Q4 2022 Globus Medical Inc Earnings Call
The conference will begin shortly to raise them.
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Thank you for standing by and welcome to Globus Medical's fourth quarter and full year 2022 earnings conference call. At this time all participants are in a listen only mode. After the speaker presentation. There will be a question and answer session to ask a question. During the session you will need to press star one one on your telephone.
Now I'd like to hand, the call over to senior Vice President of business development and Investor Relations Brian Kearns. Please go ahead.
Thank you Latif and thank you everyone for being with US today, joining todays call from Globus medical will be dance, Cabello, President and CEO and Keith Pfeil, 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 maybe considered forward looking statements. Our Form 10-K for the 2022 fiscal year and our subsequent filings with the Securities and Exchange Commission identify certain factors that could cause our actual results.
For 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.
Reconciliations to the most directly comparable GAAP measures are available in the schedules accompanying the press release and on the Investor Relations section of the Globus medical website with that I will now turn the call over to Dan <unk>, our president and CEO .
Thanks, Brian and good afternoon, everyone.
<unk> finished 2022 with a strong fourth quarter.
Revenue for the year was a record $1.023 billion crossing the $1 billion threshold for the first time.
We delivered $65 million or 7% as reported and 8% constant currency growth for the full year.
This is above last year's difficult post COVID-19 comp, where we grew 21% for 2021.
We achieved record sales, while maintaining industry, leading profitability generating a record $2.06 and non-GAAP EPS.
And an adjusted EBITDA of 33%, even as we continue to invest heavily in INR trauma competitive recruiting and absorbed significant currency headwinds.
We also launched seven new products in 2022 for the launches occurred in the fourth quarter.
Revenue for the quarter was $275 million up 10% as reported or 12% in constant currency.
non-GAAP EPS was <unk> 59 up 20% versus prior year Q4, and adjusted EBITDA was 33%.
U S spine grew 10% in Q4 with notable gains across our product portfolio and expandable biologics.
MS screws, three D printed implants, and surgical and lateral offerings.
The gains were driven by competitive rep conversions and robotic pull through.
We have a strong competitive recruiting year, surpassing the hiring levels in 2020 in 2021.
This is usually a leading indicator of growth in the coming years.
And we're excited about the potential of the team we've on boarded in 2022.
In Q4, we launched our pro lateral patient positioning system as part of our focus on the continuum of care.
It is an interactive adjustable bed Mount that enables a single position single stage lateral surgical approach for direct and indirect decompression.
Designed to maximize operational efficiencies increased ease of implant placement.
Minimize surgeon fatigue.
It integrates seamlessly with our Chelsea as GPS and <unk> solutions and enable significant capabilities in non robotic procedures.
When combined with our Salesforce platform and a range of expandable interbody offerings, we have unique and customized well lateral solutions available to our surgeons.
Enabling technologies sales were $30 million up 20% on a constant currency basis versus prior year, driven by robotic and imaging system sales. This was our highest quarter since launching enabling tech surpassing last year's Q4 sales that delivered 40% post COVID-19 growth.
We continue to see increased interest and placements with significant international gains of Celsius, GPS in EMEA and the U K that we feel will lead to future implant pull through and strong market share gains.
Robotic procedures continued to accelerate growing 25% for the full year and exceeding 43000 robotic procedures performed to date.
We launched <unk> Celsius three D imaging system in Q2 of this year and continue to penetrate the market throughout the year.
Surgeons, who said this is a game changer Excelsior three D is a three in one imaging platform offering three image modalities in a single cart with high Manoeuvrability, a large field of view a seamless integration with our Celsis GPS robotic system. It is a key component of the Celsius ecosystem in the operating room and ecosystem that is designed and built from the ground.
To communicate together seamlessly.
Market interest remains high for this state of the art technology and customer orders continue to grow <unk>.
<unk> is positioned to be a major growth driver as we enter 2023.
Our international spinal implant business, excluding Japan delivered record sales in Q4 growing 20% on a constant currency basis compared to prior year.
We delivered double digit growth in most markets and continue to see strong growth in key markets ranging between 25% to 50% for the quarter with U K and Australia being major contributors.
Our trauma business delivered its <unk> consecutive quarter of sequential growth delivering 70% growth for Q4, and 71% for full year <unk>.
Performance was driven by sales force expansion and a strong uptake in all 14 product lines delivering high double digit growth in each product offering.
In Q4, we launched the Autobahn Evo femoral nail systems to integrate now is designed to be a stand alone and the retrograde <unk> designed for either standalone or plate now combo procedures with our anthem distal femur system.
Initial surgeon feedback is strong and we expect the next generation of now to be a key growth driver in 2023.
