Q4 2019 Earnings Call
Thank you and thank you everyone for being with US today, joining today's call from Globus medical will be Dave Demski, President and CEO, Dan Scavilla Executive Vice President and Chief Commercial Officer, and keeps <unk> Senior Vice President and Chief Financial Officer.
This review is being made available via webcast accessible through the Investor Relations section of the Globus medical website at Www Dot Globus medical Dot com.
Before we begin let me remind you that some of the statements made during this review or.
Or maybe considered forward looking statements.
Form 10-K for the 2019 fiscal year and our subsequent filings with the Securities and Exchange Exchange Commission identifies certain factors that could cause our actual results could differ materially from those projected in or any forward looking statements made today.
I see see filings, including the 10-K are available on our website.
We do not undertake to update any forward looking statements as a result of new information or future events or developments.
Our discussion today will also include certain financial measures that are not calculated in accordance with generally accepted accounting principles or go.
We believe these non-GAAP financial measures provide additional information pertinent to our business performance. These non-GAAP financial measures should not be considered replacements for and should be read together with the most directly comparable GAAP financial measures.
Reconciliations to the most directly comparable GAAP measures are available in the schedules accompanying the press release and on the Investor Relations section of the Globus medical website.
With that I'll now turn the call over to Dave Demski, our president and CEO.
Thank you, Brian and good afternoon, everyone.
This medical capped off a great 29 gene performance with a strong fourth quarter.
Revenue for the quarter was a record 211.7 million an increase of 8% was quarter 2018.
Full year revenue was 785.4 million, representing a 10% increase over 20 her team and our third consecutive year of double digit growth.
Non-GAAP EPS was 29 cents per share versus 43 cents a year ago, an increase of 14%.
What are your non-GAAP EPS was $1.68 versus the dollar 67 in 2018.
Adjusted EBITDA improved to 34.3% for Q4, and we finished the full year at 32.8% significantly higher than the 31.5% we posted for the first half a year.
The results include planned investments, we made and growth initiatives such as <unk> trauma.
Factoring out the impact of these investments would have resulted in an improvement of five cents to non-GAAP, yes in the fourth quarter and added approximately 550 basis points to adjusted EBITDA margin.
Full year impact was 24 cents and 580 basis points respectively.
Well just continues to achieve market, leading operating margins, even as we invest in key strategic initiatives.
[noise] muscular skeletal solutions grew by almost 9% in the fourth quarter and 11% for the full year.
The U.S. spine business continued to take significant market share during the quarter driven by competitive recruiting and plant pull through from Excelsius, GPS installations offset somewhat by weakness in our biologics portfolio.
We finished 2019 with our third consecutive record year in competitive rep recruiting and Onboarding.
Our recruiting success accelerated into the back half of 2019 and has continued into 2020 with a very strong pipeline of successful seasoned sales professionals showing interest in joining our team.
For the fourth quarter, our biologic sales were off by 15% compared to the fourth quarter 2018, and 7.5% for the full year.
The impact to the biologics decline on our overall growth rate and muscular skeletal solutions was 240 basis points in the fourth quarter and 190 basis points for the full year.
The decline is primarily due to supply issues with our stem cell and amnion based products.
We're encouraged to see this begins to turn around in the first quarter and expects to cover and build momentum throughout 2020.
We launched 11 spine products and 29 team, including three in the fourth quarter.
Most notable in Q4 was the introduction of our first the first of our he brought on line of Threed printed Interbody spacers.
Peter and I see a cervical integrated plate spacer system and heater on <unk> lumbar integrated plate spacer system, we're both introduced in the quarter.
These products have received high marks from early clinical users.
He turns the most comprehensive portfolio three D.
Printed gearbox spacers and the industry and we plan to roll out the remainder of the huge online in 2020.
The international spine business grew by 5% in Q4, the Q4 deceleration was expected as the first quarter reporting 19 included significant revenue associated with the alleviation of pent up demand caused by supply chain issues, which have been largely resolved.
As you may recall growth in the first quarter of 2019 was nearly 25% in constant currency.
These challenging comps will likely result, a muted growth numbers for the first quarter of 2020 as well.
Growth in Japan in the fourth quarter was lower than our performance over the past couple of years as we transition to a new management team there.
Confident in the new leadership, the 2020, maybe a year of slower growth in that market, which is reflected in our overall guidance.
