Q2 2022 NuVasive Inc Earnings Call
Good day, ladies and gentlemen, and welcome to new they said second quarter 2022 earnings conference call I would now like to introduce your host for today's conference call Ms. Juliet Cunningham, Vice President of Investor Relations at New Visa. Please go ahead Cunningham.
Thank you good afternoon, everyone. Joining me today are Chris Barry Chief Executive Officer, and Matt Harbaugh, Chief Financial Officer, Chris.
Chris will provide an overview of new basis second quarter, 2022 business results and trends as well as innovation highlights.
Matt will review, our detailed financial results and full year 2022 outlook and then we'll host a question and answer session.
The earnings release, which we issued earlier. This afternoon is posted on the IR section of our website and has been filed on form 8-K with the SEC.
We have also posted supplemental financial information on our IR website.
As a reminder, this call is being recorded an archive will be available on our website later today.
Before we get started I'd like to remind you that our comments. During this call will include forward looking statements, which are based on current expectations and involve risks and uncertainties assumptions and other factors, which could cause actual results to differ materially from those expressed or imply.
<unk> by such forward looking statements.
The factors that could cause actual results to differ materially are described a new base of news releases and periodic filings with the SEC.
Except as required by law, we assume no obligation to update any forward looking statements or information, which speak as of their respective date.
In addition, this call will include certain non-GAAP financial measures.
<unk> of these measures and the most directly comparable GAAP financial measures are included in today's earnings release, and the supplemental financial information, which are accessible from the IR section of Nuvasive website.
And now I'd like to introduce Chris Barry.
Thank you Juliet and good afternoon, everyone.
Earlier today, we reported second quarter 2022 financial results.
On today's call I will review our performance for the quarter.
Sure our progress on delivering multiple vectors of growth and provide an.
An update on our innovation roadmap and how we believe uniquely positions invasive to disrupt the future spine surgery.
After that Matt will provide additional financial details on the quarter and commentary on the remainder of the year.
You basically delivered second quarter 2022, net sales of $310 $5 million, an increase of five 3% on a reported basis or seven 8% on a constant currency basis compared to the prior year period.
In spite of a challenging backdrop of macroeconomic and market pressures, we saw procedural volumes increase over the prior year period and continued surge in demand for our existing innovation and new product introductions.
This is reflected in our performance in both the U S and international markets.
Within our international business, we delivered another strong quarter of net sales, resulting in double digit growth on a constant currency basis led by Europe and Latin America.
In Asia Pacific, where COVID-19 challenges were most acute we saw growth in the region led by Japan, where we continue to see strong execution by our team.
U S spinal hardware delivered low single digit year over year growth.
Driven by continued growth in the X 360 portfolio led by the Xa Alif procedure.
Strong demand for the <unk> hundred 60 portfolio led by the simplify cervical disc.
Our U S surgical support business performed well in the second quarter supported by pulse platform net sales.
This was offset by a decrease in biologics driven by a shift in case mix and lower attachment rates in the quarter.
We are proud of our history as the leader in spine innovation with.
With spine, most comprehensive portfolio of procedurally integrated solutions.
As we continue to integrate our industry, leading procedures with pulse.
We are well positioned for continued growth.
In addition to new pulse sites going live in the United States, We achieved numerous key milestones with pulse in the second quarter, including.
Or 100 pulse cases in early sites, both in the U S and Europe .
Our first pulse cases in Italy.
As well as our first pulse case for pediatric scoliosis.
Driving clinical utilization and adoption is key to the near and long term success of pulse.
The pulse software ecosystem integrates multiple technologies into a single platform and can be utilized in 100% of spine surgery cases.
Unlike other enabling technology systems on the market pulse provides surgeons, a seamless and efficient workflow through integrating three navigation neuro monitoring radiation reduction.
Imaging enhancement tools.
Specific rod and global alignment planning.
A recent study published in scientific reports found that pulse outperformed two other common imaging and navigation systems with respect to screw placement accuracy.
Notably Paul with C O spend from Siemens health and errors with significantly more accurate than stealth with Oh are we.
We continue to make progress building out the broader pulse ecosystem and it's extensible software architecture allows for the integration of current and future innovation.
The future of spine care will not start and stop with intra operative surgical procedures.
And we remain committed to leveraging the power of pulse to extend from preoperative to postoperative spine care.
Another key strategic growth driver for our company as cervical which delivered greater than 20% growth in the U S for the third consecutive quarter.