Our product development engine continues to make progress focusing on procedural solutions designing implants instrumentation and procedures that will function together within our global ecosystem for a seamless and comprehensive approach in spine trauma and joints.
At the same time, we're expanding our solutions throughout the patient entire continuum of care supporting surgeons in preoperative planning intraoperative execution and post operative patient care to capture outcome data for future surgical planning.
While this complex approach has extended development timelines beyond our historical rapid pace I believe the upcoming launches will have greater significance in shaping procedures of the future.
Moving into 2023.
Globus medical invasive or planning to combine in an all stock transaction to create a global musculoskeletal company.
On rapid innovation addressing unmet clinical needs and improving offerings to our surgeons and patients.
The all stock structure preserves cash to deleverage the company and accelerate investment in assets to fuel growth.
The combination capitalizes on a complementary commercial organization, where we see little territory overlap and should allow us to accelerate our globalization strategies to increase customer reach and strengthen our surgeon relationships. We plan to bring together the best in class technologies from our portfolio to create a differentiated and comprehensive procedural solution offering as part of our approach.
To address unmet clinical needs and support our surgeons and patients.
Our product development engines will combine and increase our focus on rapidly developing innovative solutions throughout the continuous care from pre operative planning through the post surgical monitoring.
Our operational parents are highly complementary.
Allowing us to better leverage each other's manufacturing and supply chain resources to increase internal production, while reducing the amount of capital investment required a standalone. So we can redirect investment improve cash flow.
Over the past several months it has become clear to me that both organizations have more common than they are different.
The complementary strengths of Globus engineering with invasive surgeon relations education, and training will combine for a truly potent innovation company.
We will continue to outpace the market growth, where we compete and gain share while maintaining financial discipline to drive sales growth continued mid thirty's EBITDA accelerate EPS growth and increased cash flows for our investors.
As an update on the merger status we.
We are currently preparing our HSR submission and the joint proxy statement cross functional integration planning has ramped up so we can pivot.
Two integration implementation once the merger is approved when we clear HSR secure.
<unk> approvals and the closing requirements.
We expect to close the deal in mid 2023.
In closing we remain focused on core elements for long term growth innovative new product introductions robot in imaging system sales competitive rep recruiting and merger integration planning 2023 is all about focus and execution to deliver value to our customers and drive growth.
I know, we are well positioned to achieve our mission of becoming the preeminent muscular skeletal company in the World I will now turn the call over to Keith.
Thank you Dan and thank you to everyone for joining us on today's call.
Globus achieved a milestone in 2022 growing to over $1 billion in sales, despite strong currency headwinds and lingering COVID-19 impacts earlier in the year.
Full year 2022 revenue was $1 3 billion.
Growing six 8% as reported and eight 2% on a constant currency basis with the same number of selling days in 2022 and 2021.
Currency impacts were unfavorable to revenue by $14 million in 2022.
Net income was $192 million, resulting in fully diluted earnings per share of $1 85.
non-GAAP net income was $211 $6 million generating $2 <unk>, a fully diluted non-GAAP earnings per share.
2022, adjusted EBITDA was 33, 2% and we generated $104 4 million of free cash flow for the full year.
Q4, 2022 revenue was $274 5 million growing nine 8% as reported and 11, 7% on a constant currency basis.
Net income was $50 1 million and non-GAAP net income was $60 $1 million.
Q4, 2022 fully diluted earnings per share was <unk> 49.
Our fully diluted non-GAAP earnings per share was <unk> 59.
Adjusted EBITDA was 32, 8% and we generated $45 6 million of free cash flow for the quarter.
U S revenue in the fourth quarter of 2022 was $233 2 million growing nine 5% as reported compared to the prior year quarter led by growth in U S spine biologics and trauma.
International revenue for the fourth quarter was $41 3 million growing 11, 4% as reported and 24, 2% on a constant currency basis, driven by increased INR implant sales.
Gross profit in the fourth quarter was 74, 3% versus 75, 3% in the prior year quarter and is consistent with expectations.
The 100 basis point decline was driven primarily by product mix and higher freight costs, partially offset by lower inventory reserves and depreciation expenses.
Full year 2022, gross profit was 74, 2% compared to 75% in 2021 the.
The 80 basis point decrease was driven by product mix, primarily higher capital sales and higher freight expenses.
Research and development expenses in Q4 were $19 5 million or seven 1% of sales compared to $51 million or 24% of sales in the prior year quarter.
The lower spending is driven by decreased IP R&D spending in Q4, 'twenty two versus Q4 'twenty one.
On a normalized basis Q4, 'twenty, one R&D spending was $16 7 million or six 7% of sales.
