Good morning and welcome to the Orthofix Medical Inc. Fourth Quarter 2021 Earnings Conference Call. My name is Candy and I will be your moderator for today's call. All lines will be muted during the presentation portion with an opportunity for questions at the end. I would now like to pass the conference call over to our host Alexa Huerta, Senior Director of Investor Relations. Please go ahead.

Thank you, operator, and good morning, everyone. Welcome to the Orthofix fourth quarter 2021 earnings call. Joining me on the call today are our President and Chief Executive Officer, Jon Serbousek; and Chief Financial Officer, Doug Rice. I'll start with the safe harbor statement and then pass it over to Jon. 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 matters 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, February 25, 2022. 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 risk factors disclosed under the heading Risk Factors in our Form 10-K for the year ended December 31, 2021 filed this morning, February 25, 2022, 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 the financial measures determined in accordance with U.S. GAAP. Please refer to today's press release announcing our fourth quarter 2021 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 Jon.

Thank you, Alexa. Welcome everyone and thank you for joining our fourth quarter and full year 2021 results conference call. On today's call, I'll provide an update of our fourth quarter performance and review progress against our strategic initiatives before handing the call over to Doug who will provide our financial updates. I'll close with our perspective on the business in 2022 before opening lines for questions. Turning to our fourth quarter performance, we're very pleased with what we were able to accomplish and the momentum we will continue to build despite the prevailing macro landscape. In the quarter, we delivered total revenue of $125 million, an increase of 6% on a reported basis and 7% on a constant currency basis compared to the prior year quarter. This growth we're seeing across both franchises. Starting with a Global Spine business unit. The Spinal Implants team executed another outstanding quarter with strong U.S. motion preservation performance and market share capture overall. In our Global Orthopedics business unit, we executed double-digit growth year-over-year predominantly coming from our recovery among our international markets and share capture with FITBONE. On a sequential basis, we drove double-digit growth across all product categories compared to our third quarter of 2021. Now shifting to the performance within each of our product categories, starting with our Bone Growth Therapies or BGT, sales for the quarter were $50 million, down 2% versus prior years due to the negative impact of COVID, including nursing shortages on complex spine procedures within the fourth quarter, partially offset by continued market share capture with PhysioStim. We are happy to announce that in the fourth quarter, we reached the 1 million patients treated with our BGT portfolio. This major milestone demonstrates our committed leadership position in the bone growth stimulation that we look to continue to build upon in the future. Thank you to our BGT sales and corporate teams for your leadership and efforts in obtaining this remarkable patient-focused achievement. Moving to Spinal Implants, we are excited to report that global revenue was up 12% for the fourth quarter in a row of double-digit year-over-year growth. As a reminder, this category is made up of our spine fixation and motion preservation products, the majority of which are used in procedures that are typically considered elective. The primary drivers of growth were increasing U.S. market share capture with 12% growth in the revenue from both new distributors and over 20% increase in total surgeon users and a rebound in international market procedure volumes. Turning to our Biologics portfolio, revenue was down 1% compared to the fourth quarter of 2020, primarily due to the negative impact of COVID on procedures and nursing shortages in the fourth quarter, offset somewhat by sales growth from our fiberFUSE allograft, which continues to gain momentum with our fiberFUSE Strip introduction this past fiscal year. Lastly, moving to our Global Orthopedics business, which is primarily focused on limb reconstruction and deformity correction. Sales in the fourth quarter were up 21% over 2020. This increase is primarily a result of recovery of our international markets and share capture driven by the FITBONE intramedullary limb-lengthening system. During the fourth quarter, FITBONE generated over $2 million in sales, mainly in the European markets, bringing the full year revenue contribution from FITBONE to over $7 million. Thank you to our orthopedics team for their leadership and market success with FITBONE as its first full year of commercialization. Before discussing our key initiatives, I want to share how excited we are that Thomas West joined our Board of Directors in December. He brings over 30 years of global experience in the medical device industry to Orthofix. Thomas is currently the President and CEO and Director of Intersect ENT, where he's led the transformation of that business resulting in a definitive agreement to be acquired by Medtronic. Prior to Intersect ENT, Thomas served as a decision President of the diagnostic solutions at Hologic after spending over 20 years at Johnson & Johnson. Tom's broad global experience will be an asset as we continue to scale the Company as we look forward to working with him on our board. Now, I'd like to provide an overview of our progress we have made in the past year on key initiatives around product innovation, commercial channel, and operational execution. Starting with product innovation differentiation, during 2021, we made solid progress developing and acquiring products and procedural solutions to address unmet needs in the marketplace and strengthen our product portfolio. We introduced key products in our Spinal Implants portfolio with the launch of CONSTRUX Mini and FORZA 3D-printed titanium interbody. We are happy with the progress we made in the year. We anticipate further growth acceleration of these products as they gain traction in the marketplace. We continue to also provide additional investments in the portfolio in both organic and inorganic technologies. Changing the pipeline of new technology introductions is key to our strategy and will fuel future revenue growth. Again, Biologics, our goal is to have a comprehensive offering of products and solutions for surgeons to use in our spine and orthopedic procedures. We significantly expanded our portfolio during the year with introductions of AlloQuent Structural Allograft Q-Pack, fiberFUSE Strip, and Opus Mg Set. We also recently extended our exclusive partnership agreement with MTF Biologics for Trinity cellular-based allograft lines through 2032. Orthofix and MTF Biologics have a long history of bringing advanced biologic solutions to markets with over 350,000 patients treated, and that number is growing. We anticipate this more robust portfolio will continue to help drive incremental pull-through of our spine and orthopedics hardware offerings. Finally, within Orthopedics, we focused on investments in limb reconstruction and pediatric deformity, which included upgrades to our existing products as well as new products with incremental indications to increase our addressable markets. The strong performance of FITBONE throughout the year following its global introduction in early 2021 is an example of the success we have been able to bring to this highly innovative technology to the market to address unmet needs. Turning to our second initiative, commercial channel development. For this initiative, we are focused on our U.S. channels for biologics, spinal implants, orthopedics and working to make these channels as dedicated and predictable as our current BDC channel. In Q4, our U.S. strategic channel partners, which we defined as distributor partners that carry multiple orthopedics product carriers like hardware and biologics generated over one-third of our spinal implants, biologics and orthopedics U.S. revenue and has grown 5% when compared to the prior year quarter, and 15% compared to the fourth quarter of 2019. We will continue to invest in the development and optimization of these channels to support our growth initiatives moving forward. Moving on to our third and final initiative, operational execution. Throughout 2021, we've managed to overcome several supply chain challenges including the microchip shortage without missing a beat. We're very proud of how our team has managed through all of the macro challenges during the year and believe that we are well positioned to continue to execute all aspects of our global supply chain. I'm very proud of what our organization has been able to accomplish during 2021 which was without a doubt a challenging year. Some momentum we're able to generate was a direct result of a successful execution of our strategy and we look forward to continuing that momentum into 2022 and beyond. With that, I'll turn the call over to Doug to review our financial performance.