Surgeon interest and the C 360 portfolio and specifically the simplify cervical disc remains high.
The simplified cervical disc achieved multiple milestones in the second quarter <unk>.
Including first cases in Switzerland, Austria, the U K and most recently in Australia.
We're taking share and we'll continue to do so with the industry's most clinically effective cervical total this replacement.
To further enhance the C 360 portfolio, which currently features an invasive ACP system with advanced material science inter bodies and to simplify cervical disc we remain on schedule to introduce relying cervical this quarter.
Relapsed cervical or next generation posterior cervical fixation system is fully compatible with pulse and integrates with their oracle lumbar relying portfolio.
This creates a single comprehensive posterior fixation system to seamlessly treat pathology from the occiput down to the pelvis.
With yet another new product introduction, joining the <unk> hundred 60 portfolio, we continue to target and take share in the $2 6 billion dollar cervical sub segment.
As the leader in less invasive spine surgery and in support of our multiple vectors of growth, we remain focused on new product introductions and international markets.
And the $900 million anterior subsegment surgeon demand remains high for the X 360 portfolio.
Within our advanced materials science portfolio, we continue to introduce our market leading inner bodies in key markets around the globe.
Modulus, a lift commercially launched in Australia in the third quarter of 2021.
And we've seen significant growth in that market.
Modular ex lift commercially launched in Japan in the second quarter and we have performed nearly 500 cases to date.
In addition.
We received FDA clearance in Q2 for MA X X lip.
Our next generation expandable interbody for lateral procedures.
Our R&D team continues to leverage our proprietary three D printed porous modulus technology to other expandable antibodies and procedures.
And we remain on schedule to launch the new base of tube system later this year.
Our new tubular attractive system will be the company's first tube system and a key addition to our comprehensive portfolio of solutions to support less invasive posterior procedures.
Late last year, we welcomed the return of precise titanium products from new basis specialized orthopedics in key global markets, certainly demand and patient interest for precise remains high and we anticipate continuing to benefit from the products return as we looked at the back half of 2022.
In support of international growth and to further our industry, leading clinical professional development program, we held a ribbon cutting for our new Singapore experience Center in June .
The New center features a dedicated pulse demonstration site to provide hands on experience with the platform.
Educational training rooms, with advanced cameras and streaming capabilities for virtual learning.
And our technology rotunda with the ability for live and virtual demonstrations of our procedural offerings.
Our vision is bold to change a patient's life every minute and our purpose remains unchanged to transform surgery advanced care and change lives.
Like many companies around the globe, we're not immune to the challenging macroeconomic and market pressures. However, we were making progress on our commitment to deliver multiple vectors of growth through.
Through extending our leadership position in less invasive surgery, taking share in sub segments, where we historically had underrepresent in market share delivering on our enabling technology roadmap and driving continued growth in our international business.
The future of spine surgery will not be solved with a new antibody or procedure.
It will be defined by improving patient selection selecting the right procedure and the most appropriate surgical setting.
Creating a patient specific surgical plan.
Utilizing enabling technology for inter operative execution.
And enabling post operative outcomes management for the patient the surgeon and provider.
As a company this is our focus.
We're building upon our industry, leading procedurally integrated solutions and deep know how to redesign the future of spine care.
In closing.
We're excited about the opportunity before us and believe that new basic will make surgery more intelligent.
This in turn will fundamentally change the quality of care patients receive by providing smarter and more clinically validated tools to surgeons.
Simultaneously this will unlock value and support our progress against our vision to change a patient's life every minute.
I'll now turn the call over to Matt to discuss the company's financial results in more detail.
Thank you, Chris and good afternoon today, I will provide an overview of our second quarter 2022 financial results and drivers as well as update you on our full year 2022 outlook. Our detailed financial results have been provided in today's press release during my remarks, I will be discussing both GAAP.
And non-GAAP measures and refer you to our press release for GAAP to non-GAAP reconciliations.
I'll begin with worldwide net sales our second quarter results reflect strong net sales growth compared to the prior year period as well as sequentially.
That said, our Bottomline results were pressured by macro environmental issues, including inflationary costs supply chain delays volatility of foreign exchange rates and the ongoing impact of Covid.
I will provide greater detail on these challenges as we dive deeper into our results importantly, procedural volume remained strong and we continue to execute well on our new product introductions.
Second quarter worldwide net sales were $310 $5 million, an increase of five 3% as reported and seven 8% on a constant currency basis compared to the prior year period. This growth was driven by higher procedure volume and continued positive momentum from our new products.
