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Hello everyone, thank you for joining us and welcome to the Anovus call regarding the binding offer to acquire Essential Robotics. After today's prepared remarks, we will host a question and answer session. If you would like to ask a question, please press star 1 to raise your hand. To withdraw your question, press star1 again. I will now hand the call over to Kyle Rose, Vice President of Investor Relations. Please go ahead. Thank you, Operator. Good morning, everyone, and thank you for joining us today for our conference call to discuss our binding offer to acquire eCentral Robotics. I'm Kyle Rose, Vice President of Investor Relations. Joining me on the call this morning is Damian McDonald, Chief Executive Officer, Ben Berry, our Chief Financial Officer, and Louis Vogt, our Group President of Recon. Our press release was issued earlier this morning and is available in the investor section of our website. We also posted a slide presentation to accompany today's call on our website, both the audio and the slide presentation of this call will be archived on the website later today. During the call, we'll be making some forward looking statements about our beliefs and estimates regarding future events and results. These forward looking statements are subject to risks and uncertainties, including those set forth in the safe harbor language in today's press release, the related slide presentation, and in our filings with the SEC. Actual results might differ materially from any forward-looking statements that we make today. The forward- looking statements speak only as of today, and we do not assume any obligation or intend to update them, except as required by law. For further details regarding any non-GAAP financial measures referenced during the call today, please refer to today's press release and the related slide presentation. With that, I will turn the call over to Damian. Damian? Hey, thanks, Kyle. And good morning, everyone, and thanks for joining us on short notice. This morning, we announced that we've entered into a binding offer to acquire essential robotics. Today, I'd like to discuss the rationale for the strategically important acquisition. Explain a little bit about the technology and our timeline for commercial development. Ben will then take you through the structure and the financials and we'll have plenty of time for Q&A. Now let's talk about essential robotics and how this meaningfully scales our commitment to enabling technology. On the second quarter call last month I said that innovation and enabling technology will be foundational to our long-term growth strategy and that this means investing in technologies, the teams and the capabilities that will define the next generation of orthopedic surgery. Today's announcement is a step forward for Inovus in advancing that strategy. As the market and customer demands continue to evolve, it has become clear that providing surgeons with optionality across the enabling technology spectrum is important. Supplementing our existing platform by providing a robotic solution will only accelerate our position in the market and broaden our strategic options as we innovate in the space in the future. In Essential, we found a company that complements our existing ecosystem and has demonstrated a track record of successful innovation. With this capability in-house, we'll have an incredible opportunity to partner with surgeons who want planning, navigation, and robotic capabilities. The surgeon who works across a hospital, an outpatient clinic, and a couple of ASCs and wants the flexibility to utilize technologies across a connected ecosystem with a single intuitive user experience. We built a strong foundation with planning and navigation, and more recently via the launch of the next-generation Astra Arvis. The demand funnel has been strong, and while still early, we continue to see increased adoption and utilization. And now, acquiring a leader in surgical robotics with a proven track record of developing robotic platforms makes sense for our enabling technology journey, and essential supplements our existing Astra ecosystem. But the Essential transaction is more than just a robot. It's a deliberate strategy to reinforce Innovis' growth trajectory with a credible long-term position in robotics and advanced enabling tech. We're accelerating our pathway to bring a robotic platform to market by acquiring talent, intellectual property and advanced capabilities, which gives us strategic flexibility as we plan for the next innovation horizons in orthopaedics. Essential also brings an exceptional team of over 50 employees with a robust track record of designing, developing and facilitating the launch of three robotic platforms across orthopaedics and spine. Our partnership with Essential has grown over time and we've worked closely with them to develop a technical risk reduction and planning process to identify the most efficient pathway to market. This will enable us to bring a differentiated robotic solution to market while also supporting a durable cadence of continuous innovation across enabling technology, robotics, implant design, and surgical technique. So what does this mean for the near term? It means we'll bring the next generation robot to market within two years, first in the knee, where the form factor and product requirements are well understood by the market and Essential already has a validated technology. soon thereafter we'll follow in the shoulder and this is an exciting opportunity