Q2 2024 Globus Medical Inc Earnings Call
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Operator: Welcome to Globus Medical's second quarter 2024 earnings call. At this time, all lines will be on mute, and a Q&A session will be held after the prepared remarks. I'll now turn the call over to Brian Kearns, Senior Vice President of Business Development and Investor Relations. Mr. Kearns, please go ahead.
Speaker Change: Welcome to Globus Medicals second quarter 2024 earnings call at this time, all lines will be on mute and a Q&A session will be held after the prepared remarks.
Speaker Change: I'll now turn the call over to Brian Kearns Senior Vice President of business development and Investor Relations. Mr. <unk>. Please go ahead.
Brian Kearns: Thank you, Steven, and thank you everyone for being with us today. Joining today's call from Globus Medical will be Dan Scavilla, President and Chief Executive Officer, and Keith Pfeil, Chief Operating Officer and Chief Financial Officer. This review is being made available via webcast, accessible through the Investor Relations section of the Globus Medical website at www.globusmedical.com. Before we begin, let me remind you that some of the statements made during this review are or may be considered forward-looking statements.
John: Thank you Stephen and thank you everyone for being with US today John.
Speaker Change: Joining todays call from Globus medical will be Danske, Debello, President and Chief Executive Officer and Keefer.
Speaker Change: Keith Pfeil, Chief operating officer, and Chief Financial Officer.
Speaker Change: This reuse is being made available via webcast accessible through the Investor Relations section of the Globus medical website at Www Dot Globus medical Dot com.
Speaker Change: 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 2023 fiscal year and our subsequent filings with the Securities and Exchange Commission identify certain factors that could cause our actual results to differ materially from those projected.
Brian Kearns: Our Form 10-K for the 2023 fiscal year and our subsequent filings with the Securities and Exchange Commission identify certain factors that could cause our actual results to differ materially from those projected in any forward-looking statements made today. Our SEC filings, including the $10K, are available on our website.
Speaker Change: Any forward looking statements made today.
Speaker Change: Our SEC filings, including the 10-K are available on our website.
Brian Kearns: We do not undertake to update any forward-looking statements as a result of new information or future events or developments. Our discussions 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. However, these non-GAAP financial measures should not be considered replacements for and should be read together with the most directly comparable GAAP financial measures.
We do not undertake to update any forward looking statements as a result of new information or future events or developments. Our discussions today will also include certain financial measures that are not calculated in accordance with generally accepted accounting principles or GAAP.
Speaker Change: We believe these non-GAAP financial measures provide additional information pertinent to our business performance.
Speaker Change: non-GAAP financial measures should not be considered replacements for and should be read together with the most directly comparable GAAP financial measures.
Brian Kearns: Reconciliations to the most directly comparable GAAP measures are available in the schedules accompanying the press release and on the Investor Relations section of the Globus Medical website. With that, I'll now turn the call over to Dan Scavilla, our President and CEO.
Conciliations to the most directly comparable GAAP measures are available in the schedules accompanying the press release and on the Investor Relations section of the Globus medical website with that I'll now turn the call over to Dan Scott Biller, our president and CEO.
Dan Scavilla: Thanks, Brian, and good afternoon, everyone. Globus delivered another robust post-merger quarter in Q2, with sales of $630 million, growing 116% or $338 million. Non-GAAP EPS was $0.75, increasing 20% versus the prior year, even with the 35% increase in outstanding shares driven by the merger. Free cash flow was $26 million for the quarter, and adjusted EBIT was 30% as we build our way back to the mid-30s range. Q2 was the second quarter where we integrated the Globus and Nuvesa field organizations into one formidable team, rolling out new reporting structures globally, combining product portfolios to create best-in-class offerings for our surgeons, reorganizing support organizations, implementing common systems, and beginning to unlock synergies to drive future growth.
Speaker Change: Thanks, Brian and good afternoon, everyone.
Speaker Change: <unk> delivered another robust post merger quarter in Q2 with sales of $630 million growing 116% or $338 million.
Speaker Change: non-GAAP EPS was <unk> 75 cents, increasing 20% versus prior year, even with the 35% increase in outstanding shares driven by the merger.
Speaker Change: Free cash flow was $26 million for the quarter and adjusted EBIT crossed 30% as we build our way back to the mid <unk> range.
Speaker Change: Q2 is the second quarter, where we integrated the globus invasive field organizations into one formidable team.
Speaker Change: Rolling out new reporting structures globally, combining product portfolios to create best in class offerings to our surgeons.
Speaker Change: Reorganizing support organizations implementing common systems, and beginning to unlock synergies to drive future growth.
