2024 Guidance and Sales Dissynergies
Q: Has your guidance philosophy changed, and how will $150M sales dissynergies impact 2024?
A: Management remains confident in their $2.45B to $2.475B revenue guidance for 2024 and acknowledges potential sales dissynergies of $150 million due to the merger integration. " " " " This dissynergy represents about 7% of combined 2022 sales and is a gross number before considering cross-selling opportunities, which are expected to offset the impact over time. " " They believe the guidance is realistic, with upside potential, and expect mid to high single-digit growth after the dissynergies stabilize. " "

Confidence in Achieving Mid-30s EBITDA Margins
Q: How confident are you in reaching mid-30s EBITDA margins post-merger?
A: Management is confident in achieving mid-30s EBITDA margins by the third year post-merger. " They plan to realize $170 million in synergies, with 40% ($68 million) in 2024, primarily from SG&A and R&D savings. " Longer lead-time improvements in manufacturing and operations are expected to contribute more significantly in 2025 and 2026, driving profitability improvements. "

Timeline for Dis-synergies to Stabilize
Q: When will dissynergies stabilize, and growth pick up post-integration?
A: Management expects to see dissynergies stabilize by the end of the second quarter of 2024, reaching a steady state by June. " They believe the sales force will have settled in, system implementations will be smoothed out, and they can return to focusing on innovation, taking share, and growing. " "

Impact of New Spine Robotics Competitors
Q: How will new spine robot competitors affect your market position?
A: Management acknowledges potential new competitors in spine robotics but believes they are well-positioned to compete head-to-head. " They emphasize their superior robot and the large unmet clinical need, noting that even with competition, the market has ample room for growth. " " The merger enhances their size and reach, allowing for faster penetration and robust competition. "

Stock Buybacks and Capital Allocation
Q: Why did you repurchase stock in Q4, and how does it affect priorities?
A: Management considers the stock undervalued and took the opportunity to repurchase shares in Q4 using strong cash reserves. " They believe the market overreacted, and the buyback reduces dilution while showing confidence in long-term prospects. " They continue to prioritize tuck-in M&A but will use buybacks opportunistically. "

Ortho Robot Launch and Future Contributions
Q: What's the strategy and expected impact of the ortho robot launch?
A: The ortho robot is built but not yet FDA-approved, with anticipated approval in the second half of the year. " " " Management does not expect material contributions in 2024 but sees it as a 2025 story. " " They are scaling up implant sets and planning the launch strategy, targeting both ASCs and hospitals, and will invest to build momentum over time. " "

Growth Expectations vs. Market
Q: Are you growing at market rates, and where will growth come from?
A: Management expects mid to high single-digit growth after initial dissynergies. " " They acknowledge growth is slowing in early 2024 due to dissynergies but believe cross-selling opportunities and international expansion will drive growth. " Key areas include spinal implants, trauma, Enabling Technologies, and leveraging both legacy portfolios. " "

Sales Rep Attrition and Integration Feedback
Q: What's the impact of rep attrition post-integration, and how are you addressing it?
A: Rep attrition is in line with expectations and mostly sporadic. " There was low overlap (about 3% in the U.S.), so integration focused on reorganizing efficiently. " Management is working to fill vacancies and focusing on competitive recruiting as a growth mechanism. "

Product Rationalization and Free Cash Flow
Q: Are you planning product rationalization, and how will it affect cash flow?
A: There are no plans for product rationalization; instead, they will let customer preferences guide the portfolio over time. " " Management expects improved free cash flow through $170 million in synergies, better asset utilization, and controlled CapEx, leading to better return on invested capital. "

Future of Robotics in Spine and Beyond
Q: Is spinal robotics hitting a ceiling, and what's next?
A: Management believes spinal robotics is in its infancy, with significant room for growth in capabilities and procedural applications. " They are expanding into areas like cranial procedures and developing power solutions to enhance surgeon experience. " They see robotics as a long-term growth area with much potential. " "

Augmented Reality Headset Timing and Competition
Q: When will your AR headset launch, and how does it compete?
A: The augmented reality headset XR is expected to launch by midyear. " Management is excited about integrating it with their Enabling Technologies to create a stronger offering for surgeons. "

Enabling Technologies Financing Arrangements
Q: Are you seeing shifts in financing arrangements for Enabling Technologies?
A: In Q4, there was an increase in volume-based sales, partly due to higher interest rates affecting revenue recognition. " Management expects the mix of placements versus outright sales to vary quarter-to-quarter based on customer preferences. "

ASC Strategy and Opportunity
Q: How are you approaching the ASC market opportunity?
A: Management recognizes the migration of procedures to ASCs and is developing strategies to address this trend. " " They are considering the best ways to place Enabling Technologies and expect to strengthen their push into ASCs later in 2024 and into 2025. " "

Integration Upside and Downside Surprises
Q: What were the upside and downside surprises in integration efforts?
A: Upside surprises included opportunities for operational improvements in manufacturing and the willingness of teams to embrace common goals. " Downside involved the heavy lifting required for common processes, reports, and systems, which are necessary but less exciting amid innovation and growth potential. "

Competitive Rep Hiring and Recruiting Trends
Q: How are competitive rep hiring and overall recruiting trends?
A: There is significant interest from competitive reps, with meaningful conversations and potential hires. " Recruiting was strong in 2023 but lighter than previous years due to merger focus. " Management aims to return to heavier recruiting efforts and is pleased with current interest. " "