for us we hold a significant market share globally in shoulder tsa currently the form factor and robotic offering in shoulder is suboptimal we believe developing a robot with essential robotics that carries advantages such as a robotic arm with seven degrees of freedom will differentiate our offering in the market essentials proprietary ownership of the robotic control layer will also enable greater precision, flexibility, and automation readiness. That last point matters more than it may sound. It means the robotic software will integrate seamlessly into the Astra ecosystem, allowing our foundation of AI-enabled planning and navigation to drive both the robot and Arbus. Through one integrated workflow, a surgeon does not have to choose between two user experiences, and it means our commercial teams are not selling, training, and servicing two technologies. It is one enabling technology ecosystem where they focus on optionality and usability. And this translates into quicker speed to market by leveraging the existing platform capabilities that are architected for the future. And how does this impact our previously stated commitments? We believe this highly strategic acquisition will accelerate our long-term above-market growth opportunities in recon. on. We've made significant progress in the last 12 months on our leverage targets and are ahead of plan on our free cash flow commitments. With this investment, we're meaningfully enhancing our long-term growth potential while continuing to focus on improving free cashflow. Now, I'll let Ben take you through the structure and the financials. Ben? Thanks, Damian. Hello, everyone. Let me walk through the structure, the financial impact, and how this impacts our outlook over the next few years. The initial upfront consideration is based on an enterprise value of 155 million euros, which equates to approximately 176 million euros of cash consideration to be paid to essential shareholders at closing. Additionally, this deal includes milestones of up to 35 million euros contingent on the success of certain regulatory and commercial deliverables we expect the transaction to close by year-end 2026 subject to customary regulatory approvals we'll finance this transaction with a combination of cash on hand and with existing debt capacity under our revolving credit facility in terms of leverage we have reduced from 3.8 to roughly 3.1 times over the past 12 months this transaction initially increases leverage about a half turn however we expect to be back to approximately three times by the end of 2027. we believe this is a critical strategic investment to build on our demonstrated innovation engine in recon this investment will support our growth and pace of innovation across recon for the medium and long term we expect to continue growing above market in the near term with our existing portfolio and internal pipeline and believe this investment will provide upside to growth as we begin introducing products in late 2028. with regards to adjusted ebitda margins we expect approximately 150 basis points of deal related dilution to adjusted EBITDA margin in 2027 offset by approximately 50 basis points of underlying improvement. This equates to about 100 basis point headwind in 2027. We expect to return to 50 basis points of underlying improvement year-over-year in 2028. And looking forward, we expect initial commercial traction to offset operational costs starting in mid-2028, leading to 100 basis points of margin improvement in 2029. Despite these incremental investments, we expect our free cash flow conversion ratio to increase to approximately 50% in 2027, and we are committed to absolute free cashflow generation of at least $100 million next year. Free cashflow conversion will continue to improve in scale, and we expect to be around 70% free cashflow conversion in 2029. To summarize, this investment provides us the ability to accelerate our time to market in robotics enhance our development capabilities and build a robotic center of excellence it's highly strategic and a good fit we believe essential provides the right foundation for securing our ability to deliver above market growth and recon while this investment puts near-term pressure on margins we remain committed to increasing free cash flow and setting up the company for a future of sustainable profitable capital efficient growth Damian? Thanks, Ben. In summary, we're excited about this opportunity for Anovus, Essential, our Surgeon customers, and our shareholders. This acquisition is a significant milestone and reflects our disciplined approach to bringing externally developed innovation into Anovas. The Essential robotics team brings exceptional engineering talent, intellectual property, and a proven track record. And as part of Anovus, we'll be able to grow through a shared mission to support surgeons with greater operating room efficiency and help patients live more full, active lives. And with that, I'll turn it over to Fern for Q&A. We will now begin the question and answer session. Please limit yourself to one question and one follow up. If you would like to ask a question, please press star one to raise your hand. To withdraw your question please press star 1 again. We ask that you pick up your handset when asking a question to allow for optimum sound quality. If you are muted locally please remember to unmute your device. Please stand by while we compile the Q&A roster. The first question is from the line of Ryan Zimmerman with US Bank Corp BTIG. Your line is now open. Please go ahead. Hi, good