Dan Scavilla: Through all of this change, Globus launched four new products in Q2, reaching nine product launches year-to-date, and has set the stage for a record number of launches in the coming months. These results are testament to our incredible team working tirelessly around the clock to drive integration, overcome challenges, and create scalable solutions so that we can reach steady state quickly and shape the markets in which we compete. Focusing on the performance of our business, US spine grew 100% in Q2, with notable gains across our product portfolio in expandables, biologics, MIS screws, and cervical offerings, including Simplify Cervical Disc.
Speaker Change: Through all of this change.
Speaker Change: <unk> launched four new products in Q2, reaching nine product launches year to date and has set the stage for a record number of launches in the coming months.
Speaker Change: These results are testament to our incredible team working tirelessly around the clock to drive integration overcome challenges and create scalable solution. So that we can reach steady state quickly and shape the markets in which we compete.
Speaker Change: Focusing on the performance of our business U S. Spine grew 100% in Q2 with notable gains across our product portfolio and expandable <unk>, biologics and <unk> screws and cervical offerings, including simplify surgical desk.
Dan Scavilla: This growth is driven by the strength of our combined product offering, competitive rep recruiting from prior quarters, and increased implant usage through robotic pull-through. Competitive rep recruiting remains solid through Q2, and the pipeline is growing. As mentioned in the last earnest call, now, more than at any point in our history, the most successful and tenured competitive professional reps are seeking to join our team. Competitive reps with over ten years of tenure, once a rarity to recruit, are seeing the power and future we can offer them as a destination of choice for innovation and growth. 2024 has the potential to be a record recruiting year.
Speaker Change: This growth is driven by the strength of our combined product offering competitive rep recruiting from prior quarters and increased implant usage through robotic pull through.
Speaker Change: Competitive rep recruiting remains solid through Q2 and the pipeline is growing.
Speaker Change: As mentioned in our last earnings call now more than any point in our history. The most successful and tenured competitive professional reps are seeking to join our team.
Speaker Change: Competitive reps with over 10 years of tenure once a rarity to recruit are seeing the power in future. We can offer them as a destination of choice for innovation and growth.
Speaker Change: 2024 has the potential to be a record recruiting year.
Dan Scavilla: On the product development front, we continue to execute, launching four new products from our prolific R&D pipeline. The combined product development team has hit its stride with meaningful collaboration in developing and launching new products, and we expect this to continue at this accelerated pace due to improved development processes. I want to share these meaningful launches with you.
Speaker Change: On the product development front, we continue to execute launching four new products from our prolific R&D pipeline.
Speaker Change: <unk> product development team has hit its stride with meaningful collaboration and developing and launching new products and we expect these to continue at this accelerated pace due to improved development processes.
Speaker Change: I wanted to share these meaningful launches with you.
Dan Scavilla: Reval-S is an expandable standalone ACDF spacer system delivered at a minimized height to reduce impaction and tissue retraction while providing controlled, continuous expansion to help restore disc height and sagittal balance. In situ bone delivery allows for additional bone graft to be introduced after expansion to help promote fusion. Highline is a versatile posterior band fixation system for the cervical and thoracolumbar spine, featuring robust implants and advanced instruments. The system is engineered to help achieve strong reduction during deformity correction, provide reliable stabilization for compromised anatomy, and facilitate ligament augmentation. The X-Lift prone system is yet another testament to our commitment to advancing X-Lift procedural solutions with dedicated instruments and positioner combined with eGPS and e3D.
Speaker Change: <unk> is an expandable standalone ACF spacer system delivered at a minimized height to reduce impaction and tissue retraction by providing controlled continuous expansion to help restore disguise and sagittal balance.
Speaker Change: And sorry to bone delivery allows for additional bone graft to be introduced after expansion to help promote fusion.
Speaker Change: Hi line is a versatile post your band fixation system for the cervical interact with lumbar spine, featuring robust implants and advanced instruments.
Speaker Change: Our system is engineered to help achieve strong reduction during deformity correction provide reliable stabilization and compromise anatomy and facilitate ligman augmentation.
Speaker Change: The excess prone system is yet another testament to our commitment advancing excellent procedural solutions with dedicated instruments and physician or combined with <unk> <unk> de <unk>.