The resulting quarter over quarter increase is driven primarily by higher continued investments in R&D, mainly driven by increased head count across our spine INR and trauma portfolios.
Our full year 2022 research and development expenses were $73 million or seven 1% of sales compared to $97 3 million or 10, 2% of sales in the prior year.
Adjusting for acquisitions made in both periods R&D expenses in 2022 were $72 9 million or seven 1% of sales compared to $63 million or six 6% of sales in the prior year.
The increased spending is consistent with my comments on Q4, 2022, namely head count head count investments across our portfolio.
SG&A expenses in the fourth quarter were $118 1 million or 43% of sales compared to $106 6 million or 42, 6% of sales in the prior year quarter.
The increase was primarily higher selling costs as a result of higher compensation costs from competitive recruiting as well as higher travel expenses.
Full year SG&A expenses were $432 1 million or 42, 2% of sales compared to $408 1 million or 42, 6% of sales.
The increased dollar spending is primarily driven by volume impacts from higher sales growth as well as higher sales compensation expenses and higher travel.
SG&A spending decreased 40 basis points versus 2021, driven by leverage on fixed spending partially offset by higher sales costs and training expenses.
The income tax rate for the quarter was 19, 4% compared to 23, 8% in Q4 of 2021, driven primarily by lower international tax expenses. Our full year 2022 income tax rate was 21, 7% compared to 17, 3% in the prior year with the resulting increase driven by lower benefits associated with stock option.
Sizes.
Fourth quarter net income was $50 1 million and non-GAAP net income was $60 1 million Q4 diluted earnings per share was <unk> 49.
And non-GAAP diluted earnings per share was <unk> 59.
Compared to <unk> 49 in the prior year quarter.
The <unk> increase in Q4 2022, non-GAAP EPS includes a net <unk> of non operating favorability driven by a lower tax rate and higher interest income, partially offset by currency translation translation impacts.
On a normalized basis non-GAAP EPS in the fourth quarter was 55.
Compared to 49 in the prior year quarter growing 12, 2% driven primarily by sales volume growth as mentioned earlier.
Full year 2020 to deliver diluted earnings per share was $1 85, and non-GAAP diluted earnings per share was $2 six compared to $2 <unk> of non-GAAP EPS in 2021.
Our full year 2022, non-GAAP EPS inclusive of 14th of non operating items, which includes unfavorable currency impacts worth 11.
The higher tax rate worth 10.
Partially offset by higher interest and other income or <unk>, and a lower share count worth <unk>.
Full year 2022, adjusted EBITDA of 33, 2% includes 90 basis points of unfavorable currency impacts royalty, resulting in a normalized 34, 1% adjusted EBITDA for the year.
Net cash provided by operating activities were $64 million in the fourth quarter of 2022, and $178 5 million for the full year free.
Free cash flow was $45 $6 million in the fourth quarter and $104 $4 million for the full year 2022.
Our 2022 free cash flow was impacted by higher capital expenditures as well as investments in working capital naming namely inventory and accounts receivable the.
The company remains debt free.
At this time the company is establishing its full year Standalone 2023 guidance, we are projecting full year 2023 sales guidance of $1 1 billion.
Representing seven <unk>.
Seven 5% growth versus 2022.
We are guiding to a full year fully diluted non-GAAP earnings per share of $2 30.
Representing 11, 7% growth versus 2022.
Our 2022 results are reflective of continued investment across our business R&D spending increased as we seek to bring more new and exciting products to market, our sales and marketing spending increased as we continue to grow our sales force and our capex spending increased to meet increased demands for product output and set deployment.
In closing I'll briefly add a few comments in addition to Dan's earlier comments as it relates to our February 9th announcement that we've entered into a definitive agreement to combine in an all stock transaction with new basis.
Once shareholder and regulatory approvals are obtained and the transaction closes we expect to deliver 20 plus percent non-GAAP EPS accretion by the completion of the first full year.
This assumes likely near term sales dis synergies from Rep and account disruptions, partially offset by revenue synergies around complementary implant sales an additional INR sales of Globus capital and Nuvasive accounts in.
In addition, this includes delivering on $170 million of cost synergies of which we expect to achieve 50% by end of year, 175% by the end of year, two and 100% by the end of the third year.
Operator, we will now open the call for questions.
As a reminder to ask a question you will need to press star one one on your telephone again Thats Star one one on your telephone to ask a question. Please.
Please standby.
Again, Thats star one one.
Our first question.
Comes from the line of <unk> Zhang of RBC capital markets. Your line is open.
Great. Thank you so much and congratulations on exceeding $1 billion in sales.
