Q4 2020 Globus Medical Inc Earnings Call
Ladies and gentlemen, thank you for standing by and welcome to the Globus medical fourth quarter and full year 2000 of 'twenty earnings Conference call.
At this time, all participants on a listen only mode. After the Speakers' presentation. There would be of question and answer session to ask the question. During the session. You can eat the press Star then one on your telephone.
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I'd now like to hand, the conference over to your speaker for today Brian.
Brian Kearns Senior Vice President of business development and Investor Relations. Mr. Current please go ahead.
Thank you to Wanda and thank you everyone for being with US today, joining todays call from Globus medical will be Dave Demski, President and CEO, Dan Sgabello Executive Vice President and Chief Commercial Officer, and Keith Pfeil, 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 are or may be considered forward looking statements. Our form 10-K for the 2020 fiscal year and our subsequent filings with the Securities and Exchange Commission.
If I certain factors that could cause our actual results to differ materially from those projected in any forward looking statements made today.
Our SEC 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 GAAP.
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.
Conciliations to the most directly comparable GAAP measures are available on 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.
You, Brian and good afternoon, everyone.
What kind of remarkable finish to a very challenging year.
The proud of the way our entire team performed in the face the unprecedented uncertainty in adversity in 2020.
Revenue for the quarter was $233 million, an increase of 10% of where for Q 19. This was our second consecutive record quarter, resulting in nearly $450 million in revenue in the second half of 2020.
The revenue for the year was also a record $789 million, while the growth for the full year was a modest $4 million.
Was the significant accomplishment considering the deep hole you're in at the end of May and the full year of declines, but most of our competitors experienced.
Our fourth quarter performance was led by our U S spine, enabling technologies continued to make a strong come back from the Q2, though with $18 million in revenue for the quarter up 30% over four to 19 and double our true Q 'twenty results.
You are spot on continued to take significant market share growing the nearly 12% on Q4, even if the COVID-19 related shutdowns became more pronounced as the quarter progressed.
We estimate the COVID-19 restrictions negatively impacted the U S spine business by approximately $7 million to $9 million in Q4 of.
The roughly five percentage points of growth, which is consistent with the 17% growth we achieved in the third quarter.
We also delivered record non-GAAP EPS of <unk> 58 in Q4 of 20% over 14, 19, as well as 36% of adjusted EBITDA.
Similar to Q3 of our profitability was somewhat inflated due to the issues unique to the pandemic such as limited travel the elimination of the most kind of Eric educational activities and the conversion of the industry conferences to virtually mountains.
However, the results also reflect continued investments in INR and trauma, which resulted in the drag of three cents on non-GAAP EPS and nearly five percentage points on adjusted EBITDA and the other.
The words aside from INR and trauma the rest of the business produced 61 cents and non-GAAP, EPS and 41% and adjusted EBITDA in Q4.
The U S spinal implants business grew by 12 per cent for the quarter.
New product launches competitive recruiting in the implant pull through from robotics continue to fuel market share gains in the segment.
Table, he drawn and resonate all continue to see significant growth as well as the resurgence of the biologics, which grew by 30% in Q4.
We are also seeing strong adoption of single position lateral and pull them out of all procedures, which are enhanced by the capabilities of Excelsior G. P. S.
As I mentioned Covid restrictions impacted Q4 growth of the U S spine business by about five per cent.
The impact got progressively worse as the quarter progressed and became even more pronounced of January increasing to an approximately 15 to 18 per cent drag.
The impact is much less severe than it was last spring.
The all signs point to some easing in February and significant improvement in March.
Unless there is another uptick in hospitalizations, we expect the Q2 impact to be modest.
Right.
Our international spinal implant business was down by 4% for the quarter, while most markets grew in the quarter. The overall results were dampened by countries experiencing upticks in Covid cases, namely, India and the U K.
Japan also experiencing negative growth in Q4, partly due to COVID-19 and partly due to issues specific to that market.
Our business in Japan is primarily served by a direct sales force with some regions covered by agents and distributors. We have decided that moving forward, we will be nearly 100% direct during.
During the fourth quarter, we completed the process of terminating the majority of the third party contracts.
We expect the pace growth headwinds in Japan for the next year as we transition away from these entities.
As discussed on previous calls the legacy management team in Japan was replaced in 2019, where the team recruited and led by Steve Let me the former country manager for all of them on trial in Japan.
As well as the former worldwide president of the Medtronic spine.
I'm confident that Steve and his team will navigate the space and put us on a much stronger position to ensure sustainable growth going forward.
Trauma continued its strong performance growing by over a 130% in both Q4 and for the full year.
We continue to invest in this business with an aggressive sales rep expansion plan on several new products expected to launch in 2021.