Dan Scavilla: The system is designed to improve the safety, reliability, and reproducibility of the XLIF procedure, emphasizing secure patient positioning, MaxS4 retractor stability, and surgeon ergonomics. The Audubon Pro Instruments and Digital Targeting System are next-generation instruments for trochanteric nailing that allow for streamlined surgical workflow. The procedural targeting solution features a minimally invasive aiming handle, targeted anti-rotation wires, self-retaining sleeves, and tactile compression, while the universal nailing instruments improve efficiency for the Audubon Pro-Troke Nail and the Audubon Evero Femoral Nail platform.
Speaker Change: The system is designed to improve the safety reliability and reproducibility of the excellent procedure.
Speaker Change: Emphasizing secure patient positioning and access for retractor stability and surgeon ergonomics.
Speaker Change: Autobahn pro instruments and digital targeting system, our next generation instruments for Trochanteric nailing that allow for a streamlined surgical workflow.
Speaker Change: Procedural targeting solution features and minimally invasive aiming handle targeted anti rotation wires self retaining sleeves and tactile compression.
Speaker Change: While the universal nailing instruments improve efficiency for the Autobahn approach oak now and the Autobahn <unk> femoral nail platforms.
Dan Scavilla: In addition to driving growth from the nine products we've launched so far this year, I look forward to sharing future impact with new launches as we go through the rest of 2024. Enabling technology sales for $37 million, up 6% versus prior year, Q2 was the highest number of robot unit placements since launch, growing 59% over prior Q2, including the acceleration of our rental program where, unlike a unit sale, we recognized revenue over the rental contract life.
Speaker Change: In addition to driving growth from the nine products. We've launched so far this year I look forward to sharing future impact with launches as we go through the rest of 2024.
Speaker Change: Enabling technology sales were $37 million up 6% versus prior year Q2 was the highest number of robot unit placements since launch growing 59% over prior Q2, including the acceleration of our rental program, where unlike a unit sale, we recognize revenue over the rental contract life.
Dan Scavilla: Robotic procedures continue to accelerate, growing 26% versus the prior year and exceeding 77,000 robotic procedures performed since launch. We are adding new VESA products such as Reline and Modulus to our enabling tech platform to expand customer options and plan on offering these later this year.
Speaker Change: Robotic procedures continued to accelerate growing 26% versus prior year and exceeding 77000 robotic procedures performed since launch.
Speaker Change: We are adding invasive products, such as <unk> and modules to our enabling tech platform to expand customer options and plan on offering. This later this year.
Dan Scavilla: Exiting Q2, our robot pipeline is healthy, and we are poised to have a great second-half robotic performance. We also continue to penetrate the market with Excelsius 3D imaging systems, and market interest remains high for E3D as we enter Q3. Our international spinal implant business delivered record sales in Q2, growing 200% on a constant currency basis compared to the prior year. Globus increased investment in our international business for people, products, and sets, and we have achieved consistent above-market growth throughout these regions as a result. We have yet to fully harness the power of the combined Globus Innovative Product Offerings internationally and feel this will be a significant tailwind moving forward.
Speaker Change: Exiting Q2, our robot pipeline is healthy and we are poised to have a great second half robotic performance.
Speaker Change: We also continue to penetrate the market with Celsius, three D imaging systems and market interest remains high for <unk> as we enter Q3.
Speaker Change: Our international spinal implant business delivered record sales in Q2 drove 200% on a constant currency basis compared to prior year Globus increased investment in our international business for people products and sets and we have achieved consistent above market growth throughout these regions as a result.
Speaker Change: We have yet to fully harnessed the power of the combined globus innovative product offerings internationally and feel this will be a significant tailwind moving forward.
Dan Scavilla: The combined trauma and NSO business delivered 321% growth for Q2, driven by the continued strong performance and market penetration of our base trauma business, combined with the fast uptake of Nuvesa specialty orthopedic growth now. The combination of these two businesses is one of the strengths of our merger, offering a broad range of products and market-changing innovation. Late in Q2, we received FDA 510K clearance for two significant components of our arthroplastics business.
Speaker Change: The combined trauma and NSO business delivered 321% growth for Q2, driven by the continued powerful performance and market penetration of our base <unk> business combined with the fast uptake of the invasive specialty orthopedic growth now.
Speaker Change: The combination of these two businesses is one of the strengths of our merger offering a broad range of products and market changing innovation.
Speaker Change: Late in Q2, we received FDA five 10-K clearance for two significant components of our arthroplasty business.
Dan Scavilla: Joining the already best-in-class Excelsius ecosystem is the ExcelsiusFlex Robotic Navigation Platform, paired with the ExcelsiusFlex TKA, a total neoarthroplasty application designed to enable consistent, accurate cuts while maintaining surgeon flexibility and tactile feel. It accommodates varying surgeon preferences by offering imageless and CT-based workflows in ergonomic, unrestricted, jiggless Excelsius Flex TKA is engineered to restore control of the sleeve and the procedure to the surgeon while active tracking is engaged. The system features advanced registration and planning algorithms to enable a streamlined and efficient procedure along with a simplified user interface.