So I guess my first question is I guess, we've hired we've all had some time to digest the deal, but just given the stock reaction I'm wondering if you could comment on where you see the disconnect in your thinking versus investors on the deal rationale financials and <unk> strategy and one of the other.
One thing that's come up is if you may of Sweden the BD.
Could you just talk about the flexibility and willingness to close the deal here any comments there would be helpful. Thank you so much.
Thanks again, so just keep in mind as we did this and as we've talked about it during our announcements you're really looking at what we believe is a complementary global scale the ability to expand customer reach with minimal overlap, we've talked about being able to develop a comprehensive and innovative portfolio in spine and orthopedics when we combine these out and we.
We remain committed to innovative product development and in surgeon education, we're saying that the operational capabilities fit nicely together in this and actually can benefit us as a combined and when you look at that and then you combine us out the compelling upside of revenue and what even Keith mentioned with the EPS accretion Thats all out there for value opportunity is what we see.
The disconnect I can't say I can't speak for Wall Street, they'll point to several unrelated deals and look at that but that's okay. It's certainly their prerogative to do it as.
As for what we would do in a market and change in stock that's something we wouldn't be in a position to actually comment on and something we will have to evaluate and see when that time comps.
Got it and just as a follow up question can you just talk about the relative contribution from Rep recruitment voices NPI pulled through from enabling Tech U S. Implant sales and then are you pricing final implant and imaging sales for Q4 and thank you for taking the questions.
Thanks, again to be honest with you I wouldn't have the ability to pull all of those things apart and really tell you what they were again since we're running the business as a whole I think the fact that we have significantly outpaced the market with continued growth is probably more important is that to some of the parts.
Got it.
Thank you. Our next question comes from the line.
Matt Taylor of Jefferies. Your question please Matt.
Great Hi, Thanks for taking the question.
So I wanted to see if you could address more specifically I think the main concern a lot of investors have is about the dis synergies. The turnover that you talked about could you talk a little bit about how you can mitigate that and then also how you may be able to offset that with some of the revenue synergies that you've discussed here and maybe the timing of this.
Yeah.
Thanks, Matt So we won't go into too much detail, we're going to put together filings and different things in our proxy where you would certainly have access to that in the near future. What we're signaling of course is that like in any deal. We would expect to have some reasonable amount of dis synergies and I think that anybody would want that and there is a prudent statements. So we've built that in that way.
Whether that be reps going to a competitor accounts switching to just natural things that would occur what Keith said and what I would standby is however, when we're able to get our hands on a cervical disc thats multi level that they have their lateral procedures. We can hand to them are expandable as we can open up a market for our enabling technology.
All of those things will have actually offsets that we believe will occur over a couple of years.
And I think we all strongly believe in that so by combining the portfolios combining the markets will come out stronger and we will see some short term pain, but both teams are doing this for the long term not the current 12 months, but we're really looking at say for multi year, we're building a strong company.
Yes, maybe I could just ask one follow up on the synergies you seem very confident in that target that you laid out maybe just talk about how much of that stuff as you would call it well identified or lower hanging fruit and how much of it is harder to kind of pull.
Pull apart and synergize in your plan.
Thanks for the question, Yes, we do feel good about achieving the $170 million in synergies I would say that where we are in this early stages of working with the teams to better understand the business, but as we look at our cost structure versus their cost structure, we feel confident that we're able to achieve these savings when you look at the combined spending of both companies together.
<unk>.
Great. Thank you guys.
Thank you.
Thank you.
Our next question.
Comes from the line of Matt Mexican Barclays. Your line is open Matt.
Okay.
Hi, it's Matt.
Okay.
It wasn't quick you're referring to my answer I looked last name, but if you can hear me can you hear me okay.
Yes, we got you Matt.
And a lot of math on these calls.
So.
One just follow up if I could on the synergies.
That comment.
Comment and then I have one on margins if I could so on the synergies can.
Can you talk about maybe what what is not included in those I mean, theres, a fair amount of complementary products robots.
Cervical disc replacement in the cervical portfolio at GM add debt.
That are.
Potentially complementary.
Incentive driving additional sales are those included.
If they are.
Yes.
What things have you or have you not included in that number and then I have one follow up.
Yes, Matt so for clarity I believe youre talking about sales synergies and dis synergies is that right.
Yes, correct correct.
Okay. So separate from the overall cost savings with that.
Again, we're not going to go into a lot of granular detail I think what we're just saying is take a look at what Nuvasive has as a strength, where we can benefit and we're saying look it up to a way for us to it's really that combination.
We have some placeholders in some ideas that we're working through but this is early stages right. We really just analysis, a few days ago, and we've gone from being blind into ability to look at this with a little bit more clarity will focus through it I think what we're signaling is confidence that we have enough tools in our offering to offset.
