Welcome to be Orthofix International NV 2015 First Quarter Results Conference Call. Today's call is being recorded I would now like to turn the call over to Mr. Mark Quick, Director of Business Development and Investor Relations. Please go ahead, sir. Please go ahead, sir.

Thanks, operator, and good afternoon everyone. I'd like to welcome to the Orthofix first quarter 2015 earnings call. Joining me on the call today is our President and Chief Executive Officer, Brad Mason, Chief Financial Officer, Doug Rice, and Chief Strategy Officer, Mike Finegan. I'll start with our Safe Harbor statements and then pass it over to Brad. During this call we will be making forward-looking statements that involve risks and uncertainties. All statements other than those of historical facts are forward-looking statements. Including any earnings guidance we provide at any statements about our plans, beliefs, strategies, expectations, goals, or 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 make on today's call are based on our beliefs and expectations as of today May 18, 2015. We do not take any obligation to revise or update such forward-looking statements. Some factors that could cause actual results to be materially different from a forward-looking statements made by us on the call include the risks disclosed under the heading risk factors on our 2014 Form 10-K as well as additional SEC filings we make in the future. If you need copies please contact my office at Orthofix in Lewisville, Texas. In addition, note that on today's call, we will refer to certain non-GAAP financial measures in which we exclude certain items from our U.S. GAAP financial results. 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 financial performance measures to determine in accordance with U.S. GAAP. Please refer to today's press release announcing our first quarter 2015 results are available on our website for reconciliation of these non-GAAP performance measures to our U.S. GAAP financial results. At this point I'll now turn the call over to Brad.

Thanks, Mark and good afternoon everyone. Since we are only a few weeks removed from our last call, today's call will be somewhat abbreviated. I will start by giving you a brief update on the first quarter, after which Doug will walk you through the financial results that we reported today. I will then follow up with a review of our priorities and expectations going forward before opening it up for Q&A. In the first quarter, we continue to make progress in positioning our business for the future success. That said the numbers for the first quarter don’t reflect the progress we are making. On the financial side, our BioStim and Biologics regenerative businesses continue to show year-over-year growth. Topline revenue in our Extremity Fixation business declined year-over-year on a GAAP basis, but was flat when considering the negative impact of both FX and cash received for cash-based distributors. Despite fixation business continue to decline year-over-year but has had sequentially monthly growth year-to-date indicating that we are beginning to reverse this decline. And as Doug will describe in more detail, gross margin increased 522 basis points over prior year, strategic business unit or SBU net sales mix was the primary driver of this improvement. Sales and marketing expenses increased $3.1 million in Q1 of 2015, compared to Q1 of 2014, driven by investments in additional sales management and field-based education specialist as well as our commission rate structure in the BioStim and Biologics SP that rewards growth and quota overachievement. Our sales and marketing expenses as a percentage of net sales are expected to normalize to near historical annual levels by year-end, adjusted EBITDA decreased $6.4 million for the quarter, the decline was due to the decrease in net sales and the increase in SG&A expenses supporting our strategic initiatives. Turning to our operational accomplishments in the quarter, we continue to make progress expanding our sales channels, accelerating new product introductions and remain on schedule and budget with project Bluecore. As previously reported, Orthofix completed its restatement in Q1. We also entered into an agreement that provides us with an 18 month option to acquire eNeura a pioneer in the use of portable noninvasive transcranial magnetic stimulation or TMS devices for the treatment of migraine headache. While the first quarter's results were impacted by the timing of payments from cash based distributors, the impact of foreign exchange rates and our SG&A investments to improve infrastructure and grow topline. I remain optimistic about results in each of our SBU's over the balance of the year. Now I'll turn the call over to Doug to provide the financial details for Q1 2015. Doug?