Introductions, including the pulse platform and our C 360 portfolio led by the simplify cervical disc.
International sales of $73 $6 million in the second quarter demonstrated continued strength with double digit constant currency growth compared to the prior year period. These results were driven by Europe , Latin America, and Asia Pacific, particularly in Japan.
Nuvasive specialized orthopedics or NSO also contributed to international results driven by strong demand for our precise titanium products, which returned to market in late 2021.
Turning now to U S. Net sales by product line U S. Spinal hardware net sales were $165 $1 million in the second quarter of 2022, representing a three 1% increase over the prior year period.
Cervical grew more than 20% for the third consecutive quarter. This performance was led by our <unk> hundred 60 portfolio, specifically, the simplify cervical disc, which continues to experience strong surgeon demand.
U S surgical support net sales were $71 $8 million in the second quarter, an increase of six 2% driven by pulse sales.
Moving to operating results non-GAAP gross profit in the second quarter was $224 $7 million compared to $217 $1 million in the prior year period.
The year over year increase was primarily driven by higher procedure volume.
As a percent of net sales non-GAAP gross margin was 72, 4% a decrease of 120 basis points compared to 73, 6% in the prior year period the.
The year over year decline was primarily driven by pricing pressure that was once again in the low single digits, partially offset by a decrease in inventory charges in the quarter.
Second quarter 2022, non-GAAP operating expenses were $184 $2 million, an increase of four 6% compared to $176 $2 million in the prior year period.
The year over year increase was primarily driven by variable expenses on higher net sales freight costs and our continued investment in R&D to further our correspondent and enabling technologies product portfolios.
Increased costs due to inflation negatively impacted several expense areas, including fuel surcharges on freight shipments increased travel costs and higher compensation costs.
non-GAAP other income and expense was $8 4 million of expense compared to $1 7 million of expense in the prior year period.
The increase was primarily driven by unrealized foreign currency losses in the second quarter of 2022 during the quarter a number of foreign currencies weakened against the U S dollar.
Second quarter 2022, non-GAAP operating margin was 13% a decrease of 90 basis points from the prior year period. The year over year decline was primarily driven by lower gross margin continued R&D investments and higher costs due to inflation.
non-GAAP tax expense in the second quarter of 2022 was $7 $2 million compared to $8 $1 million in the prior year period.
Our second quarter 2022 effective tax rate was 22.5%.
On a GAAP basis, we reported a net loss of $900000 or diluted loss per share of <unk> in the second quarter of 2022 compared to net income of $1 $8 million or diluted earnings per share of three cents in the prior year period.
Included in our GAAP results for the second quarter were unfavorable impacts of foreign currency exchange fluctuations of approximately $25 million associated with the weakening of the Australian dollar against the U S dollar principally related to our 2021 acquisition of simplify medical.
On a non-GAAP basis, we reported second quarter net income of $24 8 million or diluted earnings per share of <unk> 47.
Compared to net income of $31 $2 million or diluted earnings per share of <unk> 60 in the prior year period the year over year decrease in non-GAAP earnings per share was primarily driven by unfavorable currency exchange rate fluctuations.
Notably FX accounted for approximately six cents of negative EPS impact during the second quarter of 2022.
Free cash flow for the second quarter of 2022 was $26 million versus $19 $3 million in the prior year period. The increase was primarily due to increased operating cash flow offset by continued investments in our capital expenditures to support our net sales growth and new product launches.
As of June 32022, we had cash and cash equivalents of $226 million or <unk>.
$550 million revolving credit facility remains undrawn.
Now I'd like to provide our current perspective on the state of our business for the second half of 2022.
Stepping back for a minute when we shared our full year 2022 financial guidance in late February we issued range that was wider than what we would've provided historically given the many uncertainties surrounding the macro environment, including inflation currency fluctuations supply chain COVID-19 and geopolitical issues.
<unk>.
As a reminder, based on our strong first quarter results in May we raised the lower end of our non-GAAP net sales growth range from 6% to 9% to seven five to nine 5% on a constant currency basis. However, we purposefully did not change our non-GAAP operating.
<unk> guidance range of 13 to 14, 5% due to these macro environmental uncertainties.
Unfortunately, the macro environment has remained uncertain and we can reasonably expect these pressures to continue.
On the positive side procedure volumes are healthy and we are executing well on our multiple vectors of growth strategy.