Thanks, Jon, and good morning everyone. I will provide additional details on our net sales and earnings results and then discuss some of our other financial measures because many of these measures are on a non-GAAP basis. Please refer to today's earnings release for further information regarding our non-GAAP reconciliations and disclosures. Starting with revenue, total net sales in the quarter were $125 million, which is a 6% increase on a reported basis and a 7% increase on a constant currency basis compared to the fourth quarter of 2020. In the U.S., total net sales of $97 million, or 78% of our global total revenue for the fourth quarter, were up 2% over the fourth quarter of 2020, primarily due to U.S. M6-C growth, which was offset by a decline in complex procedures early in the fourth quarter. International total net sales of $28 million were up 23% as reported compared to the fourth quarter of 2020, reflecting growth from our FITBONE limb lengthening system and overall market recovery. Gross margin in the fourth quarter of 2021 was 73%, down from 75% in the prior year period. This decrease was mainly due to changes in our sales mix from the timing of international orders and a short-term increase in electronic procurement costs because of the global microchip shortage, partially offset by reduced non-cash inventory reserve charges compared to 2020. For the full year 2021, gross margins were 75% of total net sales. For 2022, we expect gross margin to be similar to 2021, around 76%, reflecting ongoing changes in our sales mix and short-term increases in microchip costs expected in the first half of the year. Sales and marketing expenses in the fourth quarter of 2021 were 46% of net sales, unchanged from the fourth quarter of 2020. We did see an increase in travel expenses and investments in our commercial channels, but these were offset by a one-time $2.5 million expense reduction due to a decrease in our Italian medical device tax liability resulting from a recent law change by the Italian government that offers limited COVID-related relief to certain suppliers of public hospitals. This non-recurring credit is excluded from our non-GAAP earnings. In 2022, we expect sales and marketing expenses to be in the range of 49% to 50% of net sales, as we further invest in our U.S. BGT and Global Orthopedics direct distribution channels early in the year to support anticipated revenue growth, including the launch of our new product, along with increased travel and in-person events as we expect regional COVID restrictions to ease throughout the year. GAAP G&A expenses in the fourth quarter of 2021 were flat in absolute dollars and represented 15% of net sales, down from 16% in the prior year period. We increased spending on strategic investments in the fourth quarter of 2021, along with certain employee benefits that had been suspended in 2020. However, these rises were offset by the conclusion of GAAP charges related to the 2019 CEO transition and decreased expenses due to COVID disruptions. GAAP R&D expenses for the fourth quarter rose to 11% of net sales, up from 9% in the same quarter last year, reflecting our planned expenditure to support new product development, clinical studies, and compliance costs related to EU MDR. We plan to continue investing in organic innovation and differentiation, including clinical trials for specific studies and building a strong product pipeline in both spine and orthopedics, which will lead to R&D spending growth outpacing revenue growth in the near term. We anticipate 2022 GAAP R&D expense to be around 12% of net sales, including about a 200 basis point impact directly from our EU MDR implementation efforts, which we will exclude from our non-GAAP financial metrics. R&D spending will be somewhat front-loaded this year based on the timing of certain product launches and clinical site enrollments. We expect our expenditures related to the 2024 EU MDR implementation requirements to taper somewhat after 2022. Adjusted EBITDA for the fourth quarter declined to $17 million, or 14% of sales, down from $22 million in the fourth quarter of 2020, driven by R&D investments in product development and clinical trials, as well as expenditures to build our commercial channel for future revenue growth. Cost of sales expenses increased due to changes in our sales mix and rising procurement costs linked to supply chain disruptions. Adjusted EBITDA for the full year 2021 was 13% of total net sales, compared to 12% for the prior year. Notably, based on our analysis of the goodwill for our orthopedics reporting unit, we recorded a non-cash GAAP write-off of $12 million in the fourth quarter, reflected in acquisition expense line items in our P&L. The write-off indicates our ongoing and planned investments aimed at growth, including EU MDR implementation and FITBONE integration. Moving to taxes, we reported a GAAP income tax expense for the quarter of $23 million, representing a negative 240% of loss before income taxes, compared to a GAAP income tax expense of $15 million or 270% of income before income taxes for the same period in 2020. The tax provision for the quarter was significantly affected by a $25 million non-cash charge to increase reserves for our U.S. deferred tax assets, in