We're very pleased to have recently received regulatory approval to market Excelsius GPS in Japan.
There is strong interest in the system from surgeons in Japan, and we expect to begin selling units in the second half of 2020.
For the full year 2019, our international spine GRS business grew by almost $16 million or 16% in constant currency the highest level of organic growth dollars in our company's history.
Fundamentally our international organization has never been stronger our management teams have been upgraded in several important markets. Our innovative technologies have gained traction as a result of increased investments in surgeon education, and we are seeing strong implant pull through from Excelsius GPS installations, we are well positioned for continued strong growth internationally.
From a business made good progress and 29 team we aren't six new systems and have received great feedback on the quality and innovation, we are bringing to the market.
We built hundreds of sets and saw sales grew by over 150% in the fourth quarter and 400% for the full year.
Building upon our initial success, we plan to increase our investment level in 2020 by expanding our sales footprint will be more sets and launching several exciting new products.
Revenue from enabling technologies was 13.9 million in Q4 down slightly from a very strong Q4 in 2018, but continuing the positive trend we've seen over the past several quarters.
We are fully recovered from a soft Q1, and they're very bullish about the potential of our iron ore division as we move into 2020.
We continue to see robust adoption trends by surgeons were experiencing the benefits of Excelsius GPS technology as a incorporated into their practice of medicine.
We will begin rolling out the FDA cleared anybody module late in Q1, and we have submitted the cranial module five chemtec to the FDA.
We also anticipate submitting the imaging systems by 10-K in Q2.
We have invested heavily into expanding and training our clinical support team as well as our sales team in 2019, and we're well positioned for strong growth in 2020 and beyond.
In summary, we are excited by our exceptional performance in 2019.
Our organic growth rate in spine far exceeded the market and was the highest among the top six spinal implant competitors.
We sustained a strong finish and enabling technologies, demonstrating our ability to compete effectively against much larger players.
We showed significant improvement in adjusted EBITDA I go back to our mid Thirtys EBITDA commitment level and the second half of the year, despite heavy investments in trauma nine or.
We are 17, new products across spine and trauma, we completed significant working there in the final stages of development several exciting enhancements to our am I in our portfolio, including a cranial robotic application and imaging system.
Sure we have tremendous momentum across all parts of the business and look forward to a great 2020.
Before I turn the call over to Keith I want to welcome Rob Douglas to our board of directors and thank Craig Wheeler for service to our company.
Rug Douglas comes to Globus with over 30 years of experience and medical device technology and currently serves as the President and Chief operating officer in the office at the CEO for Resmed Inc., a medical device and software applications company specializing in cloud connected devices, the diagnose and treat and manage respiratory disorders and improved care and other hospital.
Salix.
His knowledge of the digital health industry and global markets is well suited to support our continued expansion in medical device technology welcome aboard Rob.
Per Wheeler served on our board of directors since 2007, he was our lead director and valuable member of our board for over 12 years.
His leadership industry knowledge and trusted advice have continued.
Contributed to the success of Globus for many years, we wish him well and his endeavors. Thank you Kurt.
I'll now turn the call over to Keith.
Thanks, Dave and good afternoon, everyone. The fourth quarter results for Globus demonstrate the underlying strength of our business.
Sales growth continues to outpace the market, while delivering on key metrics of profit and cash flow generation.
Full year revenue was $785.4 million growing 10.2% as reported or 10.5% on a constant currency basis.
The adjusted full year revenue grew 10.4% with seven fewer selling days in Japan during 2019 as compared to 2018.
Net income was $155.2 million and non-GAAP net income was $171.3 million.
Our fully diluted earnings per share or $1.52, while our fully diluted non-GAAP earnings per share were $1.68.
Adjusted EBITDA was 32.8% for the year, and we delivered $101.2 million a free cash flow.
Q4 revenue was $211.7 million growing 8% has reported any 0.2% on a day adjusted basis with Q fewer selling days in Japan versus the prior year quarter.
Currency impacts are immaterial to the quarter.
Net income was $45.5 million and non-GAAP net income was $50.2 million driving 49 cents per fully diluted non-GAAP earnings per share.
Adjusted EBITDA was 34.3% and we generated $38.5 million free cash flow during the quarter.
Focusing on sales U.S. revenue for the quarter was $177.5 million, 8.3% higher than Q4 2018.