We're seeing continued success with our new product introductions, especially with both the simplify cervical disc in pulse. In addition, we expect low to mid double digit growth in our international markets.
Taking into account current macro conditions, we have updated our full year 2022 financial guidance Accordingly as follows.
We reiterated our full year guidance for reported net sales growth of 6% to 8% compared to 2021.
We updated our GAAP diluted earnings per share guidance from a range of $1 five to $1 35.
To a range of 95 to $1 25, reflecting current foreign currency expectations and finally, we maintained our prior non-GAAP diluted earnings per share range of $2 15 to $2 45 that we provided on May four 2022.
We are working diligently to navigate and manage the macro environmental challenges that we face.
We remain confident in the underlying health of our business. Our continued strong cadence of new product introductions and the many opportunities that lie ahead.
Now I'd like to ask the operator to please open the call for questions.
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One moment, please I'll we poll for questions.
Our first question comes from Josh Jennings with Cowen. Please proceed with your question.
Yeah.
Hi, good afternoon, and thank you for taking the question.
I wanted to ask on pulse and.
Primarily my I'm curious about.
Realizing it's still early days, but are you seeing increased utilization and pull through of <unk>.
Spinal hardware and you pull in your initial pulse accounts and how is that trending and sorry. This is one question on impulse with two parts I mean, any any updates on the robotic module development.
Thanks, Josh Thanks for the question.
So yeah, we're early days on pulse.
The goal is obviously getting broad utilization, we've got limited number of sites, but encouragingly, we are seeing some pull through.
Look at those sites compared to the base business of other sites. So simple answer is we are seeing pull through now putting a magnitude on that at this point is probably a little early but.
But the fact is it is a it seems to be a a stickiness that we've been looking for and hoping for at least the initial placements of the technology.
Yeah robotic as we talk about pulse, we've always talked about the fact that we want it to be a early.
Suite of technology, obviously incorporates all the all the different technologies I mentioned in some of the prepared remarks.
Robotics will be a part of that.
We continue to make progress on the on the robotic development no updates at this point on timelines, but good progress and we look forward to really equipping pulse with a robotic module as well as many other technologies in the near future.
Understood. Thank you thanks.
Thanks Ralph.
Our next question comes from Vik Chopra with Wells Fargo. Please proceed with your question.
Hey, good afternoon, and thanks for taking the question.
So I guess one first question I had with pricing can you just talk about how pricing within the quarter.
And what's your ability to take price in this inflationary environment and then I had one follow up thanks.
Yeah. Nick this is Matt thanks for the questions pricing was kind of in line with what we've seen before obviously it is a headwind for us but it was in the low single digits, which is very normal as far as taking price difficult to do it on products that have already been introduced but obviously, we're thinking about it as we bring.
New technologies to the marketplace.
Do we need to be more aggressive on pricing.
Great and then just one follow up.
Non procedure volume can you just talk about what impact you've seen in Q2 from a hospital staffing shortages. Thanks, so much.
Yes, Thanks for question Vic.
We still see it.
The interesting thing is we're seeing procedures.
And then we see procedures canceled from time to time and that can be stopping or later or it could be patient related somebody test positive.
So there's still it's still really choppy and lumpy.
Felt good volume, but a lot of that had to do with the fact that we've really entered in markets that we were we didn't really have any business in very very low share like cervical so even with some of the downward pressure. We saw good volume growth, but we also saw a bit of mixed pressure there as well. So some of the complex cases, where a little pressured some of the dark lumbar we have.
Hi share a little pressure, there still flattish but pressured.
Like cervical where we think we can take we're taking a lot of share. We saw those volumes are really high. So so mixed bag, but overall, we feel good about the volume that we saw in the quarter, Yeah, and I would just add globally. We were really pleased with the results in our international businesses as well, we've said all along low to mid double digit growth and they were squarely.
In that zone, so another good quarter for our international team as well.
Our next question comes from Joanne Wuensch with Citibank. Please proceed with your question.
Yeah.
Okay. Thank you so much for taking my questions.
I'm going to Miss it but did you quantify what you think your new FX headwind would be versus your old.
Yes, we haven't quantified it on a full year basis.
But we did include it in our thinking around our reiterating our our guidance range. So we didn't change anything from what we said on may 4th as it relates to non-GAAP numbers. So we included that in our thinking we.
We did say on the call that we had a <unk> <unk> impact to EPS. So you can back calculate that.
