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Orthofix Medical, Inc. (NASDAQ:OFIX) Q2 2019 Earnings Conference Call August 5, 2019 4:30 PM ET
Mark Quick - Director, IR
Bradley Mason - President, CEO & Director
Douglas Rice - CFO & CAO
- Mark Quick - IR总监
- 布拉德利梅森 - 总裁，首席执行官兼董事
- Douglas Rice - 首席财务官兼首席运营官
Craig Bijou - Cantor Fitzgerald & Co.
Ryan Zimmerman - BTIG
Jeffrey Cohen - Ladenburg Thalmann & Co.
James Sidoti - Sidoti & Company
- Craig Bijou - Cantor Fitzgerald＆Co。
- Ryan Zimmerman - BTIG
- 杰弗里科恩 - 拉登堡塔尔曼公司
- James Sidoti - Sidoti＆Company
Good afternoon, ladies and gentleman, and welcome to the Orthofix Second Quarter 2019 Earnings Results Conference Call. [Operator Instructions]. As a reminder, this conference call is being recorded.
I would now like to turn the call over to your host, Mr. Mark Quick, Senior Director of Business Development and Investor Relations. Sir, please go ahead.
女士们，先生们，下午好，欢迎参加Orthofix 2019年第二季度收益结果电话会议。 [操作员说明]。 提醒一下，此电话会议正在录制中。
我现在想把这个电话转给你的主持人，业务发展和投资者关系高级主管Mark Quick先生。 先生，请继续。
Thank you, Operator. And good afternoon, everyone. Welcome to the Orthofix Second Quarter 2019 Earnings Call. Joining me on the call today are President and Chief Executive Officer, Brad Mason; and Chief Financial Officer, Doug Rice. I'll start with our safe harbor statement and then pass it over to Brad. During this call, we'll be making forward-looking statements that involve risks and uncertainties. All statements other than those of historical fact 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 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, August 5, 2019. 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 risks disclosed under the heading risk factors and our Form 10-K for the year ended December 31, 2018, as well as additional SEC filings we make in the future. If you need copies of these documents, please contact my office at Orthofix in Lewisville, Texas. 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 financial measures determined in accordance with U.S. GAAP.
Please refer to today's press release, announcing our second quarter 2019 results for reconciliations of these non-GAAP financial measures to our U.S. GAAP financial results.
At this point, I'll turn the call over to Brad.
谢谢运营商。大家下午好。欢迎来到Orthofix 2019年第二季度收益电话会议。今天与我联系的是总裁兼首席执行官布拉德梅森;和首席财务官Doug Rice。我将从我们的安全港声明开始，然后将其传递给布拉德。在此次电话会议中，我们将制定涉及风险和不确定因素的前瞻性陈述。除历史事实之外的所有陈述均为前瞻性陈述，包括我们提供的任何盈利指引以及有关我们的计划，信念，策略，期望，目标或目标的任何陈述。谨请投资者不要过分依赖这些前瞻性陈述，因为无法保证此类陈述中包含的事项将会发生。
Thanks, Mark, and good afternoon, everyone. As you may have already seen in our press release a short time ago, I'm very pleased to announce that Jon Serbousek will be joining Orthofix, effective immediately to become the President and CEO of Orthofix on November 1 of this year. Between now and then, Jon has agreed to take on the vacant role of President of Global Spine. A seasoned executive with more than 30 years' experience in the medical device and biotech industries, Jon served in several leadership positions at Biomet Inc., including Worldwide President of Biomet Biologics, Worldwide Group President of Orthopedics and President of U.S. Orthopedics.
Prior to joining Biomet, he held various several management positions within Medtronic Inc., including Worldwide Division President of Spine, Worldwide Vice President and General Manager of Biologics for their Spine and Biologics business. Additionally, Jon spent 13 years with DePuy Orthopedics, a Johnson & Johnson company, where he served in numerous roles of increasing responsibility, including the Vice President of Marketing and Product Development and as Vice President of Spinal Operations. Jon's expertise and proven track record are perfectly aligned with our business composition and make him an exceptional choice to lead the company as President and CEO.
With the recent leadership change in our Spine business, I'm pleased that Jon has agreed to serve as the President of Global Spine on an interim basis. This will give him time to focus on our needs and opportunities in that business, before he takes on the broader CEO role, which should help ensure a seamless leadership transition for the benefit of all of Orthofix stakeholders.
