Okay.
Speaker Change: Okay.
Speaker Change: Okay.
Speaker Change: Sure.
Speaker Change: [music].
Speaker Change: Sure.
Speaker Change: Okay.