The growth was driven by the continued strength of our muscular skeletal business led by U.S. fine, which continues to benefit from our record recruiting of competitive reps as all the implant pull through from accounts utilizing our Excelsius GPS systems.
International revenue for the quarter was $34.2 million growing 6.4% as reported constant currency impacts were immaterial as previously noted.
Our growth is driven by continued penetration of our muscular skeletal business as well as enabling technologies driven by Excelsius GPS placements.
Our second half growth rate slowed and is in line with our expectations in previous comments related to large distributor orders placed in the first half that did not repeat in the second half.
Moving into the rest of the RPL Q4, gross profit was 77% compared to 76.5% in the prior year quarter.
The 50 basis point improvement was driven by lower inventory reserves, partially offset by the mix of sales.
Full year gross profit finished at 77.1% and includes approximately $4.4 million of onetime benefits driven by lower inventory reserves.
Adjusting for these onetime benefits full year gross profit would have been 76.5% compared to 77.6% in the prior year.
The decrease in gross profit is driven by sales mix and higher depreciation expenses as a result investments and sense in sets across our spine and trauma portfolios.
Looking ahead, we projected mid seventies gross profit rate in 2020.
Research and development expenses for the quarter were 15.5 million or 7.3% of sales compared to 13.8 million or 7% of sales in the prior year fourth quarter.
The increased level of spending for the quarter as attributed primarily to our enabling technologies business.
SGN expenses in the fourth quarter were $92.1 billion or 43.5% of sales compared to $83.6 million or 42.7% of sales as a result of continued investment in our business primarily the expansion in our iron ore sales in clinical support teams upgrade and expansion of our international spying team as well as is.
Increased investments in surgeon education.
The income tax rate for the quarter, 16.4% compared to 22.8% in Q4 of 2018.
The Q4 tax rate is inclusive of tax benefits related to stock up stock option exercises worth approximately 320 basis points. The full year income tax rate was 18.3% and includes benefits related to stock option exercises with approximately 250 basis points for 2020, we projected effective tax rate of approximately 21 person.
Yes.
Fourth quarter net income was $45.5 million and non-GAAP net income was $50.2 million diluted earnings per share were 44 cents and non-GAAP diluted earnings per share were 49 cents, reflecting a 12.3% increase a little of Q4 2018, a 43 cents.
Full year non-GAAP earnings per share was $1.68 compared to $1.67 in the prior year.
Improvement in non-GAAP EPS was achieved despite non operational impacts which include a higher tax rate, resulting in a two cents drag currency headwinds of two cents, a three cents headwind due to higher stock compensation expense.
In addition, our investments in iron ore and trauma resulted in an incremental 12 cents impact to 2019 as compared to the prior year.
Adjusting for those non operational headwinds and our investment in iron ore our non-GAAP EPS would have been 19 cents higher in 2019 reflected a year over year growth rate of 12%, resulting in an earnings growth rate that is slightly higher than our overall sales growth rate of 10.2%.
We continue to believe that iron ore in trauma represent long term profitable growth opportunities for the company. We will continue to support the investment levels required to realize that growth, even though it somewhat masks outstanding growth and profitability in other parts of our business.
Adjusted EBITDA for the quarter was 34.3%, reflecting a 20 basis point improvement over the prior year quarter.
Our full year, adjusted EBITDA was 32.8% compared to 34.5% in 2018.
The decrease in adjusted EBITDA is driven primarily by the increased investments in our enabling technologies and trauma businesses.
Looking ahead to 2020, we're planning for a mid Thirtys adjusted EBITDA margin percentage.
We ended the quarter with $721 million of cash cash equivalents in marketable securities.
Fourth quarter net cash provided by operating activities was $54.3 million and free cash flow was $38.5 million.
The company reaffirms full year, 2020 sales and non-GAAP EPS guidance at $350 million and $1.82 respectively.
The growth in sales and non-GAAP EPS is expected to occur at approximately the same rate, which is driven by an expanding EBITDA margin offset by higher noncash expenses related to stock compensation and depreciation.
We'll now open the call for questions.
At this time as a reminder, if he would like to ask a question you will need the press star one in your telephone to withdraw your question press the pound key please standby well we've compiled candy roster.
So first question will come from Matt Miksic with.
Miksic with credit Suisse. Please go ahead, but their question.
Thanks, so much for taking the questions.
So I had just to if I could one on EBITDA margins.