Speaker Change: Joining the already best in class <unk> ecosystem is the <unk> flex robotic navigation platform paired with the <unk> flex Pka, a total knee arthroplasty application designed to enable consistent accurate cuts, while maintaining surgeon flexibility and tactile feel.
Speaker Change: It accommodates various surgeon preferences by offering Imageless and Cte based workflows and ergonomic unrestricted gigabits resections Excelsior Flex Teekay is engineered to restore control of the salt and the procedure to the surgeon active tracking is engaged the system features advanced registration and planning algorithms to enable a streamlined and <unk>.
Speaker Change: Fishing procedure, along with a simplified user interface.
Dan Scavilla: The Actify 3D Total Knee System is a contemporary total knee solution that pairs cementless reconstruction with operative efficiency and anatomic fit. Compatible with manual or robotic-assisted workflows, ActiFi 3D is engineered to combine implant endurance and a porous lattice interface for cement-less fixation, addressing surgeon preference and variant patient anatomy.
Speaker Change: <unk> total knee system is a contemporary total knee solution that person mentalists reconstruction with operating efficiency and anatomic fit.
Speaker Change: Compatible with manual or robotic assisted <unk> is engineered to combine implant endurance and a porous lattice interface for cement less fixation addressing surgeon preference and variant patient anatomies.
Dan Scavilla: Launch programs have begun for these products as we continue to expand our direct sales force to penetrate the market later this year. Invasive clinical services are a key element in our proceduralization strategy and cross-selling synergies, growing 5% on a pro forma basis. Globus is investing in expanding our neuromonitoring inventory worldwide to ensure that NCS neuromonitoring is used in more of our procedures.
Speaker Change: Launch programs have begun for these products as we continue to expand our direct sales force to penetrate the market later this year.
Speaker Change: Nuvasive clinical services is a key element in our procedure organization strategy and cross selling synergies growing 5% on a pro forma basis.
Speaker Change: <unk> is investing in expanding our neuro monitoring inventory worldwide to ensure that NCS neural monitoring is used in more of our procedures. Looking ahead. We began investing in next generation systems that will expand surgical applications add more signal analytics automation and seamless integration with our enabling technologies.
Dan Scavilla: Looking ahead, we've begun investing in next-generation systems that will expand surgical applications, add more signal analytics, automation, and seamless integration with our enabling technologies. Moving into integration status, we continue to invest in our field sales teams with product cross-training, enabling tech hands-on experience, and significant investment in key product sets so they can increase their growth opportunities and offerings to their surgeons through cross-selling. We have implemented common operating systems in the U.S., allowing us to work as one company and one team. International system synergies will start later this year.
Speaker Change: Moving on to integration status, we continue to invest in our field sales teams with product cross training, enabling tech hands on experience and significant investment in key product sets. So they can increase their growth opportunities and offerings to their surgeons through cross selling.
Speaker Change: We have implemented common operating systems in the U S, allowing us to work as one company and one team International system synergies will start later this year.
Dan Scavilla: In product development, we are carrying forward the rich history of rapid development as an industry thought leader as we work with our surgeon partners to address on-the-clinical needs. From pioneering the XLIF procedure that is now the gold standard of lateral surgery, leading the market in expandable spacer technology, and developing the best spinal robot with the most advanced interoperative CT imaging, we are working to create surgical proceduralization of all key spine surgeries to create the standard of care across the spine industry.
Speaker Change: In product development, we are carrying forward the rich history of rapid development as an industry thought leader as we work with our surgeon partners to address unmet clinical needs from pioneering the excellent procedure that is now the gold standard of lateral surgery, leading the marketing expandable spacer technology and developing the best spinal robot with the most advanced <unk>.
Speaker Change: <unk> imaging, we are working to create surgical procedure realization of all key spine surgeries to create the standard of care across the spine industry.
Dan Scavilla: Our intellectual property portfolio has been number one in the spinal industry for the last decade, and Globus is committed to further expanding this lead, especially in the enabling tech arenas, as we continue to be at the forefront of imaging, navigation, and robotics. To accomplish this, we remain committed to continuing existing projects and will have an ongoing PD presence on the West Coast focused on spine and neuromonitoring solutions. I believe our long-term prospects as a leading innovator have never been stronger.