Revenue from enabling technologies was $18 million in the quarter eclipsing, our all time best quarter by over 25%.
We not only delivered a great quarter, we exited the year with the very strong pipeline coming out of the Q1 traditionally a slow period in capital.
Well the access to surgeons on executives continues to be of challenge our teams constantly overcoming these challenges to drive interest in revenue.
Yeah.
Our focus continues to be on the enabling our customers to derive clinical and economic value from the capital equipment. The purchase we entered the simply selling capital nor are we using capital to drive the implant sales we are changing the way surgery is done.
To that end, we are seeing steady improvements in the internal metrics, we use to track the number of surgeons trained robotic adoption and self sufficient sites.
We believe these clinical achievements are beginning to build market acceptance and all of the overall market for robotics.
We are in the final stages of testing of our imaging system and anticipate filing with the FDA in the coming weeks ex.
Excellent progress has been made in ramping up manufacturing and operations and we anticipate the Q3 launch.
So there's very strong interest among surgeons of acquiring this technology.
Globus is in the early stages of the technology transformation that will combine the capabilities of our enabling technology solutions with our innovative implant portfolio.
We have reorganized our product development efforts around procedural solutions teaming up of engineers from the implant side with those from enabling technologies.
We expect that this collaboration from the ground up resulted in more impactful seamlessly integrated solutions accelerating of the advancement of the patient care.
We believe globus is in a unique position to capitalize on this convergence given our nimble organization structure and strong track record of internal innovation and both the implants and enabling technology.
We finished the year strong with a lot of momentum going into 2021.
Revenue in the second half of the year of grew by 10% led by U S spine, which grew at a stellar 14%.
In the second half of 2020, Globus produced nearly $450 million in revenue.
$1.07 and non-GAAP EPS 35, 5% on adjusted EBITDA, and 102 million of free cash flow.
I'm extremely happy with the way our team executed during this difficult time to produce markedly better results on any of our peers.
As a testament to their grit and perseverance and unrelenting focus on our customers and their patients.
I will now turn the call over to Keith.
Thanks, Dave and good afternoon, everyone.
As we concluded 2020 operating in an environment of uncertainty and challenge Globus was able to demonstrate its resiliency and strength evidenced by our strong fourth quarter results.
We continue to drive above market sales growth, while also delivering on the key metrics of profit and cash flow generation.
For the full year 2020 revenue was $789 million growing of half a percent as reported net income was of $102 3 million and non-GAAP net income was $144 $9 million.
Fully diluted earnings per share was the dollar one well on.
Fully diluted non-GAAP earnings per share was $1 44.
Adjusted EBITDA was $29 four per cent for the year, we delivered a record $135 $1 million of free cash flow.
Now turning our attention to Q4, our revenue was $233 $4 million growing 10, 3% as reported on a constant currency basis sales grew by nine 9% versus the prior year quarter.
The U S revenue for the quarter was $198 $7 million growing 12% versus Q4 of 2019.
The growth the growth was led by the strong performance of U S spine and enabling technologies. The why do call out the U S spine growth was slightly tempered by the impacts of Covid as David mentioned earlier.
International revenue was $34 $7 million growing 141, 4% as reported.
Revenue growth was affected primarily by the uptick in Covid cases within our musculoskeletal business as well as the issues identified by day specific to Japan.
These Q4 headwinds to our musculoskeletal business were offset by growth in enabling technologies driven by new robotic sales.
Q4, gross profit was 73, 9% compared to <unk> 77 per cent in the prior year quarter the.
The 310 basis point decline was attributable to higher inventory reserves higher depreciation and the mix of volume.
Approximately 150 basis points of this reduction was due to one time inventory expense items that we do not expect to repeat in the future.
Looking ahead to 2021, we project a mid seventies gross profit range.
Our Q4 research and development expenses were $15 $2 million or six 5% of sales compared to $15 5 million or seven 3% of sales in Q4 of 2019.
The resulting decline was driven by the leverage effect of higher sales as well as lower travel and consulting related expenses.
However, our R&D expense continues to reflect high levels of investment in our spine, enabling technologies and trauma businesses.
Our full year 2020 of research and development expenses were $84 5 million or 10% of sales compared to $60 1 million or seven 6% of sales in 2019.
It is important to note that our 2020 research and development expense includes the $24 $4 million impact of our Q Tusa notes the acquisition.
Adjusting for this our research and development expense would've been $60 1 million or seven 6% of sales.
Looking ahead, the 'twenty 'twenty, one we project R&D expenses to be approximately 7% of sales.
SG&A expense in the fourth quarter was $92 million or $39 four per cent of sales compared to $92 $1 million of $43 five per cent of sales in the prior year quarter.