Hard to give you a hard number right now because it's it's volatile the currencies that we saw the greatest fluctuation from an operational viewpoint, where Japan and the euro. So we spent a lot of time.
Watching those fluctuations and obviously, it's pronounced across the industry.
But as we have been growing our international business, obviously, it creates more fluctuation for us.
And the impact on revenue in the quarter and then your guidance.
Yeah, we are.
We didn't disclose the impact on our revenue, but obviously you can look at it on a constant currency basis versus not and you can pretty much figure out exactly what the calculation is.
And the guidance aspect of it I'm sorry to push on this.
Yeah, just look at the table that we provided in the release and it'll give you all your answers.
Okay, then I'll ask a more product specific one could you quantify how simplifies sales for in the quarter or qualify if you can't quantify it.
Yes, we were really pleased with the results and simplify we had a nice.
Jumped from what we did in the first quarter. So we're really pleased with the results. We really don't want to get into just talking about simplified because it's really about the cervical portfolio and its about <unk> hundred 60, simplify new products that are coming out later this year. The way we think about it is if you ask yourself.
Are we being successful in.
In cervical this was our third quarter in a row, where we grew greater than 20%. So very notable results.
Our next question comes from Shannon I'm seeing with RBC capital markets. Please proceed with your question.
Thank you so much for taking the question. So it's not just a question on guidance. So on sales you've reached your ex FX outlook and mundane reported growth despite higher FX pressure I'm just trying to understand what's driving this underlying momentum you did call out some of the products, but I'm just curious what trends you are seeing them into.
Q3 saw in July and maybe I don't know if two days of August and then you know any contribution from backlog and then on EPS you know you've maintained your outlook. Despite the Q do Miss So can you just talk about maybe the timing of expenses R&D projects, you know inflation supply FX and you know what are you factoring in that gets better in the second half.
Thank you for taking the questions.
Thanks, Ron I'll take the first one and I'll, let Matt cover the second part of the question. So we're seeing underlying momentum and some of the key investments we've made I've talked over the last several quarters.
About this idea that we've.
Sort of shifted from.
That singular focus a nice lift to really a broadening our focus across across across many different sub segments and also continuing to see growth as Matt just talked about in our in our international markets. So those are really the two contributing factors new products things like pulse, obviously, the folks we havent cervical.
Our international growth all of those things I think give us a lot of confidence that we can continue to even in challenging macroeconomic situations.
To deliver on the top line, so with that I'll turn it amount in the second part, yes. So with regard to your question around maintaining our earnings per share guidance and keeping the operating margin range.
Range the same on a non-GAAP basis.
Look we said on the last call that there were a lot of swing factors going on in the prepared remarks, you heard us talk about incremental freight charges travel charges increased compensation costs.
We have.
We have taken all that into consideration and it's the reason why we gave us wider range as we did.
From an operating margin as well as our diluted earnings per share perspective, but we're still comfortable based on everything we know right now that we can navigate these headwinds.
Have looked hard at our expenses and we're looking where we can find the right of offset to deliver on this guidance but.
We feel good about the fact that we didn't need to change guidance from where our thinking was on may 4th.
Okay.
Yes.
Yes.
Yeah, Hi, Christian Thanks for taking my questions and congrats on the quarter.
Just had one on kind of the cadence for revenue through the back half it looks like last year sequentially third quarter was down around 8%.
So.
Just wondering I think you have a larger NSO of benefit in the third quarter and then you know with simplifying pulse continuing to ramp is.
Could we see something better than that.
Or should we be thinking in line with what you saw in the third quarter of 21 sequentially.
Yes, typically our two highest quarters or the second quarter and the fourth quarter and you didn't see that in last year's results. We came in at $2 78, which I'm sure. You know last year, you got to remember the third quarter of last year.
The Delta variant.
Is putting pressure on procedural volumes in that quarter. So its not a good apple to Apple comparison, I would say, we still we see the third quarter being below what we just posted today.
For the second quarter, and then the fourth quarter will ramp back up and to answer your question on NSO, Yes, traditionally historically the third quarter has been the highest quarter. Although in the results we announced today they had a very strong second quarter as well.
Yeah.
Okay. That's helpful. And then just my second one on simplify any way to quantify the kind of Halo effect, that's having it I mean, it seems like it's driving strength across our cervical portfolio, but are you also seeing it.
Paul through across the broader spine portfolio, thanks for taking the questions.
Yes. Thanks, David we are you know that that's one of the things that gives a lot of confidence we've seen.