Moving onto the quarter results. As usual, I'll start by giving you a summary of our second quarter 2019 sales performance, after which Doug will discuss the financial results in more depth. I will then follow up with our outlook for the remainder of 2019 before taking questions. For the second quarter, we reported net sales of $115.9 million, representing a year-over-year increase of 3.9% or 5.0% in constant currency. These results were generally in line with our expectations other than in our Biologics portfolio, which exceeded our plan for the second consecutive quarter. With these results and the cadence of the M6-C cervical disc rollout in the U.S., that I will discuss in a moment, we feel confident about the sequential quarterly sales acceleration that we expect in the back half of the year, which is reflected in our full year guidance.
Orthofix Spine, which includes our Bone Growth Therapy, Spinal Implants and Biologics product lines generated $90.1 million in sales in the second quarter, which represents a 3.8% increase in reported sales over prior year or 4% in constant currency. Beginning with the Bone Growth Therapy's product line, net sales increased 3.9% in the second quarter versus prior year. This met our expectations for the period, and we continue to expect this business to grow in the 3% to 4% range for the full year.
谢谢，马克，大家下午好。正如您不久前在我们的新闻稿中看到的那样，我很高兴地宣布Jon Serbousek将加入Orthofix，立即生效，并于今年11月1日成为Orthofix的总裁兼首席执行官。从现在到现在，Jon已经同意担任Global Spine总裁的空缺职位。 Jon是一位在医疗设备和生物技术行业拥有超过30年经验的经验丰富的高级管理人员，曾在Biomet Inc.担任过多个领导职位，包括Biomet Biologics的全球总裁，全球集团骨科总裁和美国骨科总裁。
在加入Biomet之前，他曾在Medtronic Inc.担任过多个管理职位，包括Spine全球部门总裁，全球副总裁兼生物制剂总经理，负责脊柱和生物制品业务。此外，Jon在强生公司DePuy Orthopaedics公司工作了13年，担任过多个职责，包括市场营销和产品开发副总裁以及脊柱运营副总裁。 Jon的专业知识和良好的业绩记录与我们的业务构成完美契合，使他成为领导公司担任总裁兼首席执行官的绝佳选择。
In Spinal Implants, which includes both Spine Fixation and motion preservation products, we reported a net sales decreased of 2.7% or 2.0% in constant currency compared to prior year. These reported results were driven by a 6.7% decrease in Spine Fixation products, primarily due to the abnormally high ASP pressure, offset by a 33.5% increase from our motion preservation products. As I mentioned on our last call, in selective, strategic, major markets, we are upgrading our U.S. spine implants legacy sales force with new, high-potential sales partners that are attracted to our unique portfolio of motion preservation, fixation and Biologics products. These new sales partners are coming up to speed nicely, and we expect the pace of sales in our Spine Fixation product line to improve in the third and fourth quarters as the -- as these new distributors continue to gain traction. We also expect a higher than usual ASP pressure that we saw on the period to return to more normal levels in the upcoming quarters.
U.S. sales of our M6 cervical disc are going very well. My training program is continuing to ramp up, and we have trained over 50 surgeons to date. It's important to note that there can be a lag between when a surgeon is trained and when they start performing cases, due to case timing and hospital approvals. By year-end, we expect to have over 150 surgeons trained. To provide a little more visibility on our progress to date, 17 surgeons have implanted over $550,000 in U.S. M6-C cervical disk to date. This is ahead of our launch plan and gives us confidence that we will achieve or exceed our $3 million to $4 million full year revenue target, although, the majority of that will come in the -- in Q4. Overall, we expect these Spinal Implants will grow high single to low double digits for the full year. Our Biologics product lines had another outstanding quarter, reporting a sales increase of 14.2% compared to prior year. This performance continues to be driven by the contribution from new distribution added in the last year and a return to solid results in each of the three U.S. sales regions.
Also, we are pleased to report that based on recent SmartTRAK data, we believe that we have now achieved the number one position in the cellular allograft market, with over $100 million of sales to hospitals in the last 12 months. Based on our first half performance, we now expect our full year sales growth expectations to be in the high single digits for this business. Lastly, in our Orthofix Extremities business, reported net sales in the second quarter were $25.8 million, an increase of 4.0% or 8.5% in constant currency over the prior year.
Given the quarter variability in this business, we believe the best way to assess its performance is to look at the constant currency trailing 12 months year-over-year growth. On this basis, Orthofix Extremities business grew 3.7% in constant currency. On a reported basis, given the currency headwinds of $3.5 million to $4 million for the year, our current expectations for this business are for growth to be flat or low single digits for the full year. In summary, second quarter sales were generally in line with our expectations in most areas with the exception of Biologics, which outperformed against our plan for the second consecutive quarter. Additionally, the launch of the M6-C cervical disc in the U.S. is going very well and gives us confidence in our expectations for the remainder of the year.