Although overall spending was essentially flat to the prior year quarter, we incurred lower travel expenses driven by the impact of Covid in Q4 adjusted.
Adjusting for the lower travel expenses SG&A expense would've been approximately 41 two per cent.
All four of our full year SG&A expense was $354 $8 million or <unk> 45 per cent of sales essentially flat to the prior year.
Included in our 2020 spending or reductions attributable to COVID-19, mainly lower travel as well as cost containment actions, partially offset by COVID-19 donation costs.
We expect SGA SG&A spending to return to more normalized levels. In 2021. However, we expect to benefit from cost containment actions implemented during 2020 and also from additional leverage on our spend due to higher sales.
The income tax rate for the quarter was 14, 9% compared to 16, 4% in Q4 of 2019 and includes an additional 150 basis point benefit driven primarily by additional stock option exercises are.
Our full year income tax rate was 18, 8% slightly higher than 2019, driven by the impact of our Q2 snows the acquisition, partially offset by tax benefits, primarily attributable to stock option exercises.
Looking ahead to 2021, we expect the full year effective tax rate of approximately 21%, which does not assume any significant changes to U S. Current U S tax policy.
Fourth quarter net income was $53 million and non-GAAP net income was $59 2 million.
Diluted earnings per share were <unk> 52, and.
And non-GAAP diluted earnings per share were 58 cents, reflecting a 19, 6% increase over Q4 of 2019 of 49 cents adjust.
Adjusted EBITDA for the quarter was 36, 2%, reflecting a 190 basis point improvement over the prior year quarter.
Looking ahead to 2021, we are planning for a full year mid thirties, adjusted EBIT margin range, we expect it to follow a similar pattern to 2019 were our first half adjusted EBITDA was lower than our second half overall as I had mentioned, we expect the full year to balance out at a mid <unk> adjusted EBITDA margin range.
We ended the year with $785 $3 million of cash cash equivalents and marketable securities.
Fourth quarter net cash provided by operating activities was a record $82 million on free cash flow was also a record at $66 $1 million earlier I had commented on a record full year free cash flow of $135 $1 million. This result was achieved in the year of lower earnings. However, our focused approach to managing working capital.
And slightly lower capital expenditures helps drive us to achieving this record in the midst of the COVID-19 pandemic.
We continue to evaluate potential M&A opportunities and we'll deploy capital as needed if an opportunity represents the strategic fit and drives long term value creation.
As we look at 2021 based on the current market dynamics, we expect easing of the regional Covid restrictions as we move towards the conclusion of our first quarter and would only expect a modest impact on Q2, assuming no uptick in hospitalizations. At this time, we are establishing full year 2021 guidance to help set the stage, we are providing our guidance.
In reference to 2019 performance as it is a better comparative metric as opposed to 2020, given the COVID-19 variability.
We are projecting full year 2021 sales guidance of $880 million, representing 12% growth versus 2019.
So we expect our first quarter sales to be impacted by Covid. We are optimistic that Q1 will finish slightly ahead of our first quarter in 2020.
We are guiding to a full year fully diluted non-GAAP earnings per share of $1 83, representing 9% growth versus 2019 on.
Our guidance assumes that business spending will ramp up to more normalized levels net of cost containment actions implemented.
Included in our 2021 guidance, our expected non operating headwinds, which includes lower interest income of seven <unk>.
Higher tax rate worth seven cents and higher stock compensation expense, whereas the <unk>.
The lower interest income is driven by lower expected returns on our investments based on current market conditions.
Overall, we view this guidance is appropriately conservative given the current operating environment.
As I conclude on my Q4, and full year comments I want to thank our globus team and highlight the everyone their ability to drive execution and deliver the strong results in spite of the challenges we faced with the COVID-19 pandemic.
Looking ahead, we are excited about our business and its position in the market as we continue to take market share drive profitable growth and deliver long term value to all of our stakeholders. Operator, we will now open the call for questions.
Thank you.
Ladies and gentlemen, as a reminder to ask the question you will need the press Star then one on your telephone.
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Please standby, while we compile the Q&A roster.
Our first question comes on the line of show kind of thing with Wells Fargo. Your line is open.
Thank you so much for taking the question and congratulations on a great quarter I wanted to start with guidance can you help us a little bit and let us know what you've assumed on an underlying basis.
For the U S and O U S. Spine is one of the capital environment, the Japan transition and and also for catch up in procedures and then.
To that effect you know when do you expect to be when do you expect to see above normal growth given the pent up demand should we expect that.
In late Q1 early Q2 or late Q2 early Q3. Thank you.
Thanks for the question. This is a theater on $80 million, we're not breaking out the pieces of it going into 2021.