<unk> dis synergies and just kind of back to the question Matt had asked on actually cost synergies again, we have several areas to look at we havent fine tuned those down by accounts, certainly or anything like that or even department. We just realize that the abilities are there and we're in the early stages of working through those.
Got it Okay. That's helpful and then on margins going forward. Obviously, you are looking for some EBITDA margin leverage this year.
Can you talk about maybe some of the headwinds that youre facing.
Keep you here and kind of the low end of the.
The mid 30% range.
But as we can tell that's kind of where you are.
$2 30 EPS number.
<unk> for this coming year based on the top line.
And how those kind of play out throughout the year.
That would be helpful. Thanks.
Sure. Thanks for the question. So as you think about going into next year.
And alone basis.
The EBIT margin does come out on the lower end of the range, but when you. When you think about some of the things. We've done recently have really stepped up our investment in R&D spending.
That's jumped out we've invested a little bit more and Salesforce that will show that should show fruits as we move forward, but I talked a little bit about the product mix in the quarter and the full year capital sales have a little bit of a headwind on overall profitability, but stepping back to that we still feel that we're in mid Seventy's business I mean, if you look.
At.
This year, specifically 2022.
The currency impact of $14 million is worth about 90 basis points to EBITDA. So when I when I look at that I look at the business and I still see that we're healthy we are driving the business forward places that we see inflation, obviously I've talked a lot about freight this year I think in each quarter, we've seen freight tick up.
Just from fuel prices.
Cross the rest of the P&L I think it's fair to assume that you are seeing some inflation in travel.
Peak last year in 2021, the travel grew sequentially as Covid started to dissipate, but I think as you got the really the Q4 and into this year you saw inflation take hold as well while people continue to travel. So it's absolutely some of the drivers that youre seeing in the increases there which.
Offset some of the leverage growth or the leverage benefit you might see in SG&A.
Thanks, so much.
Thank you.
Thank you.
Our next question comes from the line.
Vik Chopra of Wells Fargo. Your question. Please.
Hey, good afternoon, and thanks for taking the question. So two for me first related to the deal I know you said Theres limited customer overlap, but can you talk about some of the product overlap is and which assets. Those categories. Do you think you may have to divest.
My second question is.
One of the large orthopedic competitors has talked about coming out with a spine robot application in 2024 can you, perhaps talk about the market and competitive landscape and whether you expect any impact in 2023 to your ability to continue to sell <unk> <unk> systems. Thank you.
Thanks Vic.
Yes.
Get through the second part of the question.
We've always expected we've always talked about how we're one of the first to move on this and the market will actually grow over time and become.
Naturally competitive so you kind of ask the question what do you do to stay relevant we have been talking continuously about our development of the ecosystem of multiple things that all fit together, we've talked about our procedural applications from pre op planning through to post op data and feedback loops. All of those items were well ahead of the curve were pushing out where <unk>.
Driving that will not only keep us relevant, but actually keep us as a leader here and so listen competition will comments natural they are coming because of our success and we're going to go continue to innovate spend we've talked to continuously about our investment in R&D and how that's a pull down because we're investing properly to build the strength for long term gains here.
<unk> that was the first part and I apologize can you bring up your first part of the question again on the deal itself.
Yes, sure just on the divestiture can you talk about some of the product overlap and which aspects are category. You think you may have to potentially divest.
No. It's a great question I would tell you that given our size, we're not anticipating any significant divestitures at this time, we're in the middle of all of this filing. So again, we've got the places in the hands of the government in weights, but we're not going in with any.
Thought or concern that we're seeing right now that would trigger anything of significance.
Thank you.
Thank you.
Our next question.
Comes from the line of David Saxon of Needham <unk> Company. Please go ahead David.
Hi, guys. This is Joseph on for David.
Maybe just looking.
Towards the.
The upcoming knee robot launch could you maybe talk about some of the strategy behind that what are the initial accounts youre going to be targeting.
You didn't talk about the expansion of the sales force.
But maybe you could you also talk about maybe pricing.
Teachers that maybe relative to current currently available robots and then if possible could you quantify those commercial investments associated with the launch.
Thanks, Joseph I wish I could but we don't have all of that data just yet so let me break your question into those chunks and go at them I think accounts certainly we would have our eyes on afcs and certainly hospitals. So I wouldn't say, we're going to specialize in one or the other we'll look to go at both with that type of approach.
You are correct that our initial thought was capital reps and obviously implant reps will require us to take steps in investments things that we've built into our projections, but again, if you know us we don't go out and have a big Bang, we use concentric circles, where higher group stabilize them and get it going moving will pay for them and go on and on.