Doug will now take you through the key financial metrics in the quarter. Doug?
Thanks, Brad, and good afternoon, everyone. I'll start by providing some additional details into our net sales and earnings results and then discuss some of our other financial measures. As Brad noted, total net sales in the quarter were $115.9 million, up 3.9% on a reported basis and 5% on a constant-currency basis when compared to the second quarter of 2018.
The extremities experienced the majority of the $1.3 million currency headwind during the quarter, where we saw an outperformance from Biologics and modestly weaker than expected Spinal Implants performance. Gross margin in the second quarter was some 77.7% compared to 79.5% in the prior-year period. Gross margin was impacted by higher than normal noncash charges related to the buildup of Spinal Implant inventory to support sales growth from our new sales partners in key geographies. However, for the full year 2019, we continue to expect gross margins to be between 78% and 79% of net sales.
Sales and marketing expenses were 49.1% of net sales in the second quarter of 2019, an increase of -- over 46.2% in the second quarter of 2018. As with Q1 of this year, the increase was primarily due to the investments and our expense for training and education programs to support the M6-C U.S. commercial launch. We continued our performance in Biologics has also increased our commission expenses. With expected outperformance in Biologics continuing into the back half of the year, we now project sales and marketing expense in 2019 to be approximately 47% of revenues for the full year.
GAAP G&A expenses were 18.9% of net sales in the second quarter of 2019, which were down from 19.7% in the prior year period. This decrease was due primarily to lower compensation expenses related to the realignment of Global Spine last year partially offset by increased executive succession charges. We expect that these continued decreases in G&A will offset our increased sales and marketing investments during 2019. In line with our expectations, R&D expenses for the second quarter were 7.8% of net sales, up from 7% in the prior-year period due to increased clinical research in Bone Growth Therapies and motion preservation as well as cost specific to comply with the recent medical device regulations in the European Union.
R&D spending will increase modestly in the second half of the year. And for the full year 2019, we continue to expect R&D expenses to be at approximately 8% of revenues. Adjusted EBITDA decreased to $17.3 million or 14.9% of revenue, down from $22 million or 19.7% of revenue in the second quarter of 2018. This decrease was primarily driven by costs related to the investment in the M6-C commercial launch, that are reflected in sales and marketing as well as the gross margin decrease, that I mentioned.
We expected adjusted EBITDA for the year to be $86 million to $89 million, implying margins of over 20% in the second half of the year, with significantly higher flow through in Q4. Now turning to tax, we had GAAP income tax expense for the quarter of $1.2 million or about 181% of income before income taxes as compared to income tax expense of $1.1 million or 53.8% of income before income taxes in the same period of 2018. While this year-over-year quarter tax provision was flat, the increase in the effective tax rate was driven by increases in certain nondeductible, acquisition-related and other financial expenses.
在本季度，我们看到了生物制剂的优异表现，并且比预期的Spinal Implants性能略逊一筹。第二季度毛利率约为77.7％，而去年同期为79.5％。由于Spinal Implant库存增加以支持主要地区新销售合作伙伴的销售增长，毛利率受到高于正常的非现金费用的影响。然而，对于2019年全年，我们仍然预计毛利率将在净销售额的78％至79％之间。
For the second quarter 2019, we reported a GAAP loss of $0.03 per diluted share as compared to net income of $0.05 per share for the second quarter of 2018. As adjusting for certain items and when normalizing for tax, using a non-GAAP long-term effective tax rate, adjusted EPS for the second quarter 2019 was $0.28 compared to $0.42 in the second quarter of 2018. The majority of this decrease was due to the investments in motion preservation.
Moving on to the balance sheet highlights. Day sales outstanding, or DSOs, were 63 days at the end of the second quarter of 2019, up modestly from 61 days at the end of the second quarter 2018 and down sequentially from 66 days at the end of the first quarter of 2019.
As noted on the last call, this year-over-year increase was due to the timing of collections from Bone Growth Therapy payers as well as stocking distributors in our OUS extremities business.
Our inventory turns, at the end of the second quarter 2019, improved modestly to 1.3x versus 1.2x in the second quarter 2018, due primarily to our inventory management initiatives. Cash, cash equivalents and restricted cash, at the end of the second quarter, totaled $52.1 million compared to $45.7 million at the end of the second quarter in 2018.
Cash flow from operations for the quarter was $9.4 million, down from $16.6 million in the second quarter 2018, due primarily to increases in accounts receivable, inventory and other working capital investments to support our top line growth. Capital expenditures were up in the quarter to $5.4 million from $3.2 million in the prior year, due primarily to investments in our global IT infrastructure and manufacturing capacity expansion for the M6-C artificial cervical discs.