We step back we made the decision to give guidance because we felt it was appropriate but as some of my other comments I talked about Q1 being impacted by Covid, but I did say that we are confident that we have finished slightly ahead of prior year.
But when you sit back and look at 2021 relative to 2020, we're extremely confident in our business and we're very happy with where we finished but at the same time, we saw exactly know what's going to happen. So knowing that we've had some COVID-19 impact at the tail end of Q4 coming into Q1, you know like I said slightly ahead, but as we get out to the back half.
Of next year of 2021.
We're modeling of conservatively because when you look at our Q3 and Q4 and a strong finish this year, we're still not 100% sure that some of that maybe backlog debt that came back as a result of some of the lost sales in Q2.
So as we as we went into 'twenty one we wanted to come out with the number that we felt was appropriate and achievable.
Yeah.
Thank you and then with respect of the above normal growth rate.
When do you expect to get there.
I mean, I still think for the full year, we're providing.
Excellent growth rate.
We're growing our U R.
Are you referring to of the overall market share them.
Well I'm, just referring to your growth as well as you know spine, if you'd like to comment on that I'm. Just wondering when should we expect to see the pinch.
Of the Madden, maybe catching up on that or more in.
Q2 of going to be the quarter of above normal Q3.
From a market standpoint out of Q1, we're definitely feeling a COVID-19 restrictions.
Q2 from from what we can see right now it looks like the the impact would be modestly negative, but going into Q3 and Q4, assuming no uptick in hospitalizations again, I would think we'd see some bounce back in procedures.
Since we didn't go as deep this time as we did last year I don't think the bounce back will be as strong.
But that's how we're looking at the market right now.
Thank you for taking the questions.
Thank you.
Our next question comes from the line of Matt Henriksson with Citi. Your line is open.
Yes, hi, thanks for taking the question.
Just going with the orthopedic trauma business could you provide some commentary on how the quarter went and then any kind of broad stroke kind of guidance for how you expect that.
The business to ramp of 2021.
Matt. Thanks for your question. This is Dan Scoville of I think we were pleased for the year of for the quarter with the growth in trauma, we're seeing that our existing docs are using more of our products are increasing procedures at the same time, we've had a significant gain in accounts through the year, including in the fourth quarter.
We're pleased with the product performance that we've seen we're continuing to develop several more of that will allow us to capture even more of the share and gain better access scaling through it.
We didn't break out the trauma as far as sales will go into 2021 as Keith mentioned, but.
But we do expect to have very strong growth as we launch quite of few products that are on on slate to go out the door and actually really start to drive this into the area of we've projected it to be over the next few years.
That's helpful. Thanks, and then just going back to the Japan restructuring.
When would you expect to kind of see that kind of year over year tough comparable to subside does that are we.
Looking at that per entirety of 2021 or is it by fourth quarter, we should start seeing that.
Subsides and thanks for taking the questions sure Matt.
Hard to say at this point I Wouldnt think we would see.
Much of the lift until at least the fourth quarter if not into next year. We may we may have to work through an inside of a cycle to get that behind us.
Yes.
Thank you.
Our next question comes from the line of Matt.
Net music with credit Suisse. Your line is open.
Hey, thanks, so much for taking the questions.
And congrats on a really impressive in two of really tough here.
So a couple of follow ups on the enabling tech in spine and trauma.
If I could so.
We'd love to get any color that you'd be willing to provide on.
The things like.
The percentage of your business now that sort of being pulled through on robots are getting robotically driven to the extent that you can kind of guests at the end I suppose I know, it's hard to know where your Skus go for example.
It would be super helpful.
Maybe where you see utilization of the robot. So that you have out there at this point in the end to the extent sushi you know the need to go to the second robot and then as I mentioned I have a kind of follow up.
Thanks, Matt.
We don't disclose sort of the specifics around the pull through but.
Is a fairly significant on the sites, where we have the robot.
It's much more of a fishing if you use our screws in the NRT antibody to the utilize it so.
We are really pleased with the in terms of utilization.
I've commented a couple of times, that's really built on our focus is to drive that utilization of adoption.
From a business standpoint, but also from from just the creating value for the customer and for the patients to just to see value from it as well, we're happy with where that's going we have a lot of work to do being a new technology. It's it's it's always challenging to get people too.
Adoption of new practices, especially in that early going where theres a learning curve.
But we do have.
Several several situations now where who have either as a purchase of the second robot or are considering doing so so all signs of a very positive from that perspective.
That's great that's great. Thanks, and then on the follow up.
On trauma and then if I could just sneak in a quick question on this Japan transition, but on trauma I am curious you are making good progress. There you know up until now I think of lot of us sort of maybe just me I've been thinking about the.
Separate from our field force building of trauma business around the commercial organization of the trial that I'm curious to what degree you're able to sort of you know.