Thanks, Brad and good afternoon everyone. I'll start with net sales on a consolidated basis. Total net sales in the quarter were $89.8 million, a decrease of 10.3% compared to first quarter 2014 total net sales of $100 million. On a constant currency basis, net sales decreased by 7.4% as the impact of foreign currency headwinds decreased net sales by $2.9 million in the quarter. Now I'll talk about each SBU in more detail. Starting with our BioStim SBU, 2015 first quarter BioStim net sales were $37.7 million, up 1.5% versus the same period in the prior year. The increase was primarily due to volume growth driven by enhancements to the BioStim sales organization which included adding management and salespeople and underserved geographies as well as adding additional sales representatives exclusively dedicated to our Physio-Stim product line. Turning to our Biologics SBU, 2015 first quarter net sales were $14 million, an increase of 7.3% versus the same period in the prior year. The growth was primarily driven by an expanded sales distribution network as well as continued market acceptance of our next generation cell-based bone growth tissue technology Trinity Elite. Moving onto our Extremity Fixation SBU 2015, first quarter net sales were $21.8 million, a decrease of 19.4% in comparison to the same period in the prior year. Primarily due to the foreign currency exchange impact on net sales the rebuilding of our Brazilian sales channels and the timing of cash collections from customers within this SBU were normalized for both currency and cash collections, the Extremity Fixation net sales were flat in Q1 as compared to the prior year. And lastly our Spine Fixation SBU's 2015 first quarter net sales were $16.3 million, a decrease of 28.6% in comparison to $22.8 million in the same period in the prior…

Thanks, Doug. Before we open up the call for questions, I'd like to briefly review our three main objectives for 2015 that we highlighted on our recent year-end call to discuss how each of them will drive performance improvement. Our first objective is to continue to optimize our sales channels, in 2014 and continuing into this year, we added many new talented regional sales leaders of both in the U.S. and abroad. We are working to leverage these sales leaders to find additional sales representatives and distributors to fill gaps in our coverage and in many cases augment existing territories where we are underpenetrated. Another important aspect of optimizing our sales channels is increasing the number of our field-based education and training personnel. These team members are supporting our expanded sales force, assisting with new product introductions and helping to drive growth. As a result of this, and commission quota overachievement, we saw increase in our sales and marketing expenses in the first quarter but as mentioned earlier we expect these expenses to return to near historical levels by year-end as a percentage of net sales. We believe these investments are essential to accelerate sales in each of our SBU's. Our second objective is to improve our infrastructure, as I mentioned in our year-end call we have initiated project Bluecore a multiyear worldwide process and systems improvement initiative. The strategic objective of Bluecore is to improve the reliability and efficiency of our systems, processes and reporting as well as drive down our overhead expenses as we complete each phase of the work. In addition to re-implementing our Oracle ERP platform worldwide, we expect to improve supply chain management, simplify finance and accounting procedures, and move to less manual processes with fewer redundancies throughout the company. Bluecore remains on schedule and…

[Operator Instructions]. And we will take our first question from Dave Turkaly with JMP Securities.

I guess I was wondering, given that the kind of investment you're talking about in sales and marketing, are you able to kind of give us a starting point or even I guess quantify how many people are you adding specifically I guess in stim and spine? And I guess sort of are you still adding more or do think you've hired the majority of the folks that you need now?

We're always going to continue to higher [Technical Difficulty] place the lower performing people we have out there but right now I think the number I reported as I recall off the top of my head that we added in 2014 was 263 more people in the U.S. Now, not all of those people are fully devoted to orthopedics, these are distributor reps as well as some direct reps additionally so we increased about roughly 20% of our sales force and we have a lot more to go and particularly in our Spine Fixation and Extremity Fixation businesses in the U.S. BioStim, they started a little bit earlier than we did and some of the other SBU's and so they are ahead of the curve, Biologics is still expanding into other distribution outside of our Spine Fixation distributors. So we still have a ways to go now that's not necessarily where the added costs are . Some of it is because as we bring on new sales representation typically Dave, their commission structure is such that they get a bonus or a higher commission on new sales so as we have a higher mix of new distributors and sales reps, they are getting higher commission rate right out the door because it's all new sales to them. So to that extent, it affects our sales and marketing costs and certainly that was part of the effect in Q1 but that'll give you kind of the general overview of where we are.

The 263 people that number that you said, that's the increase? That was the actual net new folks on your platform in 2014?

That was net new for 2014.

That's a big number. So I guess as you mentioned on the call, spine gets back to growth later this year, and then you talked about some new products I guess these new distributors and reps help, should help as well I mean in the first quarter overall it seemed like it was pretty good for some spine companies in general. So I imagine you would benefit from that as well sort of as this year progresses. But I guess any update on anything else on the pipeline or anything that's doing, that you think could come onboard in spine particularly and contribute?

