Orthofix Medical Inc. (NASDAQ:OFIX) Q4 2022 Earnings Call Transcript

Keith Valentine: Yes, you bet, Matt. So, we are very excited how Q1 has kicked-off. I mean, we gave some color to being two months in and part of that is because there is a great deal of strength just as we had anticipated when we did our first, kind of review of what overlap would be? We’re really excited about the lack of concerning overlap, if you will. But more importantly, the opportunity for real synergy. And so, we’re already seeing cross cases. We’re already seeing cases that go on that are using both legacy original company products together as a true merged company, including 7D as part of that as well. And I think that’s a testament to how we’re approaching it also from a sales management perspective. I think the sales management process and the selections we’ve made and what the team looks like is a nice combination of leadership that also brings with it, I think, a good deal of stability to those sales teams.

And without a doubt, we’re excited about what’s going on in the marketplace right now with a number of, I think very interesting opportunities for us to take advantage of even greater sales penetration, due to other opportunities out there from other companies merging.

Mathew Blackman: All right. I’ll let other people follow-up on that thread. Appreciate it, Keith. And thank you everybody.

Operator: Our next question comes from Jeffrey Cohen from Ladenburg Thalmann. Please go ahead. Your line is open.

Jeffrey Cohen: Hi, Keith, John, and Doug. How are you?

Keith Valentine : Good. How are you?

Jeffrey Cohen: Super. Congrats on the to call and the merger. So, I guess firstly, John, you knew this one was coming, but I wanted to ask about segmentation reporting going forward. How you’re going to look at that? Is that going to be U.S. International? Is it going to be hardware biologics, etcetera?

Jon Serbousek: Yes, we’re still in the evaluation phase of what the reportable segments will be like, because we got to figure out right how we’re going to run the business internally along portfolio lines. So, we’ll definitely plan to give more color as to the segment reporting once we’ve made those final decisions and I think we’ll have those by the first quarter reporting deadline. So, no decisions made at this point yet, but clearly something we’re evaluating as we go forward and look at how we want to run the business.

Jeffrey Cohen: Got it. Okay. And then can you give us a sense of some of the G&A expenditures and some of the synergies that you talked about? It looked like Q4 had about 9 million higher on G&A from from each side and how should we think about that for Q1 and then balance of the year before some of these synergies start kicking in at least on the G&A front?

Jon Serbousek: So, you’re asking about how Q1 will compare to Q4 in expectations for deal costs?

Jeffrey Cohen: Yes, I think as you’re €“ it looks like about 9 million spend in the fourth quarter. So, does that tail off in the first quarter swiftly or not swiftly or is it kind of going to take a few quarters?

Jon Serbousek: So, deal specific costs will probably be another heavy quarter in Q1 in terms of spend, right, because there’s still ongoing legal fees, kind of read it to the end. A lot of the banker fees will get paid at post-closing. So, that’s a Q1 transaction timeline. Then we’ll shift to more cost to achieve the synergies. As Keith mentioned in his scripted comments, right, the severance costs will increase and can be probably most heavy in the middle part of this year. So, we’ll transition from what I call deal setup in closing costs to now cost to €“ one-time cost to achieve the synergies, the bulk of which this year will likely be IT system integration costs and headcount costs occurring over Q2 and Q3 probably.