Speaker Change: Our intellectual property portfolio has been number one in the spinal industry for the last decade, and Globus is committed to further expanding asleep, especially in enabling tech arenas as we continued to be at the forefront of imaging navigation and robotics.
Speaker Change: To accomplish this we remain committed to continuing existing projects and we will have an ongoing PD presence on the west coast focused on spine and neuro monitoring solutions I believe our long term prospects as a leading innovator has never been stronger.
Speaker Change: We continue to enhance our surgeon engagement programs to increase our impact with surgeons and further strengthen how we interact with them in all aspects of our business through professional affairs scientific affairs marketing and education.
Speaker Change: In the second quarter alone we.
Speaker Change: We trained over 400 surgeons globally through Merck programs in case observations and in addition posted approximately 250 surgeon in house visits or Vips, where they learn about products and programs through hands on training.
Speaker Change: As you can see from this quarter's financials synergies have been identified in actions have begun to be realized for benefits focusing on out of pocket spending and prioritizing investments to match future growth plans.
Speaker Change: In house organizational structures have been implemented and we're working towards reaching steady state in the second half of the year.
Speaker Change: I believe the potential for Globus has never been greater it's up to us to harness our resources and shape the future of our markets.
Speaker Change: Have at our fingertips everything we need to realize this.
Dan Scavilla: I want to thank the worldwide Globus team for your dedication and support, delivering an incredible quarter and furthering the pathway to becoming the preeminent musculoskeletal technology company in the world. Digging into the second quarter, revenue was $629.7 million, growing 115.9% as reported and 117.3% on a constant currency basis. They adjusted growth to 113% with one more selling day in the U.S. and international as compared to Q2 of 2023. Shifting attention to integration, we continue to invest in our field sales team with high investments in new sets, product cross-training, and enabling tech hands-on experience so we can drive increased commercial growth opportunities by providing expanded offerings to their surgeons.
Speaker Change: I want to thank the worldwide Globus team for your dedication and support delivering an incredible quarter and furthering the pathway to becoming the preeminent muscular skeletal technology company in the world.
Speaker Change: I will now turn the call over to Keith.
Keith: Thanks, Dan and good afternoon, everyone.
Keith: Momentum at Globus continues to grow as we've completed another impressive quarter since the closing of our transformational merger on September one 2023.
Keith: Commercially our teams at forge deeper bonds, we continue on our path of growth operationally. We've remained heads down to realize efficiencies of plans put into place while preparing for the next wave of investments to drive greater efficiencies looking ahead.
Speaker Change: Our drive for profitable growth and prudent cost control remains energizing our culture as we chart our path forward in the second quarter results demonstrate our steadfast commitment.
Speaker Change: Digging into the second quarter revenue was $629 7 million growing 115, 9% as reported and 117, 3% on a constant currency basis.
Speaker Change: Adjusted growth was 113% with one more selling day in the U S and international as compared to Q2 of 2023.
Speaker Change: Our Q2 GAAP net income was $31 8 million, resulting in 23 of fully diluted earnings per share.
Keith: Q2, 24, non-GAAP net income was $102 $7 million delivering 75 of fully diluted non-GAAP earnings per share.
Speaker Change: The second quarter non-GAAP net income grew 61, 5% over the prior year quarter, while earnings per share grew 20%. However, as Dan commented on earlier non-GAAP EPS was impacted by a 35% increase in diluted shares as a result of the merger.
Speaker Change: Q2, adjusted EBITDA was 32% and free cash flow was $26 $5 million.
Keith: Musculoskeletal revenue in the second quarter was $592 9 million growing 138% compared to the prior year quarter, driven primarily from the contributions of the new base of merger.
Speaker Change: On a pro forma basis, assuming invasive was in our prior period results musculoskeletal revenue grew three 7% versus the prior year quarter. This is a third consecutive quarter of pro forma muscular skeletal revenue growth driven primarily by our U S international spine businesses as well as our combined trauma portfolios.
Keith: Enabling technologies revenue grew five 8% in the second quarter compared to the prior year quarter revenue growth was strongest in the U S. Market. However, it was partially impacted by a higher mix of rentals during the quarter.
Speaker Change: Overall, our second quarter stands as our highest quarter ever for combined capital units and highest EPS robotic units move during a quarter, whether or not repurchase rental lease are volume based arrangement. As we look ahead, we remain well positioned to further penetrate the market with our suite of an epic Celsius technologies.
Keith: Our second quarter U S revenue was $499 5 million growing 103, 5% as reported compared to the prior year quarter.