Greater than 50, plus surgeons that really didn't have any anything to do with us that have not only started picking up.
To simplify product, but also the broader <unk> hundred 60, we also have a greater than 100 of our surgeons that have been introduced that we see other parts of the portfolio kind of coming into so the simple answer is yes, we want to continue to see that but.
Put some some quantification around it over time, but early early indicators would say there is a halo effect it is giving us better exposure.
It will be as we've talked about we think a door opener for the broader an invasive portfolio. So early days here, but but encouraging results thus far yeah.
The other thing I would add on that.
As we also talked in the prepared remarks around the first cases globally.
So we're now introducing simplify in Switzerland, and Australia, and U K and so on in Austria. So.
It's exciting times, because we've got a really strong base set up in the U S market and now we're starting to chip away internationally.
Okay. Thanks, and if I could just ask a clarifying question, Matt I think you said for the back half low to mid double digit growth internationally.
Did I hear that right and is that on a reported basis or constant currency.
Yes, that's on our.
Reported basis, obviously with currency fluctuating like it is we're trying to give you a sense of what the underlying business is doing and the guidance of low to mid double digits. We introduced the JP Morgan in January 2020, So what we're saying in any given quarter you should expect the international business, you know kind of in that 11.
Constant currency range.
Yeah.
Got it thank you.
You bet.
Yeah.
With J P. Morgan. Please proceed with your question.
I'll just put them both together, but you know when we look at your gross margins. We obviously saw some pressure as you highlighted in the prepared remarks from pricing and inflation.
So how should we think about the cadence of that either improving or staying a bit more pressure ease through the balance of 2022, and then in 2023, assuming trends hopefully continue to get better how should we think about the kind of leverage you can get on that line as you work through some costs that have been capitalized into your balance sheet.
Yeah. So for this year, what I would say is the.
The fourth quarter because of what I said earlier, which is expected to be the strongest net sales quarter for us.
Youll get a stronger operating margin number there. So we will still continue to see the pressure in the third quarter, because as Ive basically said the second and fourth quarter are top quarters for net sales and that does have impact on margin and operating margin.
As far as 2023.
I'd love to see inflation come down.
The travel costs as we calculated.
Are up very significantly and travel is a big component of what we do with new faces.
<unk> like to see that come down because that will reduce our travel costs also with freight freight has been a challenge starting in the second quarter of last year and we've we've seen that continue through this quarter, but again. This is why we gave a wide range for the operating margin.
Yeah.
Our next question is from rich <unk> with <unk> Securities. Please proceed with your question.
Alright, Thanks, guys. Thanks for taking the question.
Wanted to just start off with the guide a first one on the.
The earnings.
I appreciate that you're keeping your guidance range unchanged. It was a large range.
You called out six cents, a currency impact in the second quarter.
Is that a reasonable kind of <unk>.
To just kind of run through the rest of the year and if so I guess do you feel like you're more or less likely to be towards the midpoint or perhaps towards the midpoint to lower end of the range or whether enough offsets, especially with the increased Rev. Guide that you still feel comfortable with that midpoint of the range.
Yeah.
Hard to predict right now because our biggest quarters in the fourth quarter as we think about the balance of the year.
You know predicting currencies is very challenging we've we just looked at currencies earlier today to see if there was any change in the numbers and <unk>.
Japan has gotten a little favorable in Europe has gotten a little unfavorable and net net they are falling out to the same place.
You know with all of this volatility it would not be.
Unwise to include in your model some impact <unk>.
Maybe a good number to use but.
I do anticipate the volatility to continue in the back half of the year, it's unlikely that it will kind of go back to where we were.
In previous years, where the amount of impact was not very material.
Okay, well I guess, just just to follow up on that I mean, if currency rates were to remain constant and hold right.
Is it safe to assume youre thinking about the range with kind of the midpoint.
And in all parts of the range are on the table still.
Yeah, we pretty much took the impact we saw year to date at the end of June and said if that continues that would be the impact and you can calculate that based on our first quarter in our second quarter release.
Okay great.
One more if I could just squeeze it in any any comments on.
On kind of what kind of trends you saw through June and even if you can into July and August . So you know I know, it's it's fluid their vacations or kind of in uncharted territory here in a post pandemic period. So I'd be curious just just what youre seeing there. Obviously you raised your guide so you're able to power through whatever.
<unk> be seeing but can you talk to the trend month to month. Thanks.
Yes, I mean, I'll give you an overview of bet Richard It's just been choppy I mean, I'll just tell you a week to week, it's choppy so it's really hard to trend out.