And just understanding the investments that you're making it seemed like last year as we look forward to this year. The last year, there was a bit maybe a bit more variability than usual in the margin line margin trends just one wondering if you could take a minute.
To chat about.
What do you expect in the coming year, how should we should think about.
Margin trends, given the timing and magnitude of the investments you continue to make.
Thanks for the question I think I'm an answer that in two parts first thing I would say is when you look at 2019 Q4 from an EBITDA perspective really fell outside the range. The gold was historically talked about a 30 337 as we got further along in the are you saw really sequential improvement and as we get to Q4, I think an important call out.
He is our EBITDA margin or just EBIDTA margin finished 20 basis points higher than the prior year. So when you think about kind of where we were and where we're going we feel good has as you even started on the call in spite of some of the or decide to in spite of some of the investments that we've made we think about going into 2020.
We still see ourselves investing well you also expect the growth our muscular skeletal business to continue as well as enabling which should help drive somewhat some leverage to help expand some of those even in margins.
That's great. Thank you for the color and then.
Just on some of the implant growth that you've been putting up as has been significantly above market for a while now.
And and so and I guess based on your comments, Dave It sounded like the overall case revenue if you want to call. It that consumable revenue implantable revenue would have been higher you know with more stable biologics supply potentially in the fourth quarter.
So given those very high rates.
Maybe can you talk about what do you expect the impact from the the additional applications from Excelsius and your imaging system.
Maybe one other factors need to come together to support these you call. It hi, overseeing the low double digit sort of implant growth.
Thanks, Matt.
No. We're very very encouraged by what we're seeing and in terms of competitive rep.
Coming over.
The ended last year was really strong we've actually started out really strong this year I think though the message in the market is clear that were a technology leader both from an implant standpoint, as well as the enabling technologies. So that's brought a lot of great reps to our team the the spine products that we launched this year, we launched 11.
I think those are going to give us some traction next year.
Growth as well.
And then the continuing.
The strong phase that we're building in enabling technologies as a platform for future growth. So I think all of those things will.
Drive continued success in in terms of spinal implants into next year and beyond.
That's great I'll leave it there and.
And let other folks ask questions from here.
Thank you Matt.
Your next question will come from Matthew O'brien with Piper Stand Blair. Please proceed with your question. Thanks, So much for taking my questions. Just if you could dig a little bit about enabling technologies.
You know the performance there has been a little bit stagnant over the last three quarters sequentially. So what should we anticipate for that business here in 2020, how are things going on that competitive front.
You know as you're trying to place systems and any other dynamics to kind of call off from a pricing perspective service.
Perspective on the system.
Thanks, Matt well, it's become very competitive I think I think we're demonstrating that there are holding our own for sure.
In terms of sales I think we're performing better clinically and right now I just have anecdotal evidence to that to that effect, but I think that from a long term basis, that's going to give us.
Additional traction going going forward that the systems are just getting utilize where we've had installations and I think that's going to drive future growth.
We we are working as we've talked about to enhance our current offering with the spirit, particularly the cranial module and on the Interbody module I think that can help and incremental sales I.
I think coupling it with an imaging system. Later this year is going to add some more efficiencies to the O R. So all those things like point too.
Good runway for us and certainly expect to grow that part of our business. This year.
Pricing standpoint, it's a it's this piece are holding up really well.
We weren't really sure what the megabit and certainly given the competitive environment.
It's a threat, but at this point, we're still providing a lot of value.
Through our hospital customers and their they'd been willing to pay for it so.
Okay. Thanks again.
For Dan just on the on the trauma side of things I know, it's an area that you guys have talked a lot about over the last couple of years, 400% growth is definitely great last year, but off of a small base. So is this the year with those hundreds of sets that are out there, where we see a meaningful meaningful step up and big tailwind on the topline.
Overall corporate growth from the trauma business or is that more of a 2021 event.
Hey, Matt. Thanks for the question I think what we've always said is this is a longer journey with trauma, it's about growth year on year quarter on quarter, not an explosion like we saw with robots. So I wouldn't call. It 2020, the pivotal year of significant change, but rather one step along that journey as we grow this to be something equal to the size of spine overtime right remember, it's such a big market.
We play in with that you're right. We have the sets in place to do it we have salesforce in place and we've been focused on market access and know what you'll see is just improved each quarter as we go through and penetrate the market.