Based on recent enhancements to our manufacturing outsourcing strategies, we now expect 2019 capital expenditures of $22 million to $24 million, a decrease from our prior guidance of $24 million to $26 million. Free cash flow, which we calculate by taking cash flow from operations and some tracking CapEx was $4 million during the quarter compared to $13.4 million in the prior year. Consistent with prior years, we expect our free cash flow to improve as our sales ramp for the remainder of the year.
With that, I will now turn it back to Brad.
对于2019年第二季度，我们报告的GAAP每股摊薄收益为0.03美元，而2018年第二季度的净收入为每股0.05美元。作为对某些项目的调整以及税收正常化时，使用非GAAP长期 - 有效税率，2019年第二季度的调整后每股收益为0.28美元，而2018年第二季度为0.42美元。这一减少的主要原因是对运动保护的投资。
Thanks, Doug. Regarding guidance for full year 2019, our outlook remains unchanged. The company continues to expect to report net sales in the range of $472 million to $477 million, including a $4 million currency headwind, representing a reported year-over-year increase of 4.2% to 5.3% or approximately 5% to 6% in constant currency.
We also continue to expect the reported sale cadence for the year to be heavily weighted toward the last half of the year with mid-single-digits growth for Q3 and high single-digits growth in the fourth quarter. As I mentioned on our last earnings call, this sales cadence has been driven by a number of factors, including the ramp-up of sales in the last third of the year of the M6-C disc in the U.S.; the ongoing conversion of the U.S. spine implants legacy sales force in selective major markets as our new high potential sales partners that are now attracted to our motion preservation, fixation in Biologics portfolio continue to ramp up sales; and lastly, currency headwinds weighted toward the first half of the year.
Primarily due to this sales ramp, we expect our adjusted EBITDA to be heavily weighted toward the end of the year as well. I continue to believe that for the full year 2019, adjusted EBITDA, including Spinal Kinetics, will be in a range of $86 million to $89 million and adjusted earnings per share will be $1.75 to $1.82 using a non-GAAP, long-term tax rate of 27%.
With that, operator, we're now ready to open up the lines for questions.
主要是由于这一销售增长，我们预计我们的调整后EBITDA也会在年底前大幅加权。我仍然认为，2019年全年，包括Spinal Kinetics在内的调整后EBITDA将在8600万美元至8900万美元之间，使用非GAAP长期税率，调整后每股收益将为1.75美元至1.82美元。 27％。
[Operator Instructions]. Our first question comes from the line of Craig Bijou from Cantor Fitzgerald.
[操作员说明]。 我们的第一个问题来自Cantor Fitzgerald的Craig Bijou。
Well, let me start with Jon as the new CEO. So obviously, years of experience in ortho and spine. Brad, you had a very -- or you had a specific strategy for the business and what you saw going forward. So when looking at candidates for the new CEO role, how important was it to find someone that kind of -- that shared your vision for the future of the company? And then maybe just some other thoughts around why Jon is the right person to succeed you.
好吧，让我从Jon开始担任新CEO。 显然，在矫形和脊椎方面有多年的经验。 布拉德，你有一个非常 - 或者你有一个特定的业务战略和你看到的未来。 因此，在考虑新首席执行官角色的候选人时，找到某种类似的人 - 分享您对公司未来的愿景有多重要？ 然后可能只是其他一些想法，为什么乔恩是接替你的合适人选。
Sure. I think, Craig, it was actually very important. I think what Jon shared with the board and myself in terms of the vision is to continue to accelerate our top line growth through organic and inorganic opportunities. And that is where we have been -- what we've been talking about for the last, probably 4, 5 quarters and what we've been delivering on now and -- or will be delivering on even more in that back half of the year. So Jon is very much in step with that strategy. And I think he brings some things to the table. He certainly brings some things to the table that I did not have in terms of his experiences in Spine and Biologics and other places in our industry. And with the people he knows, the companies he knows that are out there, the distribution and those sorts of things, I think he will be an incredible asset to the company. And as I said in my prepared remarks, his experiences is right out of central casting in terms of our business and how is that aligned. So that's number one. Second part of your question, I'm sorry, Craig, I lost track of it.