line with accounting recognition rules covering historical and forecast GAAP earnings, which is a non-cash charge for the quarter. We still anticipate fully realizing our NOL carry forward and tax assets over time as the company grows and profitability improves. For our non-GAAP results, we’re using a 27% long-term adjusted effective tax rate for the fourth quarter but will adjust this to a 28% long-term tax rate to account for current and projected rises in international statutory income tax rates and anticipated adjusted earnings, eliminating certain non-cash tax impacts. For the fourth quarter of 2021, we reported a GAAP loss of $1.65 per share compared to a loss of $0.48 per share in the fourth quarter of 2020. After adjusting for certain items and normalizing for tax using our non-GAAP long-term effective tax rate, adjusted earnings for the fourth quarter of 2021 were $0.27 per share versus an adjusted EPS of $0.44 per share in the fourth quarter of 2020. The decrease was mainly due to lower spending in 2020 impacted by COVID, alongside increased short-term expenses in 2021 due to the global microchip shortage, heightened R&D spending for organic innovation and differentiation, and increased expenditures for building our commercial channel. Concerning cash, we have maintained a strong liquidity position with $88 million at the end of the fourth quarter of 2021, an increase from $83 million at the end of the third quarter of 2021. Currently, we have no outstanding borrowings under our $300 million senior secured revolving credit facility. We began repaying the $14 million 2020 Medicare Advance in the second quarter of 2021, with about $5 million remaining as of December 31, 2021. We expect to complete these repayments by early Q2 of 2022. Net cash provided by operating activities was an inflow of $12 million for the quarter, down by $10 million compared to an inflow of $22 million in the fourth quarter of last year, primarily due to the repayment of the 2020 Medicare Advance in 2021. The change in accounts receivable was driven by increased net sales in 2021 compared to the prior year and cost reduction initiatives from 2020, such as suspending 401(k) matching, travel freezes, and hosting virtual conferences. Capital expenditures were approximately $7 million in the quarter, compared to over $4 million in the previous year, primarily due to the timing of spending for instruments in the U.S. spine to support our strategy for additional strategic distribution and accelerated growth plans. CapEx for the full year 2021 totaled $20 million, and we expect capital expenditures in 2022 to range between $25 million and $27 million. This increase over the prior year is driven by investments in instrument sets for distribution growth related to our new product launches, technology capabilities, and facilities and operations. Aligning with our reduced operating cash flow, our free cash flow, defined as cash flow from operations minus capital expenditures, was a $5 million inflow during the quarter, down from an inflow of $18 million in the fourth quarter of 2020. As expected, our free cash flow significantly decreased in 2021 compared to 2020 due to multiple factors mentioned earlier in 2021, including the partial repayment of the Medicare Advance, investments in sales channels and product innovation to support future sales growth, Spinal Kinetics milestone payments, and increased spending related to EU MDR implementation. For 2022, we anticipate modest increases in cash flow from operations due to the timing of the 2021 Spinal Kinetics milestone payment and the completion of Medicare Advance repayments by early in Q2 of 2022. Regarding guidance, we project that for the full year of 2022, revenue will be in the range of $475 million to $490 million, indicating mid-single-digit growth at constant currency. We expect about a 1% headwind to our top-line reported rates due to the strength of the U.S. dollar compared to 2021 FX rates. Like other companies in the medical device industry, we noted significant increases in elective procedure restrictions in January and February this year due to increased hospitalizations related to Omicron variants. From a macro viewpoint, we anticipate continued COVID-related impacts in the first half of the year, with revenue picking up in the latter half as key products gain traction and COVID cases decline, alongside deferred procedures being rescheduled. We expect Q1 to be slightly down or flat compared to 2021 on a reported basis, Q2 to be flat on a reported basis, and Q3 to likely demonstrate strong growth compared to 2021. In both cases, this is influenced by the COVID impact from the previous year's quarters. Given our inability to anticipate the effects of the global pandemic, our guidance does not account for any additional COVID variant surges at this time. For the full year 2022, we expect our adjusted EBITDA to range between $56 million and $61 million, or about 12% of revenue, and our adjusted EPS to be between $0.58 and $0.73, using a non-GAAP long-term tax rate of 28%. These projections reflect our ongoing investments to deliver a comprehensive pipeline of differentiated products and to expand our distribution channel to accelerate our growth trajectory.