Capital with your combined offering.
In some way.
On boats.
The spine and trauma or pulling trauma into the conversation on the on the strength of some of your spine relationships is one and then just if I could briefly the follow on Japan, maybe just if you hadn't already mentioned the just the rationale for the the move to the direct what some of the benefits you expect to see there.
Sure.
Both of those as well.
We are.
Our utilize.
Utilizing our relationships in spine to try to help get trauma going in sort of 90 ends on accounts of.
I would say.
A lot of success.
A lot of success there.
The dividend of small it's still small numbers of grown a lot of percentage wise the skills small numbers on trauma. So the.
More aspirational than really any of any significant impact.
And then over on the Japan question.
It's really about may.
Maintaining the consistency in terms of our marketing messages on our business practices, it's challenging.
Maintaining that control over distributors and agents and we decided with Steve and his team there and his background of Medtronic, we caught it.
The just made more sense to build a really strong foundation going forward. So we made that decision really over the course of 2020, but it's it's it's fully implemented at this point.
Sure.
Thanks, so much.
Yeah.
Thank you.
Our next question comes from the line of Jason would ease with Northland Capital. Your line is open.
Hi, Thanks for taking the questions just real quick in terms of the change in sort of your of product development.
Combining procedural with enabling technologies is that is that simply just the integrating more of the robot or is this a more fundamental change to how youre doing product development, how are thinking about launching products.
It's good it's more fundamental in the end of the fact that we're starting to think about enabling.
As we develop implants and vice versa.
Sure.
Developing features and two are enabling we're considering how specific implants might be utilized and we're looking at the from the holistic.
The way to look at that as by procedures. So.
It's the it's taking advantage of book, whereas in the past it's been more of like silos. If you think of it with the the enabling folks would.
Develop features and benefits on their technology.
With an eye towards how it would be utilized in the in the all of our certainly but.
We want it.
All of that from day, one to drive new innovations.
Got it produces.
Things that you wouldn't have thought of had you not utilize the enabling from the beginning.
We're always true okay. So some of that in development.
Okay, but that will impact both non non robotic users and robotic users of it sounds like in terms of products youre going to offer them.
It will probably have the mark more impactful on the on the computer assisted side, both both robotics and navigation.
Oh, Okay, one follow up question.
You had I think of the past you've commented that you've had record hiring in terms of the sales force this year.
Could you comment on.
What the fourth quarter look like and also kind of what the outlook is for 'twenty and 'twenty, one should we assume that type of pace.
Continuing.
The.
The pipeline is still very strong we didn't have such a great fourth quarter, we were tracking along with the prior year through the third quarter, a little drop off versus a really strong comp from 2019, we had a tremendous fourth quarter, so off the pace of little bit, but still the extremely strong year, a great year and on boarding and a great.
And we've already hired several folks in the 2021.
Great. Thank you very much sure.
Thank you.
Our next question comes from the line of Kalo Crum with truly Securities. Your line is open.
Hi, guys. Thanks for taking our questions. So I'll start off on guidance just I think in general you you guys have consistently taken a very conservative approach to your revenue outlook and now you're calling for 12% growth from 2019, which I also imagine include some level of conservatism, so I guess what.
What are you assuming is the impact of Covid on revenue this year and what are you assuming as it relates to contribution from imaging in 'twenty and 'twenty one.
Thanks, Kelly this is Keith I think you know like I.
I said earlier.
In two earnings calls, we talked about whether we give guidance or not and we decided to give guidance because we felt it was important to do so but.
But we're coming out of the year, where where the quarters really look very unusual which is why we think comp into 2019 is a better metric, but when you step back and look at it in 2020, there there could be real loss are there there is real loss of the market. When you think about how we go forward.
As we think about spine spinal patients and who is getting surgeries. We also have to think about some of the macroeconomic factors coming into 2021 unemployment. There's lots of people unemployed. Those people may not have access to health care. They may of needed surgery before that might get pushed off so as we set force with this guidance we know we have.
Covid impact here on Q1, but we are conscious of the conservatively modeling our back end of the year next year because.
We had strong Q Q3, and Q4 of the share we're just not sure how it's going to.
Finish out as we get into the year.
As it relates to enabling technologies I have no comment on that right now because we're really not looking to break out the pieces of our guidance for 2021.
Okay, and not that that makes sense I guess the day you know if I look at imaging specifically it does sound like Youre in final stages, there you're planning to launch in Q3 that is I guess on little bit later than we had expected the first.
Can you help me understand why that's the case and then I guess the second part of that question you know I'm looking at your enabling tech business is sitting at $40 million in revenue of today.
Without asking or touching about on 'twenty and 'twenty. One numbers, you know could that business double over the course of the next two to three years is there a reason why it wouldn't.