当然。我想，克雷格，这实际上非常重要。我认为Jon在董事会和我自己的共同愿景中分享的是通过有机和无机机会继续加速我们的收入增长。这就是我们所处的地方 - 我们一直在谈论的最后一次，可能是4,5个季度以及我们现在所提供的内容 - 或者将在后半部分中实现更多目标。年。所以乔恩非常接近这个策略。而且我认为他带来了一些东西。他确实带来了一些我在Spine和Biologics以及我们行业其他地方的经验所没有的东西。对于他认识的人，他所知道的那些公司，分销和那些事情，我认为他将成为公司的一项不可思议的资产。正如我在准备好的评论中所说的那样，他的经验在我们的业务方面完全脱离了中心铸造，这是如何协调一致的。这是第一名。问题的第二部分，对不起，克雷格，我忘记了它。
No. It was just any other thoughts on why he's the right person to succeed you. But I think you pretty much answered it, Brad.
Yes. No, I couldn't be happier that -- I mean this is -- I think having Jon come in and be willing to take on the Spine role for a period of time, I think it's a very elegant solution to the situation we're in today, with my retirement pending and the recent loss of one of our leaders in Spine. So I think it's set up perfectly for success. And I think it will be as -- a very, very smooth transition.
是。 不，我感到高兴的是 - 我的意思是 - 我认为让Jon进来并愿意接受一段时间的Spine角色，我认为这是对我们的情况非常优雅的解决方案 在今天，我的退休待决和最近我们在Spine的一位领导人失去了。 所以我认为它的成功完美。 我认为这将是一个非常非常平稳的过渡。
Great. That's helpful. And then I wanted to talk about the Spinal Implants business. Obviously, you're seeing some disruption there, but on a sequential basis, it looks like the loss was a little bit better than what you saw in Q1. I know you do have some nonorganic revenue from Spinal Kinetics, so I just wanted to see if you could call that out. And then when you think about the improvement that you expect in Q3 and Q4, maybe just -- are there anecdotal -- or is there anecdotal feedback that you can provide? Or what gives you the confidence? Are you seeing it in the later part of Q2? What gives you the confidence that, that spinal -- or that the disruption that you saw or seeing is going to rebound in the second half?
非常好。 这很有帮助。 然后我想谈谈Spinal Implants的业务。 显然，你会看到一些中断，但在顺序的基础上，看起来损失比你在第一季度看到的要好一些。 我知道你确实从Spinal Kinetics那里获得了一些非有机收入，所以我只想看看你是否可以称之为。 然后当你考虑到你在第三季度和第四季度所期望的改进时，可能只是 - 有轶事吗？或者你能提供轶事反馈吗？ 或者是什么让你有信心？ 你是在Q2的后期看到的吗？ 是什么让你相信，脊柱 - 或者你看到或看到的破坏会在下半场反弹？
So in answer to your first question, I don't have the numbers off the top of head. I've got some guys in the room who can figure that out for me and give it -- and get it to you or we can give it to you on a follow-up call, exactly. But in terms of the confidence, I'm -- obviously, the growth in the second half of the year is for spine implants, which includes motion preservation and fixation, it's going to be driven by M6. And I think that's -- adoption of the M6 is what will get us to the high single digit, low single digits for -- or low double digits for the full year in our spine implant business. But the pull through of the M6, we expect to have a positive impact. We also expect now to have some of these larger distributors who we signed up 60, 90 days ago to start -- to begin to have an impact as well. And that should ramp as we get toward the end of the year.
So we feel very good about it from where we are starting. And I think if I step back and look at it, the primary driver is going to be the M6 and the pull through from that in addition to those distributors. So at this point, I think we're in good shape.
所以在回答你的第一个问题时，我的数字并不是最重要的。我在房间里有一些人可以为我解决这个问题并给予它 - 然后把它交给你，或者我们可以通过后续电话给你。但就信心而言，我 - 显然，今年下半年的增长是针对脊柱植入物，包括运动保持和固定，它将由M6驱动。而且我认为 - 采用M6将使我们的脊椎植入物业务全年达到高单位数，低单位数或全年低两位数。但是M6的拉动，我们期望产生积极的影响。我们现在也希望有一些这样的大型经销商，我们在60天，90天前开始注册，也开始产生影响。这应该随着我们走向年底而增加。
Got it. And if I can squeeze one more in. Doug, maybe on EBITDA, I appreciate Brad's comments on -- in the script about the -- more revenue in the second half. Obviously, it leads to more EBITDA. But if you -- the implied percentage of sales is still significantly higher. So I was just hoping, maybe a little bit color -- little bit of color on what steps up from a EBITDA margin perspective in the second half? And how you meet your guidance?