Thanks Doug. Looking forward, we see 2022 as a pivotal year for our business. We have experienced low single-digit top-line growth in recent years. Our guidance for this year indicates mid-single-digit growth, largely due to the investments made over the last two years in leadership, products, and commercial channels. As we enter 2023 and beyond, we anticipate further accelerating our growth to mid to high single-digit expansion while still achieving positive adjusted EBITDA. Our focus to drive this growth includes two main areas: first, continuous product innovation and differentiation, which will involve the increased adoption of newly launched products and further investment in new products and solutions that leverage our core strengths. Second, we are committed to developing our commercial channels to ensure our products reach surgeons and physicians globally. Continuing with product innovation, in 2020, our primary growth drivers will be the M6-C cervical disc, FITBONE limb-lengthening system, and an enhanced interbody portfolio. We expect additional revenue growth from the over 20 new products launched in 2020 and those planned for 2022. To accelerate future growth, we will increase our investments in key areas of strength within our product portfolio. While we have a diverse product portfolio today, we aim to focus on areas where we have clear differentiation and expertise. Our key areas of strength and opportunity include regenerative technologies, spinal technologies, limb reconstruction, enabling technologies, and alternative surgical site solutions. In regenerative technologies, we stand out with our industry-leading portfolios. We offer solutions for post-operative healing and biologic products for surgical procedures. We are investing in the development of both portfolios. Recently, we submitted a PMA application to the FDA for a low-intensity pulsed ultrasound product aimed at healing both fresh and non-union fractures, which would expand our bone growth therapies portfolio. We expect market release in the second half of 2022 and continue investing in our rotator cuff IDE trial, which, if successful, could provide a unique advantage in the soft tissue regeneration market. In spinal implants, we have a comprehensive portfolio that includes a cervical offering and a differentiated artificial cervical disc. We are also developing new spine innovations through several ongoing R&D projects addressing key areas such as anterior collar support and minimally invasive spinal technologies. We expect these innovations to be introduced later this year and throughout 2023. Turning to limb reconstruction and pediatric deformity, we remain focused on our niche orthopedic markets. We plan to expand our TrueLok Ring Fixation System to become radiolucent, enhancing its use in precise segment alignment. We will also continue the development of our FITBONE technology based on feedback from leading pediatric orthopedic surgeons, aiming for its broader adoption in the U.S. We are also advancing enabling technologies, such as our OrthoNext preoperative planning software, which will integrate with most major orthopedic products. Our partnership with nView will further enhance surgical guidance with low-dose radiation 3D imaging capabilities, aimed at improving patient outcomes in surgeries. In terms of commercial channel optimization, we will invest in expanding our distribution with targeted reps in U.S. limb reconstruction to focus on pediatrics. We're making strategic investments to enhance growth in long bone care and increase the synergy across our channels for better sales predictability. In summary, we are optimistic about the future at Orthofix. We have gained significant momentum, and we are moving into a pivotal growth phase. We will continue investing to accelerate growth while ensuring sustainable profitability. Now, I would like to open the line for questions.