Thanks Taylor in terms of why we're late with the imaging we hit a couple of bumps on the road in terms of getting through the final.
The verification and testing we have addressed all of those concerns are actually in the the last couple of days of of finalizing that testing right now.
We're hopeful to be with the FDA early in March and then.
Hopefully things go smoothly, there and we get to the three Q3 launch we're almost at the finish line when it comes to that.
To answer your question is there any reason why enabling couldn't double over the next two to three years no not non whatsoever. We're.
The bullish on that opportunity and that's why we've invested.
The way we have on why we're expanding the portfolio of there so.
We're excited about it.
Great. Thank you guys.
Thank you.
Our next question comes from the line of Matt Taylor with UBS. Your line is open.
Hi, Thank you for taking the question I had one follow up on the imaging question there.
Assuming you do have a Q3 launch I think in your earlier comments you mentioned there are a number of surgeons.
We were interested in acquiring the the technology.
Do you have orders kind of penciled in already could could that be of quick wrap.
Or should we expect it to proceed more slowly after you do get through the launch phase.
It's hard to predict now there's a lot of folks interested we're not able to all of them to really market the device yet until it's approved so.
Well theres indications of interest we haven't gone through that kind of business process of quoting and going through administration. So.
It's hard to predict that as well as the our our manufacturing of ramp so.
At this point, we're not gonna be specific with with the number we're excited about the technology I know once we do get going its going to be significant for us, but the actual start on what the impact of would be on 'twenty, one is still a little bit murky.
Okay, Great and you commented a little bit around this question, but could you just speak to the strength and enabling tech in Q4, what does that say about the environment and are you seeing of strong interest level in order book as we were starting the year here in 'twenty one.
Well, we as I mentioned in my comments our pipeline when we came into this year it was never stronger.
The offset that with the Q1 is typically the worst quarter on capital. So it typically comes down to the last month of the quarter. So a lot of activity a lot of great deals in the works, but theres going to have to see how it plays out but I would say we came into this year with more strength than we ever have.
We came off of great second the second half of last year. So our capital is just one of those things where it's it's.
It's really hard to predict because of the each each deal of the deal in itself and it's it's not a.
Recurring revenue stream.
We have on the or.
Okay I'll leave it there. Thank you very much okay.
Thank you.
And our next question comes on the line of David Saxon with Needham and company. Your line is open.
Yeah, Thanks for taking the questions and congrats on the quarter given the the environment I guess first one on trauma, you've talked about how you want to take a point of trauma market share annually.
You continue to see really strong growth.
I think we set of 130% net in the quarter. So do you feel like you have are you.
We're on track to take of a point of share in 'twenty 'twenty one.
And if not what needs to happen there.
Thanks for the question. This is dance because of all of I would say that that's a bit aggressive because we need the full portfolio, we need to gain the access you've got to get through the COVID-19 disruptions, where the value of committees in the hospitals and all were delayed things like that so we're pleased with the growth as Dave said, there on smaller numbers.
We're more pleased with the fact that we've got 14 product families out there several more in late development and we'll have the ability to start not only penetrating the displacing as as we get through into the end of 'twenty 'twenty, one and I think that's really where we're focused on now we'd have to assess the market and the entire situation to understand.
What points of growth will come over time.
Got it.
And then just a question on the total joint Robotics application can you just give an update on on that timeline.
And.
Once that's launched I think sell cash when you when you acquired them. They were about a 10 million dollar business. So.
Once the robotics.
Is launched how should we think about that portfolio and the revenue contribution. Thanks, so much.
Sure.
We're looking at on 2020 to launch for the the robotic system.
And we.
We continue to make progress on the development.
In terms of the specifics.
As is our practice, we really don't break out of the segments with specifics on.
Although I will say that once we get launched the rollout of that was our of our thought process going on that we would.
Get some pull through from our enabling technologies as we hit the market and we're also.
The expanding and enhancing their product line.
So we've got some some second half launches plan there for just the the manually.
Implanted devices. So so we're working on that business and we do expect that business to grow even in advance of the of the launch of the robot.
Great. Thank you sure.
Thank you the.
The next question comes on the line of Steven Lichtman with Oppenheimer. Your line is open.
Thank you hi, guys.
Just wondering how much has COVID-19 impacted the rollout of the Interbody module for Celsius. It that all of you know hasnt impacted your ability to train surgeons.
Or has that been done on virtually any any thoughts of raw in terms of the pace of that rollout would be that'd be great.
Well thanks, Steve.
Think of it's affected us very much I think we're really happy with the rollout we're getting strong adoption of a lot of the training occurs at the site. If they already have unacceptable installation. So really really pleased with that and I don't I don't think COVID-19 aside of major impact on it.