Some normal seasonality appear to be in the numbers, which we expect in the back half of the summer where specifically in some international markets and in the U S.
We just see increased level of travel so whats contributing to the Choppiness is still hard to sort of to distill out but clearly.
I would say on an average we're seeing pretty good volume on a week to week basis, our month to month basis, It's still a little up and down so the simple word is choppy.
But I would say underlying that choppiness is.
As a as a trend line at least shows volumes that exceed pre pandemic levels are right at pre pandemic levels. So we think that that's potentially a good floor.
Just wanted to see are more predicted trend kind of start to form over the court hopefully over the next few months.
Our next question is from drew Ranieri with Morgan Stanley . Please proceed with your question.
Hi, Thanks, Thanks for taking the questions maybe.
Maybe just to follow up on Rich's question is if you could go a little bit more into what you're seeing in terms of the market.
In General Chris you talked about your confidence in taking share.
Sharon cervical, but just kind of wondering where you are thinking in terms of the broader broader spine market and maybe what underlying growth was and then just a.
I had a second question there can you give us any type of a preview of what we should be expecting on the upcoming investor day. Thank you.
Yeah, I'll try to I'll try to clean it out I mean, it really if you think about our portfolio.
Where we had areas of strength, we saw more downward pressure from a volume perspective, not negative comparatively but down just not the not the underlying growth they would've expected areas. So methodical lumbar procedures poster was down fairly sharply.
We were flattish in and the anterior segment and that's with some good growth in a level again, where we're still taking share.
Some of the complex cases were down.
And then areas that we've made a lot of investment like in cervical I think even with the down downward pressure. We saw some strength just because we were all out share taking so it's hard to kind of get to clean the underlying market growth.
We look at the NCS data, so that we have and that would show that it was sluggish at best in the quarter.
So we feel pretty good about our performance in general.
As far as Investor day.
I don't know that we've let anything else on it we're looking very much forward to talking to everybody and kind of reshaping some of the narrative.
Selling and some of the blanks for everyone.
So we're committed to it and scheduling, but I don't think we have any other updates other than that at this point, yes. The only other thing I would add on that is we do intend on doing a product fair.
What we have found is that.
When people actually get to see the technology and talk to folks below christen I that Oh, no the products in and out.
The people are.
More fully appreciate the technologies that we're bringing forward, which obviously is manifesting itself in the strong growth. We've posted today. So we will do a product fair and look forward to introducing the products at a deeper level.
Our next question comes from Jason <unk> with loop capital. Please proceed with your question.
Oh, hi, thanks for taking the questions.
First off in terms of the guidance just a housekeeping thing I see GAAP was lower but non-GAAP rate is that a one time charges is that the difference between.
The two estimates or.
Our guidance.
It's just taking into consideration charges that occurred between GAAP and non-GAAP are the.
The numbers you should focus on Jason or really on.
The non-GAAP because we are basically reconfirming that there are going to be fluctuations in GAAP and you can see all of that and the reconciliations that came out in the table release, Okay. I thought so and then the real question I wanted to ask was about simplify and impulse in terms of it sounds like at least on simplify at least from some of the key.
Inventory you've made a lot of the the the the growth is coming from new accounts.
I assume those are our.
Accounts that had already been using disc and you're displacing some competing discs and then the same for pulse.
Think about the the customer or the the users at this point is that primarily your own customer base or is that also extending into new territories.
On simplify.
I would say that it's primarily C. T. D are users that are they're moving from other companies and there are several companies, but I would also say that that it would it would feel and again, we've got some just turned out that the market is has accelerated a bit and I think that that may be some of it is is our performance there and our are introducing.
C D D R that simplify desk into the market.
So there is definitely some some new interest in using.
Artificial disc in cervical space, but I would say the majority of our growth is likely from competitive users at this point.
As far as pulse.
It's it's a little tricky to say that there clearly it may have been using some of our hardware, but clearly not using anything navigation or anything enabling tech from us other than potentially a neuro monitoring systems or maybe in certain situations less right. So we think that anybody that's picking up pulse right now is moving from a likely a predicate system that they've employed at some point.
So.
New technology for us in the market not new technology, specifically in the market in some cases, but new technology for us. So that's one that we'll see turned out a little further but as I said earlier, we are seeing some some good pull through of the accounts that we that we have installed pulse in.
We see it we see a material.
The increase in the overall business that we're getting those accounts.