Dan started up to push you a little bit I Miss It's just I think it's been something you've talked about for a while it's been a lot of investment and it's a humongous market is there is something that youve encountered along this journey that it's kind of surprised you as you're trying to penetrate this market and do you have any less confidence in your ability to take some meaningful share here over the next several years.
No no less confidence whatsoever, the only thing that we disclosed earlier on in the year well some of those sets were delayed because of all of the growth throughout the entire company, we had to prioritize differently. So we rolled those sets out but announced that through 2019. They are in place. So other than the fact that were little bit behind because the set delays there really is nothing that pulls back.
Back on this at all we're all in and we're driving forward like we plan to.
Okay I appreciate that thank you.
Your next question will come from Kayla Crum with Suntrust. Please proceed with your question.
Hi, guys. Thanks, so much for taking your questions I'm, sorry, so congrats on putting up a great you ask first bank growth number in the quarter, but I did want to touch on the biologics supply issue can you just give a little bit more detail there is there anyway.
To quantify that that headwind and just any sort of specific commentary just shaped by shape up that that issue.
Sure a killer.
Yes, there's a couple of a couple of things into supply area. One one is our stem cell based product we were in the process of getting that bag and online and we hope we hope to be back hopefully be back in the first quarter. We still have a couple of more tests to to get past four we're having to do that.
When it comes to amnion.
That that is just a pure market supply and we've now engaged with some additional sources of tissue there.
Those are in in the building being processed and working their way through the system. So that we're starting to see even some of that already.
The first quarter, so that'll be a.
A gradual thing through the year as we build that up restore those customer relationships and build the.
Bill that back up we did try to quantify the headwind for the year was about 190 basis point I think overall and then it's it's gotten worse fourth quarters about 240 basis points and that's.
Paul.
Reflected in them into muscular skeletal solutions numbers that we put up.
Got it okay, well that's that's helpful.
And then.
Second you guys have been a first mover in time for potash and it feels like you'll have that first mover advantage for some time, but I know you'll be consistent innovating your robot without a million press releases alerting us of updates. So I'm curious if there are any sort of dates to your spine robotics.
Just to make that you have plans that you think are meaningful enough to press release in 2020.
Nothing other than what we've already discussed the Interbody module is Oh, we're basically building sense for right now and getting ready to roll it out this quarter.
We have a deformity module that is going to.
Enhance the planning aspect of the overall system, particularly as the more complex cases.
The Credo module is with the FDA right now and.
We hope to get a a clearance on that.
Near future although it.
It's hard to predict.
And then the ability to combine it with our imaging, which we hope to launch in the second half of the year is going to help efficiency and work flow within the and the although our as well as a.
Providing better.
Image quality as and more we'll be able to address more levels to do more complex cases without having to do multiple spins.
I think all those things are coming out in the next year.
Great. Thank you guys so much for the questions.
Your next question will come from Craig BG with Cantor. Please proceed with your question.
Hey, guys. Thanks, Thanks for taking the questions just wanted to start with obviously you have your your revenue guidance number that's out there but.
I know in the past you've given some color on the components you know whether its U.S. fine or international.
Then trauma and enabling technologies. So just wanted to see if you could help us think about where where that.
Units of that eat 50.
I think I'd say well first off thanks for the questioning 850, we were really not move forward with breaking out split uneasy muscular skeletal, enabling and U.S. international what I will say is that.
Coming out of this year and going into next year. Some of the comments we discussed on the call I think we're very excited we feel like we're very well positioned next year to grow.
Muscular skeletal as well as in April I think some updates comments about things that are coming with enabling helped drive growth. So we think that as we look into 2020, we think we're positioned to drive solid growth across the business.
Great. That's helpful and then if I could ask on the the robotic program for.
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For Fort worth, though beyond spine. So just I just wanted to.
Wanted to see if theres any update there and when we can expect hear more about your plans in that space.
Oh, no official uptake, Craig, but you will be.
Talking about towards the end of this year is probably the bus this timing to think about.
We're working we're making good progress on it we're happy with it we think we have some advantages we can bring.
To the technology that exist in the market today and.
We're just working towards that.
Just a follow up their contribution to revenue line is that a 2021 event should we think about it that way yes, yes.
Alright, thanks for taking the questions guys.
Thank you. Thank you.
Next question will come from David Lewis with Morgan Stanley. Please proceed with your question.
Hi, This is myrisk <unk> on for David Thanks for taking my questions. Today I'd had two quick questions. HM gives me the first one.