Got it okay. Thanks, David and then Keith I, just wondering on the puts and takes on the SG&A you mentioned more normalized spend.
What are the type of investments do you see making in 'twenty one of the media held off due to Covid and 2020, and when you think about those investments off offset by some of the cost saves you mentioned are you targeting that 45% SG&A range like we've seen the last couple of years overall, okay. Thanks for the question number one.
I would think that as we go into 'twenty 'twenty, one that our SG&A would be actually lower than the 45 per cent.
Obviously, we've had savings this year in travel some of that was partially offset by the COVID-19 donation cost that I called out, but the interesting thing or the nice thing about stepping.
Stepping back and looking at 'twenty. One is that we've continued to invest in our business like like we always were.
And really we have an infrastructure that can handle the higher level of sales as we go on that one of the 'twenty. One we're going to continue to do those types of things, but with some of the cost containment actions that we put in place.
Some of the you know the.
The D I would say the continued increase in SG&A spend.
One of the next year I'm thinking SG&A is going on in beef more on the range of 42 to 43 per cent of sales.
Got it helpful. Thanks, guys.
Thank you.
Our next question comes from the line of Kyle Rose with Canaccord. Your line is open.
Great. Thank you for taking the questions.
Yes, David I first wanted to start maybe just help us understand you've obviously got the robot you've got the the Interbody module launching you're going to watch imaging later on this year.
And then you're also talking about it on a new design and development ethos.
How long do you expect it'll be before you get some of those procedural type solutions to the to roll out onto the market.
I think you're referring to the change kind of in our org structure, so that I spoke of.
Yeah, yeah, exactly brick products on that yeah.
Perhaps by the end of this year, but certainly early next year.
We've got a couple of things in the in the Hopper we're excited about.
Okay, and then just I believe there was you had a capacity issue from from some three D printing.
Our products through 2020 on the second half you just maybe help us understand is that behind you now how much of a benefit can that be when we move into <unk>.
2021, and then with respect on the trauma side with respect to.
The continued investments as far as debt products and are in.
The commercial channel maybe help us understand is that of independent order of.
<unk> as far as new sales reps, you put them in the field of new products Youre going to bring out I'm, just trying to kind of frame out the investments there relative to how the top line is going to growth.
Gotcha I I'll take the three D. One of them then Dan all the pick up the trauma question, but the.
We are not we have not addressed that yeah. We have we have.
Ordered equipment way of installed some equipment, we actually ordered more equipment. So I think that will be.
A constant source of growth for us this year is that as that.
Capacity comes online we have a tremendous demand for it right now.
We're having the term people away from access to the technology until we can get ramped up so I think all of this year, we're going to see benefits from that.
And kind of I'll pick up the trauma side of it so when it comes to the sales force, we certainly have plans to.
To significantly change that double that or go beyond if we're capable of doing that again were starting with small numbers, we won't disclose those numbers, but the investment to continue to put feet on the street in order to penetrate as planned in our 'twenty and 'twenty one numbers for our existing products. We do feel like we have enough sets in place some slight expansion, but nothing.
Moving financially so the spending on sets will be more related to the new product launches that are coming up and as you mentioned, we have several of them in process. Two day the rate of spending in those projects would be equivalent to what we were spending in 2020 from whatever from everything I've seen.
Thank you very much.
Thank you as a reminder, ladies and gentlemen, Thats star one to ask the question.
Our next question comes from the line of Richard in the Winter with SBB Leerink. Your line is open.
Hi, Thanks for taking the questions.
Just to kind of summarize what I think I heard about how to think of the guide the $880 million. It sounds like you guys are saying you know.
To be conservative you're not assuming that the the.
The back half of your year is going to necessarily trend at the same run rate when things, presumably normalized as they had in 2020, where you were kind of mid teens kind of normalized U S. Core spine. So if you were to kind of be there and it wasn't just all backlog of work down.
Sandra I assume that that's one kind of big lever.
Deliver upside relative to your starting point for the year end and also the.
In the same vein is it fair to assume you're just not assuming any imaging really.
Meaningfully either and that would be another another source.
Upside to our base case debt that's embedded in your guide is that a fair characterization.
I would say of the answer to that is yes, we modeled the year. We've all of the year conservatively from the standpoint of the things I had mentioned earlier, we talked about the Q3 launch for the imaging system, but I don't you know, we're not really getting into the pieces of what makes up all of the ATT.
Okay.
Got it and then did you quantify the.
The Japan headwind or can you quantify in any way, what the Japan headwind might might look like and you said it would be down is that down relative to 2020 were down relative to 2019 per international. Thanks.
Yeah, Thanks rich as.
As a practice, we don't break out the specifics of any part of our business, but in particular, the it'll be down when the relationship of 2020 and.