Our first question comes from Mathew Blackman of Stifel. Your line is now open. Please go ahead.

Maybe just to start with the housekeeping questions for Doug on the '22 guidance. The one-point top-line currency headwind, is there any way to quantify that drop-through impact on the EBITDA and/or EPS? And then I have a couple of follow-ups?

It's a good question. So you're right about 1% on the top line. It's mostly reporting translation risk obviously at the revenue level as well as the cost level. We're fairly and actually hedged at most of the GEOs where we have exposure primarily to the Euro dollar rate and some to the Brazilian real. So I would look at it as a lot less or fairly material at the EBITDA and EPS level in terms of FX impact.

And then, Jon, a couple for you. Just sort of thinking about the longer-term expectation for upper single-digit growth, what's the bridge to get there from mid-single-digit growth? Is it another step up in Spinal Implants growth that gets you there? Does it contemplate rotator cuff and bone stem? Essentially just asking whether the acceleration would be balanced across the business or disproportionately weighted to any particular segment or new product launch? And then one more follow-up after that.

Matt, thanks for the question. There's a general improvement in our strategies moving forward. It's a mix of new product innovation, launches, and setting ourselves apart in the marketplace, which brings surgeons to our organization while strengthening the commercial channel. These elements are closely interconnected. We are concentrating on both direct and indirect commercial channels, and a stronger product portfolio helps us attract better talent. Looking ahead, we've observed growth and are focusing on orthopedics, limb reconstruction, deformity sectors, and spine areas. You witnessed our performance in Europe with limb reconstruction deformity, driven by our TL-HEX, FITBONE, and JuniOrtho Plating System, complemented by our comprehensive OrthoNext planning platform. In spine, we've also seen positive results in Europe and other regions, and we will keep investing there as part of our strategy, including in the U.S. We're executing plans in both spine fixation and BGT. We are eager for new product innovation in BGT, which has been absent for a long time, and we anticipate launching it in the second half of the year.

And then the last question and I'm not asking for more explicit long-term guidance. I appreciate what you gave this morning, but as we think about where EBITDA margins could go beyond 2022. Is there anything structurally that prevents you from getting to upper teens or even 20%, really just trying to frame what the profitability profile could be with a higher single-digit top-line growth trajectory?

We stated consistently that as we build or rebuild the organization that we know where we're spending our dollars, and as we basically get those product portfolios refreshed and sales channels put in place, that we believe there'll be EBITDA leverage in the out years, so that is, by plan and by design. And so from that standpoint, we do expect EBITDA leverage in the out years. And we should be able to operate in any comparable way to any other company of our size and style and that increase our profitability over the near-term in the park and mid-term.

Thank you. Our next question comes from Jeffrey Cohen of Ladenburg. Your line is now open. Please go ahead.

Firstly, is there any update on the M6 two-level study?

Jeff, we continue to add enrollment sites here. You see enrollment within those sites we've already established, and we are just on plan as far as the M6 two-level study.

Could you talk a little bit about the substance technology and how that falls into the BGT platform? On a commercial standpoint, is it something that sounds like late this year or is that back half of '22 will be commercial on that, and those channels will be largely the same and they'll kind of bolt-on to your current platform?

Yes, we contemplated looking outside of the U.S., but really this is a U.S. position for our product and has been for BGT for many years and it will remain focused on the U.S.

And then a couple for Doug, I guess firstly, the $23.3 million income tax expense I know you've been carrying there for a number of years and it's $23 million last quarter. So that hits to zero. Looks like your actual 1.77 on the balance, so we should expect that to remain at that very low level going forward. Is that a safe assumption?

Jeff, if I understand the question correctly, you're asking about the volatility of the income tax rate?