In 2014, we had a really good year in new products and the other think one thing to understand with the new product rollouts, they take time, we typically do a limited market release for about six months and then start to ramp up. So things like our SambaScrew SI, Centurion, our LoneStar, those sorts of things, really take about nine months before they start contributing anything of notice. And so those are starting to kick in now, Samba is moving up, Centurion is moving up, LoneStar as well. And we are in a limited market released on our SkyHawk lateral in that business and we also released the [Janus cortical cancellous screw] for midline approaches early in -- actually in the middle of the first quarter. So these things will take a little bit of time to kick in but those will all contribute to this year and we've got a very nice pipeline going forward from here as well with some nice products so and then one other point. In our U.S. Extremity Fixation business where we launched TrueLok Hex at the end of Q1, we really like that product and we think we have a lot of room for that product in the U.S. So that's a nice one as well.

And we next move to Raj Denhoy with Jefferies.

I wondered if I could start on the second quarter. I don't believe you gave guidance I apologize a lot of information on the prepared remarks but it sounds like you expect a lot of what impacted the fixation in spine business in terms of cash receipts to correct, do you expect all that to come back in the second quarter?

I think it's tough to predict the time today, Raj, this is Doug we expect it to normalize throughout the course of the year, but it's hard to say exactly when that would happen.

Can you give us any guidepost in terms of what you think you might do in terms of revenue in the second quarter?

We're going to stay away from guiding on a quarterly basis. We're still confident on the annual guidance of the $385 million to 390 million.

The other thing too Raj is, I've been saying for a little while it's still going to be choppy for a bit now with both FX, of course that you factor into it but with this cash-based customers, and frankly, some of the -- one of the areas that we’re trying to sort through right now is there is areas like Brazil where the real is so weak now that they're going to hold off on placing orders and things until that because they think that's going to improve over time so will have to address that as well but that's why it just doesn't make sense for us to give a quarterly guidance.

And in a broader sense, the flattish growth you’re guiding to on a constant currency basis, though, for the year, I could imagine corrects for some of these things and I don't imagine that that is the level of growth that you guys are going to be satisfied with longer terms in terms of the various businesses and you certainly made a lot of investments in terms of the sales force. As you think about the various businesses moving into 2016, what level of growth should we be thinking about for you guys?

Sure. What we feel is that we can outgrow our market rates in each of our businesses so if you think about of the BioStim business, we think about that as maybe a 0% to 2% growth rate in that business. Our Biologics is in upper single digits. Mid to upper single digits and Extremity Fixation is in mid to upper single digits. And Spine Fixation, we're just looking at 1% to 3% growth in Spine Fixation so we think in each of those business units as we get into '16 and certainly into the second half of '16 that we will exceed those rates because you are right, we are not satisfied. First quarter was not -- I'm not happy with those numbers at all. We've got a lot of work left to do.

Okay. The spine business I guess in particular has been the fixation business been a little tough sliding for you guys recently and you get this question a lot but in terms of your commitment to that business or whether you think it's important for you to continue to compete in Spine Fixation, do you’ve any kind of broader thoughts around that?

It's a topic that comes up regularly as you suggested, Raj, a couple things about the business, first of all, I was about a year late pulling the trigger on some things that should have been done are now being done. I got sidetracked with the restatement a little bit and some other things. But the things that we're doing now are the right things and we are starting to feel the momentum. We're not -- it's not necessarily showing through in the numbers yet but it's got a start with a culture and an attitude and a feel and that's where we are in the business now. So we think that business is eminently fixable and now that things that we are doing will have the result, it's just going to take a little bit of time. The other thing that's important that I remind everybody of is that, it's still a significant portion of our Biologics revenue goes through that sales force and so if we were to disrupt that, we have to be careful how that happened and what the result of that was. So at this point, we are absolutely committed to that business and we're going to turn it into a nice business for Orthofix.

Okay two last questions if I could, you guys are almost caught up now in terms of I guess you are caught up now in terms of reporting with the first quarter today. The restatement costs still running pretty heavy, is that going to start to moderate here?

We're done at the end of the first quarter with restatement charges so you won't see any moving forward.

Okay, good. And then you mentioned, this target of 20% EBITDA margins you didn't put a timeframe around that, I mean do you have any updated thoughts on when you think you can get to the level?

That must have been an oversight on my part. I do have some ideas of when I think we can get there. We just have to execute a lot of things very, very well. I really don't want to be pinned down on it but I would say that we should see progressive improvement along the way so it's not just going to be dropping off a cliff, we'll get there and we will have some good improvement along the way in the quarter's and years to come.

Ladies and gentlemen, that does conclude today's question-and-answer session I would like to turn the conference back over to management for any closing remarks.

Thank you, operator, and to all the others who joined us today, thanks for joining in and we look forward to seeing a number of you in New York and talking to you on the next call. Take care.