As we've done in the past so I wouldn't signal that there is a major drop or an anticipated investment that takes us off of our curve that way.
And finally with pricing I would just tell you we will price at the market appropriately we recognize there's competition out there we feel like we've got a viable solution that will add value to doctors.
And like I said, depending on what the market bears were in a position to actually do that.
Okay, great Yeah that makes sense.
And then maybe could you maybe just give a quick update on the commercial team out in Japan, if things maybe stabilize there.
Still more wood to chop.
Yes, I would tell you that it's in the stabilization phases is probably about a quarter behind where I would have wanted it to be but what we're seeing right now is.
That is settling down into where I think it's actually at the point, where we should expect to see some building up of it in the first half of this year.
Okay, great. Thank you for taking our questions and congrats on the quarter.
Thank you.
Thank you.
Our next question.
Comes from the line of Steve Lichtman of Oppenheimer. Please go ahead Steve.
Thank you guys.
Looking at the 2023 sales guidance I'm wondering if you can provide any color on the components of grow U S. Brazil U S buying emerging Tac incremental trauma and any color there.
Great question. Thanks for thanks for it we typically don't break out the parts and pieces, but when I step back and look at the year that we're going into I think we still feel very bullish about our U S spine business and its ability to grow I think we came off a strong quarter between that biologics and trauma in the U S. Enabling tech I see that continuing to grow cognizant.
We're entering into a recession. However, one of the things that we see happening is is greater sales of those units internationally. So that's something that we feel good about going into next year, but that's about as much details give in terms of breaking out the guidance.
Steve One thing I'd add to that which I'm pleased with is we're not dependent upon one or two of these site. It really seems like we're projecting forward as we've as we've performed in the past and while we'll never get each one of these exactly right. We have enough levers here that I feel strongly that we can get into this and achieve it.
Got it okay, Thanks, Keith and Dan.
And then just secondly, as you look ahead here near term is there anything you feel you need to do to help retain rep.
And prevent any coaching ahead of the deal closing or just overall.
The tenure of the group.
The last couple of three weeks here. Thanks.
It's a great question and look it's human nature in the state of change to have some discomfort. So the best thing to do is communicate because we don't need to beg here with this keep in mind that we as globus symbol. We intend to do is the bigger company is PE strongly for our reps and we've been doing that historically without change.
Unlike other companies and so we're going to maintain that at the same time, but we have discussed in person with the field team our portfolio to understand the strengths that were about to give them on the <unk> side and they are actually are.
We're in the process of doing the same for us on the globe aside with that so we're talking about strong compensation arguably the strongest offering for products in the spine market with that and then.
Our enabling technology, along with the pulse system can really become a powerful tool and I think everybody can see that in and of course, we're always looking at what near term yet future innovation can be to significantly tie. These together through that ecosystem. When we offer that up with people. Its a tough thing to compete against center Rep that has long term focused and wise.
Can recognize that within 12 months, they're going to have at their fingertips, the most powerful offering in the industry.
Got it thanks, Dan.
Thank you.
Our next question comes from the line of Matthew O'brien of Piper Sandler. Please go ahead Matthew.
I kind of broke up when you say Matthew O'brien.
He did.
Okay fantastic. Thanks for taking my question, So I guess, Dan can you.
<unk> actually just talk about the timing of the <unk> vote from the shareholders and then it is a take under at this point, it's about 5% lower.
For instance versus where it was trading before the announcement to how are you going to tuck those investors into voting for this transaction between you and Chris and.
Are you still committed to this deal that you would offer up a sweetener more stock or even cash if need be to make sure. This gets done and I do have one more follow up.
Thanks, Matt So a lot of questions. There I would tell you that we're not going to be in a position yet to comment on what it is we're going to do certainly we're going to talk to investors show them. Why this deal makes sense show them, the math to get them lined up with this and understand that this is a long term gain that will create.
A significant acceleration versus if we stayed alone as a stand alone. So I think that's probably the biggest thing with it.
But to talk about any other steps at this point premature so I'll refrain from that.
Okay Dan.
When we hear middle of the year closing you think alright June 30 to the vote would be sometime before then I mean is it.
The next few months, where we could see the vote.
I'm, sorry, I did leave that off hours and avoiding that with that.
Really what we need to do right now is to create the joint proxy first and then get the vote. We are in the process of compiling that as I said in my statements.
Yes look I don't have an exact day, where we'll say that's done but its obviously the priority right now is to get the HSR filing and get that working get the joint proxy <unk>. So we can get to.
In motion.
Okay, and then the follow up Dan as again more of a strategic question because I think part of the reaction in the stock was kind of the.