No, directly the income tax expense that the $23.2 million Q4 income tax expense. Is it something that caused that to come toggled off because we were a bit unexpected that that will come through now?

So, we're still normalizing to a long-term rate. In the script, I mentioned that we're moving from 27% for an adjusted long-term rate to 28% to reflect changes in the world. International tax rates are starting to impact jurisdictions where we do business, but what you're seeing in Q4 was the GAAP charge. It was a non-cash charge of the expense related to an evaluation allowance on our U.S. deferred tax assets. Because of our historical GAAP losses over the last couple of years, you're seeing pressure on our ability to record the full value around our DTAs and so we were in a position in the U.S. similar to Italy last year to reserve our tax rates. So, that's about $45 million of tax expense additional in the fourth quarter, but I would simply look to the longer-term rates for a more normalized view. We do continue to expect to fully realize all of our net operating losses carry forwards in tax assets as our earnings improve over time.

Okay. And then related to the acquisition-related amortization and remeasurement of $12.56 for the fourth quarter, what should we expect or what should we model for '22 and going forward on that line?

For the Spinal Kinetic final milestone, I would expect that in 2022 to accrete up a lot closer to the ultimate payment amount of $30 million. It will happen semi-ratably over each quarter. Also notice in our balance sheet that the final milestone liability payments slipped from long-term to current. So that will give you an idea of the speed of the accretion.

Okay. So, is the $12.5 part of the $30 million or should we expect $30 million during 2022?

The current liability is simply an accounting fair value that's discounted to today's dollars, and we go through a lot of simulations with a third party to value that payment, the ultimate payment. And so, the liability at the end of the fourth quarter was roughly $17 million, that $12 million is just a part of the $30 million.

Okay. And then lastly, any specific commentary and labor issues that you've been seeing or you expect to see going forward into '22, both domestically as well as internationally?

Jeff, this is an ongoing issue, it's going to be an ongoing issue for all companies. I was just recently with three institutions, East, Mid, and West Coast, very large institutions, and they see labor going out in 12, 18 months plus as far as just the dynamics that are going on in their institution. So, the good news is that the good news, I think, the positive side of that is that those institutions as well as the surgeons are out there ready and motivated to care for those patients that come to them. And we'll be there right with them as far as ready to do that.

Our next question comes from Jim Sidoti from Sidoti & Company. Your line is now open. Please go ahead.

It's nice to hear somebody asking questions about the non-GAAP adjustments or even me for a change. Can you repeat what your guidance was for gross margin for 2022?

Gross margin for '22, we expect to be at 76%, approximately reflects sales mix. We've got some pressure in the first half of the year from the chip shortage that we experienced late last year, and so those are the primary items at 76%.

And then I wanted to focus in on the capital spending because I think you said you're going to be roughly $25 million to $27 million for CapEx, which is about $10 million more than you did this year. I assume that's mostly instruments set. Is that primarily for the spine business? And is that a function of the new products or the new distributors or a combination of both?

It's a little bit of both. It's about a $7 million increase over a $20 million CapEx level in 2021. I would characterize it in large categories, with approximately two-thirds of that spending related to instruments, primarily to increase distribution. It requires more cash to support the increased distribution of our products like M6 and Excel Stem being rolled out. Those are the main factors. We are also making some investments in operations at various facilities.

And then last one for me. And this is strictly a long-term question. But I mean, if you look at the new products you have coming out for stem and have the M6, you have the increased distribution. Do you think at some point this becomes a double-digit grower? Because I mean, there just seems to be a lot of levers here that you can push? And I know it's not going to happen right away, but it just feels like growth to be going beyond that mid-single-digit target at some point?

We've basically stated where our trajectory is at right now. And also, the new product activity does not include any M&A. And so we actually have the organic side, and so we see as markets grow and as we basically improve our portfolio and improve our channel, that we see a good future for Orthofix. I can't really say right now as far as what we're going to be at as far as the ultimate high singles, doubles, and all the rest of that. I don't think that's fair to do that right now, but we are very comfortable with where we look at provided.

I just want to clarify one thing: the spending for seen approvals seems to be tapering off a bit. Does that mean there's hope for getting wellness products registered?

I know your questions related to MDR and maintaining our CE Marks in Europe; your questions about spending levels. We're getting each word you were saying there, but anticipating if I say correctly, yes.

Thank you to everyone who joined the call today. I look forward to a very positive year in 2022 and beyond, and we'll be talking to you throughout the year. Have a wonderful day.

This concludes today's conference call. You may now disconnect your lines.