得到它了。 如果我可以再挤一次。道格，也许是EBITDA，我很欣赏布拉德的评论 - 在剧本中关于 - 下半年更多的收入。 显然，它会导致更多的EBITDA。 但如果你 - 隐含的销售百分比仍然高得多。 所以我只是希望，也许是一点点颜色 - 从下半年的EBITDA利润率角度来看，它有多少颜色？ 你是如何满足你的指导的？
No, it's a fair question. I think we'd expect contribution really from all components of our P&L. You'd expect gross margins to normalize. I think Q2 was an outlier, for the reasons I mentioned in my script. I think you'll see commissions and sales and marketing cost start to normalize in the back half of the year and improve as our sales ramp as we incurred a lot of costs, as you know, around the launch of our M6 in the United States ahead of the sales. So as the sales start to ramp in the fourth quarter, I think you'll start to see our flow-through normalize. Those are probably the two biggest drivers.
不，这是一个公平的问题。 我认为我们期望从我们的损益表的所有组成部分中做出贡献。 您预计毛利率会正常化。 由于我在剧本中提到的原因，我认为Q2是一个异常值。 我认为你会看到佣金和销售及营销成本在今年下半年开始正常化并随着我们的销售增长而改善，因为我们在美国推出M6时会产生大量成本 在销售之前。 因此，随着第四季度的销售开始增加，我认为您将开始看到我们的流程正常化。 这可能是两个最大的驱动因素。
Our next question comes from the line of Ryan Zimmerman from BTIG.
Just want to follow up on a few of Craig's questions. Brad, based on the revenue achieved thus far with M6, I wonder if you could just speak to the surgeon base already implanting it. It certainly suggests a very high number. And so as we think about it kind of rolling in the Q3 and then the Q4, I mean, is this early leg? Should we think of these as the early adopters and then maybe some of that revenue per surgeon maybe moderates a little bit? How -- maybe you can help us understand kind of whose implanting today versus who you expect to implant over Q3 and into Q4? And then I have another question as well.
只想跟进一些Craig的问题。 布拉德，基于迄今为止用M6获得的收入，我想知道你是否可以直接与已经植入它的外科医生基地交谈。 这无疑表明了一个非常高的数字。 因此，当我们考虑它在第三季度和第四季度时，我的意思是，这是早期的一段路？ 我们是否应该将这些视为早期采用者，然后每个外科医生的一些收入可能会有所缓和？ 怎么样 - 也许你可以帮助我们了解今天植入的种类与你期望植入Q3和Q4的种植方式有什么关系？ 然后我还有另一个问题。
Sure. Good question, Ryan. So I think what you're seeing is actually maybe even a little bit less than what we expect per surgeon, believe it or not. I think that the surgeons that we went to first were surgeons that were part of the IDE, and we restricted our activities to those surgeons to make sure that they were taking care of their needs, we're taking care of -- for their participation in the study. And they had already been trained, so we -- the retraining was less significant than with surgeons who had not used the M6 in the past.
That said, in recent weeks, we opened up that funnel a bit and are now going to additional surgeons around the country. We have instrument sets available. We have implants available. We have six people dedicated full-time to training, we're adding three more. So we think that the ramp will be very good.
There is a delay between when a surgeon decides to use the M6 and gets trained, and when -- and typically, when they do their first cases or when -- as their -- or their cases ramp up. Some can be just cases that we're already set, and they've already made a decision on the implants, some can be the hospital registration or approval, those sorts of things. So as we go through the year, we -- I said we expect to have over 150 surgeons trained by year-end. Certainly, not all of those surgeons will then be up and in -- at full swing, but I would expect over a 100 would be at that point. So I think the case volume we're seeing from the first 17 that have done cases is probably less than what we'll see overall, but it's just -- it's still very early in the process.
当然。好问题，瑞恩。因此，我认为您所看到的实际上甚至可能比我们对每位外科医生的期望要低一点，不管你信不信。我认为我们首先去的外科医生是属于IDE的外科医生，我们限制我们的活动给那些外科医生，以确保他们正在照顾他们的需求，我们正在照顾他们 - 他们的参与在研究中。他们已经接受过培训，所以我们 - 再培训的重要性不如过去没有使用过M6的外科医生。
外科医生决定使用M6并接受培训时，以及 - 通常情况下，当他们做第一次病例或何时 - 作为他们 - 或他们的病例增加时，会有一段延迟。有些可能只是我们已经设定的案例，他们已经对植入物做出了决定，有些可能是医院注册或批准，这些事情。因此，当我们度过这一年时，我们 - 我说我们预计将有超过150名外科医生在年底前接受培训。当然，并非所有这些外科医生都能够全力以赴，但我希望在这一点上超过100人。所以我认为我们从前17个案例中看到的案例数量可能比我们总体看到的要少，但它只是 - 它还处于早期阶段。
Okay. That's fair. And then I just -- I might have missed this, but the pricing pressure in the quarter that you called out is abnormally high. I think you mentioned about 6.7% decrease in your core Spine Fixation product relative to the 33.5% increase in motion preservation. What are you seeing on the pricing dynamic? And why does that get better through the rest of the year?