Just can you give us any update on the timing of additional indication expansion for itself, yes, or anything we should be thinking about coming in 2020 and on top of my follow up.
Sure Marissa, there's a couple that well we have we have the inner body module now we haven't we haven't launched it yet and then as we mentioned in the and the prepared remarks, the cranial modules with with the FDA.
At this at this moment and that.
You imaging system will be following on that.
We hope to file that in the second quarter and then it will be up to the FDA when we can begin selling it.
Okay understood. Thank you.
And then core spine growth is coming off its strongest year since 2015 to the extent that you can give us any more detail how sustainable do you think the high single digit tableau double digit growth rate on is that you posted in 2019 and is it fair to assume that this the seller with year over here or do you think southeast Paltrow can continue to drive share gains.
Yeah.
Sure.
Everything I'm seeing indicates it we're gaining momentum a business is really strong.
Competitive recruiting has never been stronger the installed base of Excelsius continues to grow even though our revenue in enabling was flat. This year. That's is added to our installed base and then the spine.
Product.
Development engine is back up and then producing at a pretty high clip. We got 11 products out in 2019 and there's several more of that are that are coming out. This year. So all of those 0.22, very bullish look at or spinal implant business.
Great. Thanks.
Your next question will come from Matt Taylor with <unk>. Please proceed with your question.
Hi, guys. Thanks for taking the question.
So I wanted to follow up on your your biologics comments because it seems like things are turning around there I was hoping you could give us more color on what your liking about the trends that you're seeing in Q1, and I think you're also launching food products. There how could that improved the growth rate for biologics in 2020 versus what we saw last year.
Well, we definitely hope to grow this year versus being a drag.
It's hard to predict it because weve because the supply issues as have caused customers to seek those products elsewhere, we're gonna have to restore those relationships.
Those initial conversations are going well.
As I mentioned earlier, the amnion products are we've got the supply.
The commitments and we're starting to process that tissue.
Im cell is a little more.
Risk at this point, we still have to pass some some of our internal quality metrics to get that those products back up and launched.
But it's hard to predict what the impact is gonna be this year, but we're encouraged by the early signs.
Okay. Thanks, and I just want to see if you could comment on the opportunity per year robotic system outside of the U.S., especially now you have the Japan approval.
Can you talk about how much how you've been able to make outside the U.S. to date and what kind of an opportunity you think Japan can be.
Oh sure I've actually been very pleasantly surprised about our growth internationally I think we're in nine countries outside the U.S.
Asps are good and I wasn't sure that that was going to be the case, one we when we got into the business and Japan is a very big market and its from of spine surgery standpoint, and we were just over there a couple of weeks ago talking to some of the key opinion leaders in the market and they're very it's a very technologically savvy country.
Very very much interested in efficiency in and everything they do.
They're very excited about the opportunity to utilize the technology and we.
We are we're very bullish about what that coming to us in terms of our growth over the next few years.
Got it thank you.
Your next question will come from Richard Newitter with SBB Leerink. Please proceed with your question.
Hi, This is Jamie on for rich. Thanks for taking my questions I guess just on the international business.
First I just a housekeeping did you guys have been imagine what the actual growth rate was for the core international spine business. It out would be number one and then second appreciate that this is a strong year growing 16%. So just I'm looking into 2020 is it reasonable to assume that and mid teens growth rate is still.
The right place to be for this business or how should we potentially be thinking about that business and plenty.
Yeah. Thanks for the question, we did not really split we did not break out the component of international between spine and everything else.
So we came in at 6.4% for the quarter and about 15 six for the year. When you go into 2020.
Dave alluded to earlier and I made a comment as well when are the first quarter and second quarter, we're gonna be coming up on tough comps when you come to last year because of the largest tribute orders that were placed in the first half of the year.
When you think about last for 2019, we grew roughly 23% in Q ones in Q2, so going into the first half of the year, we would expect growth to be a little bit more muted in the back half, we would expect growth to accelerate.
To drive to drive overall growth into 2020.
Jamie I decided to that the only dealing caution on that which I mentioned is that we've got new leadership team and in Japan and a heavily.
Heavy experience for Medtronic, so their access to some of the large scale wells is something we've never had before.
So that's a big opportunity, but how long it's going to take us to break into that is the question. So we we internally in terms of how we've broken out the business, we've been a little more conservative about our growth in Japan in 2020, as we set the table for long term expansion there.
