Thank you for standing by. My name is Jay, and I will be your conference operator today. At this time, I would like to welcome everyone to the Orthofix Q1 2024 Earnings Call. [Operator Instructions] I would now like to turn the conference over to Louisa Smith. You may begin.

Thank you and good morning, everyone. Welcome to the Orthofix First Quarter 2024 Earnings Call. Joining me on the call today are President and Chief Executive Officer, Massimo Calafiore; and Chief Financial Officer, Julie Andrews. During this call, we will be making forward-looking statements that involve risks and uncertainties. All statements other than those of historical facts are forward-looking statements, including any earnings guidance we provide and any statements about our plans, beliefs, strategies, expectations, goals or objectives. Investors are cautioned not to place undue reliance on such forward-looking statements as there is no assurance that the matter contained in such statements will occur. The forward-looking statements we will make on today's call are based on our beliefs and expectations as of today, May 7, 2024. We do not undertake any obligation to revise or update such forward-looking statements. Some factors that could cause actual results to materially differ from the forward-looking statements made by us on the call include the risk factors disclosed under the heading Risk Factors in our Form 10-Q filed this morning, May 7, 2024, as well as on additional SEC filings we make in the future. In addition, on today's call, we will refer to various non-GAAP financial measures. 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 press release announcing our first quarter 2024 results for reconciliations of these non-GAAP financial measures to our U.S. GAAP financial results. At this point, I will turn the call over to Massimo.

Thank you, Louisa, and thank you, everyone, for joining us this morning for our first quarter earnings call. I'll spend some time providing insight into our higher-level strategy as well as updates on some key priorities and initiatives, before I turn it over to Julie for further details on our quarterly performance and financial results. I'm pleased to report another strong quarter for Orthofix, driven by healthy business fundamentals and exceptional operating performance of our teams. We continue to gain momentum and leveraging strategic initiatives to grow Orthofix across all our business segments. Net revenue for the first quarter was $189 million, representing a 7.5% year-over-year increase in constant currency, led primarily by 10% growth across our U.S.A. businesses. The strength in U.S.A. performance was driven by 10% growth in BGT, 16% growth in spine fixation and 23% growth in Orthopedics. We are clearly outpacing market growth in all of these segments. We are delivering innovative products and outstanding service while executing to plan and taking advantage of emerging opportunities. I remain very confident in our future and the prospects to deliver value moving forward. To reiterate some of the 2024 priorities that we laid out in our fourth quarter call, we are diligently focused on: one, profitable growth; two, emphasizing a synergistic and balanced approach to our portfolio platforms; and three, strategic innovation. We remain committed to delivering across all 3 in the near term and are already seeing pull-through in our results. Our first priority is to grow the business and growing profitably. Julie will discuss the specific metrics later, but I'm happy to report that in the first quarter, we saw an improvement of more than 200 basis points in our adjusted EBITDA margin as a result of strong top line growth and the realization of synergies.…

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 resales. Additionally, all revenue percentage changes discussed will be on a constant currency year-over-year basis. As of this quarter, we have annualized the impact of the merger and will no longer be referring to pro forma growth. In addition, all results of operations that I referred to in my prepared comments will be on a non-GAAP as adjusted basis. As Massimo noted, Orthofix had a strong first quarter, delivering 7.5% constant currency top line growth and EBITDA margin expansion of approximately 220 basis points. For my commentary, I'll go through each of our business units and review financial results on the quarter as well as provide an update to our guidance for the full year 2024. Total company net sales were $188.6 million for the first quarter of 2024, up 7.5% over prior year. Bone Growth Therapies revenue grew 10% to $52.5 million in Q1 and marks the fifth consecutive quarter of double-digit growth for the BGT franchise. This growth was driven by above-market performance in both the spine and fracture channel. In the spine market, where we hold the #1 market share position, we continue to take share with more than 50% of the growth coming from new customer acquisitions. In addition, investments in the fracture market sales channel drove 16.8% growth in fracture, with AccelStim continuing to outperform the market. As a reminder, the fracture market represents an opportunity of more than $200 million, and we are just beginning to scratch the surface of our potential in that market. Global Spinal Implants, Biologics and Enabling Technologies first quarter revenue was $108.8 million, with year-over-year growth…

I'll close today's call by emphasizing my confidence in the business and reiterating my enthusiasm to be part of the Orthofix team. We have solid fundamentals, exceptional employees and a best-in-class portfolio that is driving above-market performance. Throughout 2024, we will keep delivering on our commitments to patients, customers and shareholders, driving the company to new heights. Before we send off, I would also like to thank all of our employees worldwide for their dedication to Orthofix and its mission. I'm very excited for the next chapter ahead of us. At this point, we will open the line for questions.

[Operator Instructions] Your first question comes from the line of Mathew Blackman of Stifel.

Can you hear me okay?

Yes.

Maybe the first question -- and I hate to nitpick here, but guidance for the year is up about $2 million to $3 million midpoint to midpoint versus the $4 million to $5 million 1Q. I appreciate it's early in the year I sense conservatism, but I just want to make sure you're not seeing anything different here in 2Q and maybe tempered your momentum.