morning. This is Izzy on for Ryan. Thank you for taking our questions. Congrats on the deal this morning. I was hoping to start with just some of the terms that you guys laid out for the acquisition and the $35 million in milestone payments. Could you spend some time talking about the timeframe that you expect those to be triggered over? Hi, thanks, Izzy, for the question. Yeah, the contingent consideration are going to be tied to development milestones on both the knee and the shoulder introductions into the market. So based on the timelines that we put in the materials, you can think about them that way. Understood. Thank you. And could you help me with the margin outlook and the 150 basis points of the dilution. Just what visibility do you have into driving that 150 basis point? Is it coming from R&D? Is that headcount? Is it infrastructure? Any thoughts there? Thank you. Yeah, thanks. So the majority of it is the ongoing operating expenses that are coming along with the infrastructure that we're acquiring with essential. On top of that, we're also going to continue to heavily invest in these programs in the near term as we look to accelerate the launch of these products as we've laid out. So overall, I'd say it's mostly the burn that we're acquiring on top of, you know, some additional incremental investment that we'RE putting into this program. your next question is from the line of vick chopra with bmo capital markets your line is now open please go ahead hey damien and ben it's uh anton heldman on for vick uh thanks for taking our our questions uh Two for me, I guess, first on essential kind of revenue contributions and guidance is unchanged for 26, implying no contribution this year. And if I'm hearing you correctly, it sounds like initial revenue contributions should begin in 2028. I guess, you know, what run rate, revenue contribution should we be expecting for that time frame, and how do we think about kind of the revenue inflection once the knee and shoulder robotic applications are introduced? Yeah, so I think, thanks for the question, Anton. You know, we remain committed to, you know, growing the business above market like we've demonstrated over the last several years. We don't expect that to change. We think this helps secure our future as the market continues to evolve. So as we laid out in our prepared remarks, we think this is an accelerator to allow us to really capitalize and maximize our full potential here in the market, given given this this technology that we're going to continue to develop. So overall, I think we have what we need to continue To grow above market in the near term. And this will help us to to really accelerate and sustain that growth into the future. Okay, great. Thanks so much. And maybe just talk a bit more about the expected commercial strategy for the essential business. Will robotics be sold directly by the existing recon sales force through a dedicated enabling tech team or through a hybrid model? Do you have all the people you need today? And if not, I guess, what changes are required to the commercial organization? Louis, why don't you take that? sure good question thank you um yeah it's a bit of a hybrid approach as to what we envision and so we we do have the ability we have the the benefit of hindsight here and we've kind of seen some of the things that have worked and some of things that haven't worked for other you know companies who have introduced robotic technologies and have had different degrees of success so yeah we we will be augmenting you know our our channel with with um you know corporate resources at various different levels from enterprise solutions at the top you know down to clinical success you know managers at the bottom and and a few things in between but we remain committed to our distributor model and i think we have the right blend of what we need to be successful this is a couple years you know away before big impact so we're we're building out some of those muscles now we've been building them out with the arvis ecosystem that we've that we'd been rolling out this year, but we'll continue to do that here in the next couple of years. Thanks again. Your next question is from the line of Robert Marcus with JP Morgan. Your line is now open. Please go ahead. Good morning. This is Henry on for Robbie. Thanks for taking the questions. First one, Could you talk a little bit more about why you believe acquiring Essential is the right strategy at this point versus the existing partnership? You know, said another way, like what changed to make full ownership the better path at this point, versus continuing the collaboration, and then just a quick follow-up. Yeah, morning, Henry. Thanks for the question. We really weighed that up, and I think the single most important thing for us was about agility and being able to respond to the way clinicians want to engage in terms of developing the next generation of technology. Partnership is great and works in a lot of instances, but by having the team come on board, we really think we're adding capabilities around the way they execute with a proven team, with proven execution, rather than having a series of one-off partnership agreements, you know, first the knee, separate contract, then the shoulder, separate contract. Then the evolution. And we just think that the speed and agility is really enhanced by having the team part of our family. Thanks. And then also maybe a little bit of additional color on why you think, you hospitals, ASCs, you know, other centers would purchase or adopt this