Adjustment to the strategic direction of the business that I think most were anticipating because you are kind of more diversifying away from spine now you're doubling down more is this part of a bigger.
Push for the company longer term double down in spine get big they're getting a lot of cash flow and then invest in other areas of ortho to become a much bigger entity in this space.
Thanks, Matt again really good question so.
It's obviously, it's obviously interesting from this seat.
For years for eight years investors have asked what are you going to do how are you going to make an acquisition. What are you going to do we've made an acquisition and folks are sort of stepping back by it.
But the fact is we've been patient we've looked we've analyzed we decided this was the right time to do it we've looked through multiple scenarios throughout our portfolio and really came back to this being the strongest opportunity now to go do this and what you touched on is exactly right. The combined company will be stronger than the individuals and our cash flow itself when we can.
Mine will be significant which will allow us then to move on to other larger acquisitions over time doesn't mean that we have just shifted and won't create innovation and launch organically. We're just saying we want to use the financial strength to our benefit as well as our engineering prowess.
Got it makes it a lot of sense. Thanks, so much.
Thank you.
Our next question comes from the line.
Craig Bijou Bank of America. Please go ahead Craig.
Thanks, guys. Thanks, Thanks for taking the questions.
I wanted to focus on enabling tech here and.
It did come in a little bit lower than the street was expecting I know you guys had a record quarter.
You guys have talked about the strength internationally.
So maybe kind of wanted to parse out U S versus O U S trends in.
Enabling tech and then really see kind of what you would see.
In your funnel and has anything changed over the last three months or so since the last quarter with the funnel either U S O U S.
Yes.
Thanks, Craig Yes, I guess my first thought is I'm not sure I would apologize for delivering 20% growth in a recession in a challenged market I think that's very strong performance that was done by the team.
And so I'll stay by that one.
Certainly last year 2021, you had a lot of sales robotically in the U S. Because of pent up demand a lot of activity along with Covid and like I say, we came close to that this year. The international has I think recovered economically a little bit better than the U S and some of these concerns. So what we're signaling is we've seen some great placements internationally.
Kind of put us back into a strong spot overall that way Robotically and as we've said we've also put out the imaging system.
Really U S right now with where that is and what we're doing with that and just continuing to take advantage of that market.
Got it and just following up a stick on enabling tech, but Keith made the comment about.
Looking at into a recession in response to one of the previous questions, but your view on 'twenty three you still feel like Theres, a strong hospital appetite for for capital and you don't see any any concerns or any changes in either.
Thinking or the actions of <unk>.
Hospitals.
I would say, it's a little too soon for us to call I mean, certainly even getting all through COVID-19 and into last year, we have seen behavioral changes and concerns and shorting of staff that they have to divert funds otherwise all things like that that had been a ripple through this so I don't know if we had a chance to look for really the last two to three years at <unk>.
<unk> state and understand what's normal and now we're in the face of a recession so difficult to call.
Again, what I would tell you is replaced out standalone guidance and in that we have fairly strong numbers that we feel we can achieve recognizing that there may be some pressure on the enabling tech, but again there is enough levers throughout our overall portfolio. We feel confident we can achieve those numbers and the only comment I would add to Dan to what Dan said as we step back and look at enable.
<unk> Tec going back to 2018 that business delivered $47 million in sales in 18, its over 47% and 19, we went through Covid and we delivered $41 million and last year. We delivered 81 to finish this year at 96. So the business has really grown obviously, there's there's always issues that we're going to be faced with but at the end of the day.
We're going to really work to to get through them and really get our capital in the hands of our customers.
Got it thanks for taking my questions guys.
Thank you.
Yes.
Thank you our next question.
Comes from the line of Kyle Rose of Canaccord Genuity. Please go ahead Kyle.
Kyle Rose your line is open.
Hello, sorry, I Didnt hear my name there.
You for taking the question I wanted to talk a little bit about topline guidance.
You outlined some.
The expectations for the usual sales dis synergies once the deal closes I'm just wondering how youre thinking about the first half of the year pre deal close any sort of people taking the eye off the ball maybe guidance contemplate some of that on a standalone basis, and then there's the kind of upside there.
And play out any insights you can provide there would be helpful. And then secondarily on.
On new products Youre still talking about the.
Total joint application from a robotics perspective, but in the past you've detailed maybe some product gaps or need to improve the underlying implant systems in total joint.
Is it fair to expect that we should see some of those new product launches come along ahead of the robotic launch. Thank you.
Alright, Thanks for the question I'll take the first part and hand, the second part over to Dan.
As it relates to guidance Standalone guidance and looking at 2023.
Don't see or we don't see anybody taking their eye off the ball, we are happy with what we've seen thus far in the quarter.