In 2019 I guess.
As a matter of fact as well.
Got it and if I can just one last one I think you had you had rattled off a couple of per share of items.
And I think non operating items.
Just rehash those again and what what were those but it was relative to 2019 to get to the dollars 80 or.
You know seven cents of your five cents there.
Yes, the law.
Well, we called out lower interest income of seven the higher tax rate of seven cents on higher stock comp of five those comparisons again going back to 2019.
And really the lower lower interest income and is reflective of current market conditions based on our investments.
Thank you very much.
Thank you.
The next question comes from the line of David Lewis with Morgan Stanley. Your line is open.
Hi, everyone. It's drew on for David Tonight, Just a quick question on per adjusted EBITDA guidance not the split hairs here, but I think you said mid thirties and maybe in the third quarter call. You said you were confident in 33% to 37 per cent of 'twenty 'twenty. One. So just wanted to be clear, if we should be thinking about 34% to 36% or <unk> 33 to 37 per cent.
For the full year.
What are the way I would answer that is we are mid Thirty's business. You know one of the comments I had in my prepared statement was that you would expect our first half adjusted EBITDA to be lower than our second half a good way I think about it is go back and look at and look and see how 2019 performed that would give you a good indication of.
How we expect it to improve going forward, but we expect for the full year, we are of mid Thirty's EBITDA business.
Got it and then you've mentioned throughout the call that the rep hiring is still going to be of growth driver for the company, but just with one competitor announcing the spin off do you see on even better opportunity to be more aggressive on the on boarding reps over the next 12 to 18 months really.
Yeah, I wouldn't say, we'd be more aggressive or are we haven't been extremely aggressive in the past and we're not kind of back off and I think the the attractiveness of Globus is only getting better given the.
The technology that we're rolling out on the opportunity folks have to to grow their business personally I don't know that the that announcement is going to have much of an impact on us one way or the other.
Got it and then just one last one of them to go back to Japan for a moment I know that you have a relatively new management team on their part of that was.
Should get better access the Kols. So just in your direct business in Japan now was there any Prague.
Progress that you can point to evidence of for enthusiasm on.
You're lying basis, the direct business the Japan, yes, absolutely.
Steve on the guys have refocused into the into the the.
Yes.
More of Kols and more academic institutions, the they're very interested in robotics, we havent sold on yet there.
But where we're getting more traction in those accounts of more interest more credibility. So.
It's going to be a matter of the that offsetting the drag the of the.
So we've lost.
Over time that mix.
The quality if you will of the customer base is going to be greatly enhanced and more stable and I think I'm, just just a better opportunity of long term.
After we get through this year.
Thank you so much for taking the questions.
Thank you.
Our next question comes from the line of Matt O'brien with Piper Sandler Your line is open.
Hi, guys. This is drew on for Matt. Thank you for taking the questions I just wanted to follow up a little bit on the the capital environment.
You guys seem to be outpacing a lot of the other capital equipment providers. So I guess just wondering in your opinion have.
Of your strong results really just been due to a general of all interest in the the technology or is there anything pandemic specific that you've kind of capitalized on in the last couple of months.
Some competitors struggling or anything you guys are doing on price.
Yeah. Thanks, do I don't think its pandemic related I think over time the the.
The quality of the system the the.
The the functionality of it and if you will the user experience is being borne out so where are we.
Were competing for a deal on the front end.
And we're holding the line in terms of the value, we're bringing in all of our competition doesn't always do that so we may lose.
The other two upfront but youre.
We're seeing actually some of those come back around as as they've had failed installations and we're we're gaining that business, where we're continuing to focus on clinical value.
Driving all of our value proposition, if you will and.
You saw some of the results in the fourth quarter and really excited about all of the pipeline we have right now.
Okay, that's fair.
Perfect and then you know I think you've talked about this a little bit in the past, but we've obviously heard some of the companies talk about the.
The shift the ESPN has the potential tailwind that helps offset the volume disruption as of late.
Just curious about your take on that in the spine space and then I guess the durability of that trend in general as we sort of move beyond the pandemic.
Certainly we are.
We're seeing that as well.
The pandemic accelerated it as as they were not able to operate in the hospitals. So they would move some surgeries over there and then longer term I think that is a trend that we're going to see across the board in orthopedics.
So we're positioning ourselves accordingly.
Try to make sure we're meeting the needs of those customers as well as our more traditional hospital based ones.
Thank you.
Thank you.
I'm showing no further questions in the queue with no further questions, ladies and gentlemen, we will now conclude the Globus medical fourth quarter of input for your 2000 of 'twenty earnings Conference call. Thank you for joining US you may now disconnect.
Okay.
Okay.
Okay.
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