Got it Okay and then just in the mid seventies gross margin profile in 2020 could you just give us a sense of how we should be thinking about that kind of cadence for Smith perspective quarter over quarter. Thanks.
I mean, I would just say overall, it's fair to assume mid seventies, a whole year I mean, I think the I think we're going to continue to provide a very strong gross profit margins I think quarter to quarter. I think you you bake mid seventys assumption throughout the year I think are good.
Thanks.
Thank you.
Your next question will come from Mike Mattson with Needham Company. Please proceed with your question.
Hi, Thanks for taking my questions.
Yes, I just wanted to start with the these new robotics modules. So I'm just curious how it goes how you could monetize those is there are charged as or software that you charge for or are there additional disposables or is it just simply giving the the customers the ability to do.
More with the existing robot hopefully you get more implant sales.
Yes, it's really both Mike the cranial module has its own hardware and software. The a interbody module same thing Oh incremental hardware and software opportunities. The other thing that comes along for US with the Interbody module is we hope that we'll pull through.
Body implants with it.
So it's really.
Those two items, but but overall, it's just enhances the value package that we can bring to an account, particularly cranial. So you've got both disciplines can utilize the same platform technology to address their clinical needs that just makes it a.
A little bit easier buying decision for the hospitals they can they could layer on those additional applications.
Okay. Thanks, and then just on the I apologize if you said this earlier, but just on the biologics issues have that has not been fully resolved. So in other words that going to that headwind gone in 2020.
The amnion one is the stem cell one it's just a matter of timing. We're we're we we need to get.
Through the process of Revalidate Revalidating our process.
Which we are in the middle of in a encouraged by where we are but again I know theres that subject to risks that could take us longer than that we think it will.
Okay, great. Thanks, a lot sure.
Your next question will come from Steven Lichtman with Oppenheimer. Please proceed with your question.
Thank you hi, guys. So obviously you guys continue to grow well ahead of the of the underlying market wondering where you're thinking the market growth is overall or any color on the state of the market from your perspective heading into the year round volumes are price you would be very helpful.
Sure. So it's hard to tell from our size, but.
Generally speaking it seems it seems strong demand is strong as it's been in the last four or five years.
I I saw the Medtronic results the other day and for the market leader to grow like they did that's that's encouraging for the entire market.
I think.
The larger the larger companies look for one are putting up some some decent growth so.
It looks good from our perspective.
Where we are on the latter but also as I look around it I think there's some some good growth going up.
Got it thanks, Dave and then just just secondly, I'm. Obviously you mentioned the investments you remain elevated just relative to 19, well the investments be higher in 20 versus 19 as they were in 19 versus 20, <unk> I eat in terms of bps impact or will actually be low.
Last but well they just directionally any color there would be helpful.
Yeah. This is Keith thanks for the question as we head into 2020 way. The plan is to hold at the level of investment spending relatively flat, but I would call out that you know where some of our comment earlier comments talked about really investing in looking at the long term if things come up that we see our advantageous for us to invest we will make a move and invest.
But going into the year based on I see right now, it's really more flattish looking investment.
Okay got it thanks Keith.
Your final question will come from Ryan Zimmerman with BTI G. Please proceed with your question.
Hi, This is Sam on for Brian Thanks for taking the question just.
One of the first see there's any incremental color you have on the length of the selling cycle for Excelsius I'm, not you're seeing any delays with some of the newer.
Competitive options coming out within the next few quarters.
Oh, yes, thanks Sam.
Selling cycle has been about where it has been for the last six to nine months. So its longer than we first entered the market.
But at this point, there's really only one competitor, but there there are picking important competitor and we're going at it for almost every deal so that does take.
Longer for hospitals to to make a full evaluation of both technologies and work their way through the contracting process.
No no further extension of it but it is longer than when we started in the business couple of years ago.
Great. Thanks, and then I'm just.
Modeling question on on R&D expense, you know with with the cadence of investments in the years, there any way we should be thinking about.
Where in a year that that may or may be lumpy. Thanks.
We finished this we finished this year at roughly 7.6% and I think that go into next year I would assume that's pretty pretty straight lined across the year.
Okay appreciate it.
[noise] and at this time there are no further questions in queue at this time, ladies and gentlemen, this will conclude today's globus Medicals fourth quarter 2019 earnings conference call. Thank you for participating you may now disconnect.
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