Keith: On a pro forma basis U S revenue grew three 1% compared to the prior year quarter, driven by contributions from spine trauma and enabling technologies.
Keith: I call attention to the fact that we've experienced U S sales growth on a pro forma basis and each full quarter of results since the merger with new basis.
Keith: International revenue during the second quarter was $132 million growing 182, 3% on an as reported basis compared to the prior year quarter.
Keith: On a pro forma basis International revenue grew four 4% as reported led by strong implant uptake, partially offset by lower capital sales, primarily as a result of lower pulse unit sales.
Keith: Our growth of implant sales were strongest in the EMEA and Latam regions.
Keith: GAAP gross profit was 58, 7% in the second quarter of 2024 compared to 73, 8% in the prior year quarter.
Speaker Change: Consistent with commentary from previous quarters. The decline in gross profit is associated with the Nuvasive merger, namely step up amortization as a reminder, step up amortization is expected to end during our fiscal fourth quarter.
Keith: $238 1 million or 37, 8% of sales compared to $120 1 million or 41, 2% of sales in the second quarter of the prior year.
Keith: The increase in total SG&A dollars is directly a result of the invasive merger, partially offset by cost actions taken as well as fixed cost leverage on spending.
Keith: Looking ahead, our expectation is that full year SG&A expenses will improve 1% to two percentage points over the full year 2023, SG&A expense as a percentage of sales.
Keith: Net interest expense during the second quarter of 2024 was $2 3 million.
Keith: Compared to net interest income of $8 3 million in the prior year quarter.
Keith: The resulting $10 $6 million pre tax unfavorable impact is driven by the use of cash to fund an invasive line of credit pay down at merger close share repurchases related to our buyback plan and interest expense from the senior convertible note, which is assumed from invasive at merger close.
Speaker Change: The GAAP tax rate for the second quarter was 33, 2% compared to 22, 7% in the prior year quarter, driven primarily by higher valuation allowances on foreign losses, our non-GAAP tax rate during the second quarter was 24, 4%, we expect our full year non-GAAP tax rate to be in the range of 24% to 25%.
Keith: Moving over to cash and liquidity, our cash cash equivalents in marketable securities were $527 million at June 32024.
Speaker Change: Drive planned cost synergies faster, we're also working to consolidate volumes and orders with third party vendors to accelerate delivery times and drive cost savings to.
Keith: Memphis distribution center is now on a common operating system and becoming a larger part of the overall Globus business. All activities are progressing to plan and we are actively working now on synergies that will drive year, two and year three savings, we again reaffirm our commitment to achieving the $170 million in cost synergies.
Keith: We remain upbeat and confident with our results, thus far and expect an enduring focus on commercial growth and operational execution as we enter the back half of the year.
Keith: Based on that we are updating our previously provided guidance. We now expect 2020 for net sales to be in the range of 2.4 dollars 7 billion to $2 $49 billion and our fully diluted non-GAAP earnings per share to be in the range of $2 80 to $2 90 per share.
Keith: Our revised net sales guidance implies three 1% to three 9% growth over 2023 pro forma revenues of $2 $396 billion. The revised non-GAAP EPS guidance implies 27% to 25% growth over the prior year non-GAAP EPS of $2 32, Despite a high.
Speaker Change: Your share count due to the stock for stock merger.
Keith: We remain appropriately conservative with our projections so.
Speaker Change: New starts given given that things are going I would say better than expected simple.
Keith: A simple way to put it.
Speaker Change: Should we expect you to start updating those numbers maybe.
Speaker Change: For the full front to back integration and then also.
Speaker Change: At what point.
Speaker Change: Might you start to talk a little bit about the intermediate and long term opportunity here. So.
Speaker Change: So that's a look at the success of the first half and have greater ease going now.
Speaker Change: Kind of colors and super helpful. Thanks, So much.
Keith: Sure Matt This is Keith I'm going to take the first part of your question and Dan will take the second part so to your comment we've gotten off to a strong start I think messaging wise when we talked about when the deal was announced in February of 'twenty, three as well as when the deal closed in September we remain we remain very steadfast on the route to meet the merge.
Dan: Is your thesis of why we are bringing the companies together and with that the cost synergies that we identified in terms of the number of the $170 million as well as where we thought there would be cross selling opportunities for us to move forward.
Dan: To get to 30 for the full year, but I think we're going to work to get closer to that.
Speaker Change: Great. Thanks for that question.
Speaker Change: And then my follow up question I, just wanted to ask you what youre seeing on the capital side one of the large orthopedic competitors has talked about coming out with the spine robot at the end of the year.