好的。 这还算公平。 然后我就是 - 我可能已经错过了这个，但是你所说的那个季度的价格压力异常高。 我想你提到你的核心脊柱固定产品减少了6.7％，而运动保护增加了33.5％。 您对定价动态有何看法？ 为什么在今年余下的时间里会变得更好？
Yes, really good question, Ryan. So overall, the industry -- if you listen to some of our competitors, they had some, I would say, unusually high pricing pressure as well in the spine implant business. We saw a bit of that. So that's probably, let's say, 2/3 of what we called out. So the other third is just -- internally, some of our recently launched -- recently meaning of the last 18 months, launched products are coming off of some of the premium pricing that we were able to get in the early days, and so that affected our ASP as well. So with those ramping off or rolling off, the better ASPs, we don't expect that to continue to happen as we go through the year. So hopefully, the market, in general, will decrease -- the pricing pressure will decrease in the market, in general, but certainly, internally, we expect to see a decrease as well.
是的，非常好的问题，瑞恩。 总的来说，整个行业 - 如果你听听我们的一些竞争对手，我会说，他们在脊椎植入业务中有一些非常高的定价压力。 我们看到了一点。 所以，这可能是我们所说的2/3。 所以另外三个只是 - 内部，我们最近推出的一些 - 最近18个月的意义，推出的产品是我们在早期能够获得的一些高价定价，所以 也影响了我们的ASP。 因此，随着那些越来越多或越来越好的平均售价，我们不希望在我们经历这一年的过程中继续发生这种情况。 所以希望市场总体上会减少 - 一般来说，市场的定价压力会下降，但当然，在内部，我们预计也会出现下降。
Okay. And last one for me and I'll hop back in queue. On the guidance, you took a nice step up, I think about $0.20 on strategic investments for the year. Just can you give us a little more color on what that is, Doug? I think about $4 million from what it formally was previously.
好的。 最后一个给我，我会跳回队列。 在指导下，你采取了一个很好的步骤，我认为今年的战略投资约为0.20美元。 道格，你能给我们一点颜色吗？ 我认为它以前的形式大约是400万美元。
Yes, I'll take it, Ryan. Yes. So if you look historically, it's not too far off of what we've spent last year. We -- as we said all along, we're going to remain very active. We have been active, and we're going to continue to look for opportunities that can really generate accelerating growth in the areas that we play. So it's just us being active and pretty similar to what we had historically last year.
是的，我会接受的，瑞恩。 是。 因此，如果从历史角度来看，它与我们去年所花的东西相差不远。 我们 - 正如我们一直所说的那样，我们将继续保持活跃。 我们一直很活跃，我们将继续寻找能够在我们所发挥的领域实现加速增长的机会。 所以这只是我们活跃而且非常类似于我们去年的历史。
Our next question comes from the line of Jeffrey Cohen from Ladenburg Thalmann.
我们的下一个问题来自Ladenburg Thalmann的Jeffrey Cohen。
So two areas. First, I want to kind of follow up on some of Ryan's questions as far as the training goes. And could you talk about where the training's taking place? And what's typical on average number of cases in the case of the physicians that have not been involved with the IDEs -- the IDE?
所以有两个方面。 首先，就培训而言，我想对Ryan的一些问题进行跟进。 你能谈谈培训的进行地点吗？ 对于没有参与IDE的医生 - IDE，平均案例数是多少？
So the first part first -- first part of the question first. So the training is taking place in Lewisville and also in the field. This is not cadaver training, this is training with models. We have developed a proprietary model for training that the physicians are very excited about. Actually, it's one of the best training tools they -- the comments back in -- one of the best training tools they've ever used. And so we can do that out in the field, and we are doing that out in the field. But we also have pretty large groups of surgeons come in at least monthly in the -- Lewisville as well. I mean that's our preference. We can expose them to our other products as well while they're here and those sorts of things. But typically, they're going to be in some training sessions and then we're going to be with them in surgeries for a number of surgeries until they are launched and ready to go. The second part of the question was? Sorry.