Uh huh.
Our next question comes from Matt <unk> with Barclays. Please proceed with your question.
Yeah. Thanks, so much for taking the question one.
One follow up on simplify Chris you were just talking about.
You know the nature.
Growth and share gains.
Wanted to get a sense.
Uh huh.
Part of this has to do with.
You know taking surgeons in centers, where you have good relationships, who may be using another jess and converting them to.
You know it simplify.
It is you know where you are in that you. If in fact, that's one of the drivers just trying to get a sense of how important that is.
How much runway you have along that pathway of growth for simplifying and then I had one follow up.
Thanks, Matt.
Yeah like I said earlier I quoted the number that I've seen a few days ago that 50, plus maybe even 50 to 60 plus.
Surgeons that sort of started out using simplify have now.
<unk> adopted other parts of the cervical portfolio, which tells me that that it's bringing along you know the NCS anterior cervical plate and we're launching relying C. Later this quarter. So we've got I think we've got a lot of dry powder still pent up and we're just now getting out of the gate really was simplified.
We're still we're still ramping up our capacity was still ramping up the number of sets that we're releasing are still entering new geographies as Matt mentioned earlier. So we've got a good runway and I think the artificial disc space in general.
We will continue to grow faster than that then the relative the relative surgical market, which is fairly large but fairly flattish in growth so $2 $6 billion market.
We think the cervical disc space is probably 250 to 300, you know I think the.
At $2 50 number is probably antiquated so we look at more than 300.
Growing near double digit we think now we've got a quite a quant.
Quantify that coming out of the pandemic, but also so all of those things considering the fact that we we estimate we still have less than 5% share. We think we've got a lot of runway to grow the circle.
Really grow the cervical market.
That's great I appreciate that and then follow up just your comment you made.
Rounds.
Systemic and supporting technology.
Patient follow up quality of outcomes being the things that.
Are really going to change spine surgery going forward.
Opposed to sort of the new inter body may.
But I wanted to get a sense of.
I think I know the answer to this but I'm guessing that you have.
Do you have a fair amount.
New implants revised implant systems and technologies in the pipeline just love to understand how you're balancing your your spend on R&D, which I know is significant to get.
Particularly pulse up and out the door to support that but also to kind of continue to back it up with the kind of things that innovation has been known for in the past, which is you know a steady flow of well design.
Implant systems as well.
Yeah, It's a great question and one that we've talked a lot about when you think about kind of phase one.
As I've sort of come in I think nobody has always been known for fantastic instrumentation, great implant technology, and there's still work to be done there by no means are we are we finished and we will continue to refresh the portfolio.
As we see innovation opportunities the R&D team does a phenomenal job there.
But having said that I believe that what happens pre surgery and what happens post surgery are part and parcel to the overall success for that patient and choosing the right patient with the right procedure.
Yeah.
<unk> presents with a pathology and Theres just unlimited options that they pursue them. So we got to get smarter.
As an industry.
And ensure that the that the pathway is clear and it's data driven.
And then what happens post surgery, what can we measure there is a lot of things that we can measure and there's clearly a lot of things that we can't measure.
What the impact of the surgery was on the patient longer term.
This patient reported outcome.
Outcomes, which as you know are you still on panning out in pain.
I think there's more we can do and there's technology out there that we think we can incorporate so we believe that our procedural innovation strategy is truly sets us up uniquely specifically as we add in something like our pulse system to really start to think more broadly about the whole patient care continuum and that's that's where we're looking for we're looking we continue.
222 to really hone in our focus on on measuring what's on measurable and providing support in areas that we don't necessarily today, and we think youre doing those things will will it will increase the overall outcome for the patient and as we said create value for us and our shareholders.
That's great. Thank you.
Okay.
There are no further questions at this time I would now like to turn the floor back over to Chris Barry for closing comments.
Thanks, Maria and thanks, everyone for joining us today I just want to just reiterate the fact that we're excited.
Happy with the performance in the quarter continued to focus on this idea of multiple vectors of growth.
Our leadership in less invasive surgery, taking share in those on an underrepresented segments.
Delivering on enabling technology roadmap and our starting point here is pulse and then obviously continuing to drive our international growth and as I, just mentioned with a map ultimately extending the parameters innovation to really create a more intelligence spine surgery. So with that I'll. Thank you all for your participation and we look forward to speaking with you again in next quarter.
This concludes today's conference you may disconnect your lines at this time. Thank you for your participation.
Okay.