platform specifically, you know maybe just why you believe this platform is meaningfully different from the other robotics platforms already on the market today. Louis, do you want to talk a little bit about why we have feedback from our surgeons around wanting to be part of an integrated solution across various offerings and and how we view planning navigation and assistance sure so great question um you know there's there's subtle nuances uh you know with with features on on the knee side there's quite a bit uh of a bigger differences on the shoulder vision that we have in place right now um you we think we're able to take what is you know what is the latest generation robot seven degrees of freedom that can give us a few different different capabilities for how we want to do surgical techniques in the future and how that will build into personalized implants in the future as well so this puts us really in the driver's seat to give us the strategic optionality to go where we want to go with our with our horizon one two and three in the space um you know in terms of the platform itself you know we think it's very important to meet the customer where they are both economically and from their preference with automation so this blends very well with with astra harvest we don't want to forget about that and that's a different customer segment with some different needs and and it's a very scalable and deployable technology and of course the robot here is going to be for the people who prefer you know more automation and we think we have the capabilities with this new system to go wherever we want to go whereas some of the other systems may be a little more limited Thank you. Thanks, Henry. Your next question is from the line of Lawrence Beagleson with Wells Fargo. Your line is now open. Please go ahead. Good morning. This is Ross Osborne on for Larry. Thanks for taking our questions. So starting off, I believe Essential is currently on market with a spine indication. How should we think about that installed base and revenue run rate? Is the plan to further commercialize spine or pull back ahead of your knee launch? good morning ross how are you yeah that's right um they do have a spine solution and our plan is look they've also uh developed j and j's uh vellus spine robot so um again this is part of why we like them because they've developed technologies and and they have things in play our focus is on the the total knee and then the total shoulder um and we don't have any intention to expand into the surgical spine space, but we'll support the agreements and the way that Essential has been building relationships across the spine universe in their open platform. But our intention is not to enter the spine space specifically. Got it. And then looking at the 50-person plus Grenoble team, is that purely R&D and engineering, or does it include manufacturing and what capacity exists today to support launch in 28? Louie, do you want to talk about that? Yeah, I'll take that one too. So, yes, it's a little over 50 people. It is primarily engineering, primarily software and hardware development. It also includes, you know, a small quality team regulatory as well. So we like we call that basically it's a product engine group that does have a small manufacturing and assembly team. there is a there are two buildings that we operate out of there that they operate out of there the second one is is for manufacturing and assembly you know right now their output per year in that assembly they believe is between 75 and 100 robots thank you thanks russ your next question is from the line of jeff johnson with baird your line is now open please go ahead. Well, yeah, thanks. Good morning, guys. Maybe a few follow-ups here, if I could tick off a few. But, Louie, I don't know if it's for you or Damian, for you, but just what has to be done from here? When I've met with Essential in the past, you know, they obviously have a robot. Louie mentioned the seven degrees of freedom on the arm itself. You know, so is there more hardware development to go here? Is there more software development? it? Is it just designing a knee and a shoulder kind of software application on the current hardware platform? Just what are you going to be working on over the next couple of years, I guess, is the first question. Thanks. Great question. So it's a little different in the hip and the knee. So the way that this has come together and the way Damien has articulated it is it really is sort of a puzzle piece that comes and accelerates the strategy that we already have. So the core foundation and what I call the brain of our AI-based planning and our navigation, we at Inovus is going to bring that to the table for this robotic application and of course the implants. So on the knee side, we have some development to do on the planning front, taking a CT image and turning it into a virtual surgery application and creating the brain of what will actually drive the robot. So importantly, we Have that to develop on the side. And the second thing is, is, you know, we have a unique approach to innovation where we're incredibly surgeon centric, and we want to make sure that our surgeons and our KOLs really have a meaningful input into, you Know, what we bring to market. And so instead of taking something off the shelf, we really want to tailor it as much as we possibly can. And we think that's going to be a difference maker in the market. On the shoulder side, we've given ourself a bit more time. We already have the planning application in place. That was an