所以第一部分是第一部分 - 首先是问题的第一部分。 因此，培训将在路易斯维尔和现场进行。 这不是尸体训练，这是训练模型。 我们开发了一种专门的培训模型，医生非常兴奋。 实际上，它是他们最好的培训工具之一 - 评论回来 - 他们曾经使用过的最好的培训工具之一。 所以我们可以在现场做到这一点，我们正在实地做这件事。 但我们也有相当多的外科医生团体至少每月进入 - 路易斯维尔。 我的意思是这是我们的偏好。 我们可以将它们暴露给我们的其他产品，而它们就在这里和那些东西。 但通常情况下，他们会参加一些训练课程，然后我们将在手术中与他们一起进行一些手术，直到他们开始并准备好去。 问题的第二部分是？ 抱歉。
Okay. No, I think you answered the question. I guess as a follow on to that is, is your backlog -- is your list of surgeons waiting for training that you're catching up with as far as bringing them in or going to their facilities at this point?
好的。 不，我想你回答了这个问题。 我想，接下来就是你的积压 - 是你的等待训练的外科医生名单，你现在正赶上他们或者去他们的设施吗？
Absolutely. Absolutely, yes. There's -- there is a lot of demand for the M6 disc.
绝对。 绝对没错。 有 - 对M6光盘有很多需求。
Great. And then secondly, could you talk a little bit about the Biologics segment? I'm just trying to get an understanding. It looks like you had a solid quarter. But is that coming from Trinity? Is it coming from better ASPs? Is it coming from more products and a more diverse selling platform?
非常好。 然后，你能谈谈Biologics部分吗？ 我只是想了解一下。 看起来你有一个稳固的季度。 但那来自三位一体吗？ 它来自更好的ASP吗？ 它来自更多产品和更多样化的销售平台吗？
It's more volume of Trinity, that's what's driving it. We -- a little bit more volume in some of our other Biologics. But remember, our ancillary products are only -- are well less than 10% of our total Biologics sales. So it's really Trinity volume that we're seeing. And we -- the distribution we've added in the last year is kicking in, and that's the primary driver of that increase.
这是Trinity的更多音量，这就是它的驱动力。 我们 - 在我们的其他一些生物制剂中增加了一点点。 但请记住，我们的辅助产品只是 - 远低于我们生物制剂总销售额的10％。 所以我们看到的真的是Trinity音量。 而且我们 - 我们在去年增加的分配正在推动，这是这一增长的主要驱动力。
Okay. But I guess bigger picture, you're still seeing strength at the higher end of Biologics, kind of from the macro standpoint?
Absolutely. Yes. We are.
绝对。 是。 我们是。
Our last question comes from the line of Jim Sidoti from Sidoti & Company.
Couple of questions. The decline on the spinal fixation, I assume that was almost entirely the U.S., is that correct?
The callout on -- I'm sorry. Say again.
标注 - 我很抱歉。 再说一遍。
On the spinal hardware, the weakness in spinal hardware, that was all U.S. business, right?
Yes. It's basically U.S. There's a little bit of international but basically U.S., yes.
And what you're saying is once you get the new distribution worked out, you think that those results improve in the back half of the year and into 2020?
Correct. That's correct.
Okay. And then the $4.8 million charge for strategic investments, I just want to be clear, is that for acquisitions you completed? Or is that for acquisitions that you're looking at now?
好的。 然后，对于战略投资的480万美元收费，我只是想明确一点，那就是你完成的收购？ 或者是您现在正在寻找的收购？
Jim, our strategic spend of $4.8 million for the quarter is roughly flat with what it was last year, and it represents some spending as we finish up the integration on a Spinal Kinetics. And it also reflects what Brad mentioned a few minutes ago with regards to us continually looking for ways to grow the company and grow our top line.
Okay. And at this point in the curve, how many cases do you think the surgeon needs to do with the Spinal Kinetics disc before he can go solo?
好的。 在曲线的这一点上，您认为外科医生在进行独立之前需要使用Spinal Kinetics椎间盘的情况有多少？
So typically, if they've used the disc before, it's probably three or four cases. If they have not used the disc and they were not part of the IDE, it's probably five to seven cases, something along those lines, after they've received the initial model training.
Okay. And has that number changed in the last three months? Or has that been pretty consistent?
好的。 这个数字在过去三个月有变化吗？ 或者那是非常一致的？
No. That's consistent.
We have no further question at this time. I will now turn the call over back to Brad.
Thank you, Operator, and thank you, everyone, for calling in today. We appreciate the time and look forward to talking to you again soon. Take care.
感谢操作员，感谢大家今天的来电。 我们感谢时间，并期待很快再次与您交谈。 照顾自己。
Ladies and gentleman, thank you for joining us. This concludes today's conference call. You may now disconnect.
女士们，先生们，谢谢你们加入我们。 今天的电话会议结束了。 您现在可以断开连接。
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