Sales are coming <unk>.
Meeting expectations, So I don't see anyone taking their eye off the ball. It is we are running a business and we're moving the business forward as we had intended prior to deal announcement.
What I would say on your second question is we will launch out a robot that will have a knee application. We're working on other applications now.
I would not think that youre going to see them come out before the knee application you. My initial thoughts I think it will start out with me, we're going to migrate into hip as we've said and then we have the ability to move into other applications over time that way.
Thank you.
Thank you.
Yes.
Our next question comes from the line.
Of Mathew Blackman of Stifel. Your question. Please Matthew.
Hi, its Matt Blackman from Stifel. Thank you for taking my question just one just thinking about the inputs you put into your deal model revenue Dis synergies synergies, where do you think there is the most flex or maybe better said where is the most opportunity and perhaps the most risk as you think about those different inputs.
Okay.
So great question, a little bit of a teasing question, we probably don't want to answer, but what I would tell you is I feel like we were aggressive in what we think the dis synergies would be in light in what we think the synergies will be we're conservative group by nature, If you know us.
And so I do think that we might be able to retain better than we planned and dis synergies and I think that we could probably beat if we have the right focus on our synergies within those sales areas, but not product specific just in general.
Alright I appreciate it thank you.
Thank you.
Our next question.
It comes from the line of Richard No Winter of <unk>. Please go ahead Richard.
Hi, Thanks for taking the questions.
Two for me just.
On the deal.
You mentioned minimal customer overlap I was hoping you could elaborate on what the threshold was for defining.
Overlap for surge in between the two companies essentially just trying to gauge whether a surgeon that you consider.
Not to be overlapped.
Necessarily translated into minimal disruption.
In the region, especially in the way the territories are going to be grown because you still need to split those territories. So just hoping you could maybe elaborate a little bit on that.
Yeah, Rich I'll do that in a certain way theres not a lot I can reveal right now with where we're going on this but I will give you what I think we can do along these lines.
So during the diligence of course all of this data was blinded and it was done by bankers not us and we traced it down to a surgeon level as the most logical way to go and what we found is.
We had the vast majority is complementary in what that definition of complementary is is that some EMEA were up 100%, 80%, 75% of a surge in by themselves and then it was kind of after that maybe if you're 50 50 or less debt that would be the overlap and so what we found is kind of I can't.
We revealed this but I would say extremely high in the nineties.
The ability to match up now as we unblinded that perhaps we see it differently, we adjust we look and go but even with a surge in overlap very well could be that the surgeon is using new base of pedicle screws in our inner body or vice versa. So it may not be a product conflict the thought being that even along those lines where that.
Is the case, we can decide between those reps what's best.
One keep the surgeon do they both keep it that way our goal is to maintain all of the reps we have enough space enough growth enough opportunity to do this so it's not really about a rep rationalization and what we're signaling out to the market is we believe that this is a very favorable thing for the deal that will minimize disruption.
Got it and then.
I think you had referenced the new augmented reality headset product launch in 2023 on your last conference call. Just curious if that's still on track and what the timing might be there.
I am speaking to you through it right now rich not kidding.
No listen it's on it's on track.
I think that again and can never say for sure what's going on with the FDA in the filings, but I would tell you that we signaled that with the thought that it would be out towards the latter part of this year and by no means will we take our eye off that ball is going to be a great player for us to get out and continue to differentiate with with this type of approach. So it's one of the top priorities.
Okay and anything in there for for from a guidance standpoint baked in.
Our how we always answer that right. So in total we feel good it's one of the levers that we'll look at but it is something that would not take us off our ability to achieve our numbers, whether it came to market or did not.
Thanks, a lot.
Thank you.
Again to ask a question. Please press star one on your telephone again Thats Star one one on your telephone to ask a question.
Our next question comes from the line of drew Ranieri of Morgan Stanley . Your question. Please.
Hi, Thanks for taking the question just one on international I think in your prepared comments, you said international extra Pan was up 20% year over year can you maybe give us a little bit more detail about the OLED number with Japan, and just comment on any kind of key moving drivers there in the international market. It seemed like from the acquisition call you are putting a.
A lot of emphasis on the global reach of the two companies. So.
More detail that you could share there would be great. Thank you.
Okay. Thanks. Thanks for the question. So as we look at International did Japan sales were down there is obviously some currency impacts in there as well, but what we really saw as we got to the back end of the quarter is touches on the stabilization that Dan commented on earlier that as we get into 2023, we expect to start to see this business to move forward and grow.
Okay.
Thank you with no further questions. This concludes the Globus medical fourth quarter and full year 2022 analyst call. Thank you for your participation you may now disconnect.
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