investment we made some time ago. It's been going very, very well and continues to develop along a nice curve. You know, we have the navigation as well, but shoulders is in its infancy. It's it's it'S nascent right now. It's a bit of a blue ocean where we want to go with it is is unique. So we've given ourselves some time for acts of discovery and true innovation process there. And that's why we we have a little more time built into the schedule. and louis when you say unique uh on the surgical approach itself robotically and then getting to uh uh thin placement and and beyond i'm assuming yeah yes we yeah we see a future with robotics um that that um you know really enables things that the surgeon can't do without a robot um and that's sort of the next horizon unlike kind of where we are right now in the knee And so, you know, as we think through that, there's new discoveries that we have to do together with our surgeon key opinion leaders. We've been working on some of these concepts for quite some time. The robot is really a facilitator. It's an enabler to help us get there and to be able to drive reproducibility with the masses. All right, that's helpful. And sorry, I'm going to ask Ben maybe if I could just sneak in a couple financial questions just on the 2029 margin guidance. I know we're a long way away from that. But as you're going into full launch mode there, we've seen robots go in kind of placement strategies, obviously some leasing strategies, a lot of different financial models for robotics nowadays. And I'm sure those will evolve over the next couple of years as well. But how do you get back to 100 basis points of margin improvement when you may be placing robots or having even mixed shift to probably, I would assume, lower margin capital as you start to sell robots in 2029 and beyond? Thanks. Yeah, thanks, Jeff. I mean, actually, as as Recon will continue to accelerate as part of, you know, part of Inovus, we'll continue to reap those benefits. So I think there's leverage as we get through some of the initial investment hurdles here to bring the products to market. And then we'll be able to capitalize on some efficiency as we step into 2029 on top of just Recon Mix continuing to be a total benefit for the company. So overall, we see opportunity here to get back on track of, you know, margin improvements. And like we said in the prepared remarks, continue to make progress on cash flow, even here in the near term with bringing on this investment. Fair enough. I'll take the rest offline later today. Thanks, guys. Thanks, Jeff. Thanks, Jay. Your next question is from the line of Mike Mattson with Needham Company. Your line is now open. Please go ahead. Yeah, thanks. Just curious how you think this would fit in sort of the ASC setting. It does seem like we're seeing a lot of procedures moving to that setting. Seems like that's only going to accelerate with some of these potential inpatient reimbursement cuts and the comprehensive care for joint replacement model. So, you know, do you think this is something that is an appropriate size and price point that will work well in the ASC setting? Louie? Sure. Good question, Mike. So, so, you Know, every ASC is different, right? And the volume that they produce is different. You know, our research suggests that if you don't do 100 knees per year, the account doesn't do a hundred per year. it may not be best suited for for a large format robot that's that's not exclusively that way but that's generally what our research indicates so importantly with our strategy is we want to be able to meet the customer where they are economically and help them with their goals and that's why we don't have a single problem approach here and we think Arbus is going to play a critical role in those accounts so it's it you know it's a tailored approach that we want to bring to people to help them accomplish their goals solve their problems, but not everybody's the same. Okay, thanks. And then just in terms of, you know, Arvis and the robot, it's the intention here to have sort of like a single software platform across all your enabling technology offerings. In other words, if a surgeon, you know starts with Arvis, and gets comfortable with the the software, the navigation software that they can then you know more easily move to the robot if they chose to do so. yes in fact you uh you said that very very well you stole my thunder so so yes the the we want the customer experience to be the same so we have what we call a you know unified portal planning and analytics portal we have a unified navigation core that has the you know a tech stack that will be similar or the same between the two outputs the arvis the astra arvis system and the and what is now the essential robotic system so camera tracking our code base our workflow our user interface, all of that will be the same throughout. It's helpful for the surgeon customer. It is helpful for sales representative. It is also helpful for us from an innovation standpoint that we can innovate on sort of one platform instead of two or multiple. Yeah. Okay. Got it. Thank you. Okay, Fern. I think that's it from the Q&A. everyone, thank you for the thoughtful questions. Again, short notice, we very much appreciate you joining us. We'll be at the Wells Fargo conference next week and look forward to providing an additional update and answering any Q&A or, you know, the third quarter results in early November. But thanks for joining and have a great day. This concludes today's call. Thank you for attending. You may now disconnect.