Yes. No, we wouldn't -- we're not seeing anything that would temper our momentum. We're -- again, it's early in the year. We want a new management team in place, and we are confident in what we're delivering. But nothing that's tempering our enthusiasm.

Great. That's what I figured. And then just maybe a housekeeping question. Did you have 1 fewer day -- selling day in the first quarter versus 2023? Some of your peers have. So I'm just curious about your calendar.

No, we did not.

No, okay. Okay. And then I guess my last question -- and Julie, you sort of alluded to it. I was hoping maybe to get some firmer numbers, but you gave a great metric in the fourth quarter, that 8% of sales were from new distributors. You mentioned that continued. Any chance you can update that number similar to last quarter or higher? And I appreciate you may not have this at hand, but also is there any way to give us any sort of same-store sales kind of growth number for your accounts? And I'll leave it at that.

Okay. I'll say in the revenue from new distributors, I said in the prepared remarks that it nearly doubled. So you can interpret that from the 8% to nearly doubling. And then I don't have same-store sales at the ready in front of me, but we'll think about release -- if we want to release that or not. Thank you.

Your next question comes from the line of Ryan Zimmerman of BTIG.

This is Izzy on for Ryan. So just first off on the gross margins, it looks like you guys came in, in line with our estimates this quarter. We were just wondering what you could see that could drive them higher over time?

So yes. So over -- I mean, this year, we've said that our margins would be 71% in line with last year. I think as we look into the future, we have an issued long-range guidance on it, but we do see opportunity in the gross margin line. I think there's synergies with supplier rationalization, leveraging our footprint and those types of things that we're looking on.

Great. And then next, on the bone stim, it looks like you guys are seeing some pretty strong growth here. Just wondering what you can do to maintain this growth in a market that's maybe growing not as fast?

Yes, it's an excellent question. Look, we see for the foreseeable future great potential. Just given from what we said during -- in our remarks, but we are leveraging as much as we can right now all of the new surgeons coming from the SeaSpine acquisition. So as I said, it's true that the market grows our market rates, but if you confine the business in our domain, we see strong potential, as said, for the next few quarters. So we will try to maximize this potential as much as we can.

Your next question comes from the line of Jason Wittes of ROTH MKM.

Just on the growth rates we saw this quarter, I mean, you kind of mentioned for Global Orthopedics, it's going to vary. The Spine growth has been pretty nice, is that something that we expect to continue for the rest of the year? Or could you comment on sort of what the trends are for the remaining other businesses?

Yes. Look, we feel pretty confident about the growth rate that we are achieving right now. As we said earlier, we have clearly identified a couple of growth drivers for us. One, we are getting a lot of interest from new distributors and new surgeons. The amount of inbound cost that are coming has been pretty remarkable for us. And all of these allow us to really pick and choose the right partner. Because remember, we are fully focused on profitable growth, so -- and we can achieve this if we get the right partners. On the same token, with our investment in innovation, we are seeing a further utilization of our product. So a very healthy increase on revenue per case. So all of this to say that we see a very strong business fundamental for the foreseeable future.

Okay. And then you mentioned you should go cash flow positive in Q4. I assume that's sustainable. And going forward, the quarters will be cash flow positive from there on? Or will seasonality impact that? Or sort of what's the outlook for the cash flow generation?

Yes. We'll issue a formal guidance on that for 2025, and we'll do so later this year. But, yes.

Your next question comes from the line of Jeff Cohen of Ladenburg Thalmann.

So I wondered if you could talk about AccelStim a bit in fresh fractures, and talk a little bit about some of the channels. And I did hear you call out the fracture market in some of those channels, some of those docs, and are you still focused on surgeons? Is there some focus that's on pain docs as well?

Right now, I think that we are keep leveraging our network on the surgeon side. So at the end, we have 2 products that are helping us to address the continuum of care in fracture, fresh fracture, and malunion. So we keep driving our product portfolio using existing distributors, plus try to find synergies with the distributor that working on the orthopedic side. So our market is defined right now on the surgeon piece.

Okay. Got it. And then could you talk a little bit about the larger, more dedicated distributors as far as aggregate numbers you anticipate over the balance this year, that the actual number of distributors will decrease? And then if you could give us a sense of feet on the ground.

Yes. I don't think that we give the specific detail about like among distributor and like in general. What I can tell you is that on the positive side, we are seeing that all our top distributors keep increasing their loyalty to us. So I think at the moment we're seeing on the -- everything is shifting to have -- let's say, given the depth of our portfolio, especially in Spine, our top distributor are becoming exclusive to us. So -- and I think this one is going to keep driving -- is going to help us to drive compliance going forward and focus with our products. So as I said, we don't give a specific number. But what I can tell you that, directionally, the quality of revenue that we are seeing is pretty high right now.

That concludes our Q&A session, and this concludes today's conference call. You may now disconnect.