Speaker Change: And another competitor recently received FDA approval for the spinal robot just talk about the market and the competitive landscape. Thanks, so much.
Speaker Change: Thanks, Rick I'll take that so a couple of things right keep in mind that we have been executing our long term, enabling tech plan and Theres nothing thats occurred that would have us deviate from that.
Speaker Change: We will take our existing technology and continue to expand its applications through procedure organization things, we've talked about openly with that as you recall one of the main drivers of the merger was to in fact increase our company total available market and create more areas for rapid penetration. So while we take any entrance seriously and we'll look at that there's nothing that's occurred.
Speaker Change: <unk> that has shifted the capital market in which we play or altered our plans at this point from where we're going.
Speaker Change: I would tell you I was very pleased with where we were in Q2 and with the portfolio. We're working on in Q3, it's one of the strongest and so we'll continue to execute and stay focused.
Speaker Change: Thank you.
Speaker Change: Please tracked along with low single digits with that and for the most part I would say, we're still adhere to that there's nothing that's occurred from the marketer from our growth that is either positive or negative along those lines.
Speaker Change: We say this all the time, we talk in the marketing as an assumption.
Speaker Change: My thought is that it's probably over the long term around 3% Theres certainly quarters that can be more or less with that but I would just tell you as we project out as a company and we look for the multiple years I still call that around the 3% range.
Speaker Change: With us in particular, I'm happy with where we are I think there are certainly puts and takes where we're strong in some areas and we certainly have other places where I think if we can penetrate the right way, we can even accelerate but just my long term guests would be around the three range I Couldnt tell you what I thought it was for first or second quarter. So far this year and Steve just one thing out one comment.
Steve: I would add to Dan is one of the things that we've historically looked at Globus is the introduction of new products to offset price I think with the first two quarters, you've seen us come to market with five new products in Q1 and another for this quarter that strategy of bringing new product to market is hitting and thats something that will help us offset prices, we see it now or in the future.
Speaker Change: Got it and then.
Speaker Change: Thanks, guys and then just wanted to pop on R&D expense.
Speaker Change: Okay, super helpful. Maybe a quick follow-up on on that. So do you view 12 months as kind of the the milestone?
Speaker Change: You know, what we've done, we went very fast since this deal was announced.
Speaker Change: Those comments should help to indicate that we're getting more and more confident as we look ahead.
Dan Scavilla: Yeah, what I would build up to is certainly that we're looking to reach steady state by the end of the year. So I would tell you that it's more of a 12 to 18 month type of approach for us to get where we want to be. But keep in mind that even though we're in a strong spot right now, this is a point where we lean forward and push harder, not step back. We've got a lot of heavy lifting to do, and we're mindful of that we want to be perfectly conservative. We want to make sure we drive this well beyond where it needs to be to get this done right.
Unnamed Analyst: Afternoon, thanks for taking that question. Dan, I know you said you didn't want to talk about next year too much here, and I understand that. I just, as I look at the street and where we're all modeling things for next year, it's about a $180 million absolute increase. If you go back and look at GMED standalone and NUVA standalone, each of you would do something like $80 million and then $60 million. So that's about $140 million.
Speaker Change: Thank you.
Speaker Change: Some of the legacy and invasive products had a longer lead time because many of those products came from third-party vendors. As those products start to come in, that will drive greater ability for both legacy teams to cross-sell because there will be more product on hand.
Speaker Change: I think so. It's certainly 12 months, and I would say 18 months up to the limit, right? So we have activities that are occurring, and I just think that by that 18-month period, we'll know for certain where we are. There's still a lot of things in play. Not worried about anything, but just saying, you know, as we continue to work through,
Speaker Change: That's very fair and thank you very much. We'll jump back in queue.
Speaker Change: was we will put newvasive products on there. For example, we're kind of modular, so it would be the two obvious, a pedicle screw and an inner body type of thing. And when we get that software and the things done, which we're in the process of doing,
Speaker Change: Okay, understood. And just on that point, I think you had already started engaging some of these accounts in the first quarter, maybe even started quoting some of them. Were there any placements or sales this quarter, just out of curiosity? And then I do have one follow-up.
Dan Scavilla: There was one sale that we closed thus far related to the Legacy NUVA account. You know, as I think about the quoting volume and really the pipeline, there's strong interest on both sides, and to me, the amount of quotes we're putting out continues to increase.
Speaker Change: There was one sale that we closed thus far related to Legacy NUVA account. You know as I think about the quoting volume and really the pipeline there's strong interest on both sides and to me the amount of quotes we're putting out continues to increase.
Speaker Change: Okay, that's great. My final question, I swear.
Speaker Change: You know, this is a little bit off the reservation, but...
Speaker Change: I think maybe one of the underappreciated pieces of the portfolio that...
Speaker Change: We're all going to probably see more and more about, is this the power to launch? I'm just hoping maybe you could frame that opportunity for us and how you're thinking about that contributing into all the other sort of growth vectors you have over the next several years.
Unnamed Analyst: Yeah, we'll do it. And thanks. It is one of the best
Speaker Change: Yeah, will do, and thanks. It is one of the things I've said before that I'm most excited about this year. We have a great, as you know, cadence right now with product launches.
Speaker Change: But that, in particular, we consider to be transformational. The fact that you can go out with that bone removal without soft tissue damage...
Speaker Change: allows the surgeon to move freely where they want, to not be restricted by artificial boundaries or other type things that can hinder what they want to do. And so not only does it create that freedom.
Speaker Change: and put more into the hands of the surgeon, I think that it can also make it safer by not having to roll tears or other type of items that can occur. So I think that that in itself, as we scale up, and there's a really a lot of hot interest for it in the field, will continue for the years to come, and it will be one of the main growth drivers that we have.
Speaker Change: Thanks so much.
Speaker Change: Thank you.
Speaker Change: Our next question comes from the line of Ryan Zimmerman of BTIG. Your line is now open.
Ryan Zimmerman: Hey, thanks for taking our questions, guys. I want to ask, you know, a lifetime ago, Dan,
Ryan Zimmerman: You know, you talked about robotics and the ability for pull-through. And this was, you know, back in, I think, even 2018, 2017, when Excelsius was just launching.
Speaker Change: And at the time, we thought about one incremental case per week, and we kind of built an assumption around the incremental volumes that Globus would get from robotic adoption.
Ryan Zimmerman: You know, fast forward today and you've added a lot more to Excel tips.
Speaker Change: And so, I'm wondering if you could kind of just...
Ryan Zimmerman: You know, opine a little bit on, you know, that pull-through impact, kind of what you're seeing in the field today versus maybe when robotics was more in its infancy, and whether our assumption of, you know, one incremental case as a result is maybe stale at this point.
Speaker Change: Thanks Ryan. So I what I think is this
Keith Pfeil: When you place a robot, we see, and we continue to see, a lift in the implant pull-through, whether that be more procedures or more usage, or several surgeons interested in doing that. That's kind of what we started with assumptions, and that remains today, and there can be a whole range depending on where you are and what they're doing, but, you know, I would say if you want to pick even a 20% lift for a period of time that occurs, possibly even more,
Ryan Zimmerman: of pull through as it's new. Now obviously that neutralizes over time. It's not gonna create each account that way.
Ryan Zimmerman: But the good news is the robotic market in total is still in its infancy and very underpenetrated in total.
Ryan Zimmerman: And so there's still a lot of that growth that can occur throughout, and I think that's really where it is. So the assumptions, whether it be one case or not, I don't know because it depends on how many cases they're using. But if you pick something where you'd say conservatively 15 to 25 percent of pull-through in that first year and then remaining,
Ryan Zimmerman: That's what I think you can model in and see as we go forward and what we've experienced since launch.
Keith Pfeil: Okay.
Keith Pfeil: Very helpful. Maybe turning to Keith, you know, at some point you're starting to generate some really nice free cash flow, you know, again, before the merger you generated a lot of cash flow.
Keith Pfeil: What are you going to do with the cash, Keith, and how should we think about your capital allocation, especially as we're kind of lapping this merger now?
Keith Pfeil: That's a great question. So I think about capital allocation, you know, number one, Globus is going to maintain strong balance sheets, part of our cultural culture and will remain.
Keith Pfeil: Capital allocation is going to be focused on internal development from an R&D perspective, machinery and equipment. We've talked a lot about driving additional insourcing in the near term here.
Keith Pfeil: As I think about longer term, I would absolutely think that we're going to continue to look at M&A opportunities within our core of musculoskeletal. I don't see us venturing outside of musculoskeletal, but as we move the business forward after we've digested this merger, I would expect us to become active again on the M&A front.
Keith Pfeil: Thank you.
Keith Pfeil: Thank you.
Keith Pfeil: Thank you.
Keith Pfeil: Our next question comes from the line of Richard Newitter of Truist. Your line is now open.
Speaker Change: And revenue was up 6%, but you guys had a lot of unit placements of robot record robot unit placements. So.
Richard Newitter: I guess specifically.
Richard Newitter: What what's driving the acceleration.