Q1 2025 Globus Medical Inc Earnings Call
Okay.
Speaker Change: Welcome to the Globus Medicals first quarter 'twenty 25 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: To ask a question during the session you will need to press star one one on your telephone you will then hear an automated message advising your hand is raised to withdraw your question. Please press star one again.
Brian Kearns: I will now turn the call over to Brian Kearns Senior Vice President of business development Investor Relations. Mr. <unk>. Please go ahead.
Brian Kearns: Thank you Brenda 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 operating officer, and Chief Financial Officer.
Speaker Change: This review is being made available via webcast accessible through the Investor Relations section of the Globus medical website at 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 2020 for 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.
Speaker Change: <unk> and any forward looking statements made today.
Our SEC filings, including the 10-K are available on our website.
Speaker Change: 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.
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.
Dan <unk>: 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 <unk>, our president and CEO.
Speaker Change: Thanks, Brian and good afternoon, everyone. Glover has had a flat quarter in Q1, finishing slightly down in sales with negative <unk>, 8% growth versus prior year on a constant currency basis.
Speaker Change: Drivers were softer enabling tech sales against difficult comp chimp.
Speaker Change: Temporary integration related supply chain disruption and timing of international distributor orders, partially offset by continued strengthening momentum of the U S spine business.
Speaker Change: Revenue for the quarter was $598 million non-GAAP EPS was <unk> 68 cents, increasing 9% versus prior year against higher diluted shares and a six one time 2024 E. P. S gain not repeated in 2025.
Speaker Change: Free cash flow was $141 million, increasing $117 million or 493% versus prior year.
Speaker Change: We returned to the debt free status in Q1 paying off the remainder of the nearly $900 million debt inherited from the new base of merger in January enough cash to pay for the Q2 never a acquisition while investing in the ongoing business without interruption.
Speaker Change: In addition.
Speaker Change: We launched two new products in Q1 that will aid in driving market penetration.
Speaker Change: Since the new visa deal closed in September of 2023, we've cumulatively added over $1 billion in incremental sales.
Speaker Change: $615 million in free cash flow and executed over $500 million of share repurchases, reducing deal dilution more than 20%.
Speaker Change: Well Q1 sales were flat.
Speaker Change: We're already seeing stronger results in Q2 throughout the business as we remediate supply chain disruptions fill open distributor orders in close robot deals. We will continue to focus on the long game investing and sustained profitable growth and using our financial strength and discipline to accelerate the top line results, while continuing to deliver strong EPS and free cash flow.
Speaker Change: Moving into the performance of our business areas U S. Spine grew 2% in Q1 with gains across our product portfolio and expandable and my ask screws lateral and <unk> platforms.
Speaker Change: The corresponding growth is driven by several factors, including a high retention rate at all levels of our field sales team the strength of our combined product offering.
Speaker Change: Increased product cross selling an implant pull through from robotic procedures.
Speaker Change: U S Q1 results were impacted by temporary integration related supply chain disruption and a planned reduction in third party biologic sales, resulting from expected changes in the reimbursement landscape for wound care products, including some of our tissue products.
The reduction of third party Biologics was included in our annual guidance and the supply chain continues to strengthen in Q2.
Speaker Change: Exiting April we delivered above market growth in our U S spine business I feel positive about the quarters ahead.
Speaker Change: Competitive rep recruiting was strong in Q1 and the overall recruiting pipeline remains active as we enter Q2 positioning us for another meaningful recruiting year.
Speaker Change: As mentioned earlier, we launched two new products in Q1.
Speaker Change: The co here, a lift spacer with integrated screw fixation builds on the clinical success of our co here line now.
Speaker Change: Now offering surgeons, a porous peek solution for anterior lumbar interbody fusion procedures.
Speaker Change: Our cohere proprietary porous architecture supports bone in growth and reduces fibers encapsulation, while maintaining the radiolucency needed for precise inter operative placement and post operative fusion visualization.
Speaker Change: The cohere aerospace or meet surging demands for improved osseointegration without sacrificing imaging clarity or mechanical performance. This expansion further establishes our leadership in advanced materials science.
Speaker Change: They rely on a GPS fixation system deliver solutions for open minimally invasive and hybrid procedures with pre assembled and modular implants paired with versatile instruments to address both degenerative conditions and complex deformities effortlessly inefficiently.
Speaker Change: The integration of the realigned fixation system with Celsius, enabling technology suite creates a powerful synergy of trusted reliability and innovation delivering a comprehensive solution for surgeons, while advancing our mission to help improve patient lives.
Speaker Change: The following <unk> systems are now compatible with <unk> technologies.
Speaker Change: Your line open modular mass mass reduction small stature mass midline every line cervical.
Speaker Change: The R&D pipeline remains rich and I look forward to another year of meaningful launches improving outcomes as we strive to develop solutions to address unmet clinical needs.
Speaker Change: Moving to enabling technology sales for the quarter were $22 million, a decrease of 31% against a record prior year comp.
Speaker Change: Capital sales tend to fluctuate among quarters with Q1, historically being slower, but we didn't close the deals we planned on in Q1 in the face of market uncertainty.
Speaker Change: To our knowledge, we did not lose any pipeline deals to competition and expect to close active deals in the upcoming quarters.
Speaker Change: The deal pipeline is robust in Q2 is off to a good start with several robot in imaging system deals closed in April and May.
Speaker Change: Robotic procedures performed since launch surpassed 100000 procedures globally in Q1 and continued to accelerate.
Speaker Change: Growing 6% versus prior year, continuing to create increased implant pull through.
Speaker Change: Our international spine implant business grew 1% in Q1 on a constant currency basis impacted by the timing of distributor orders and temporary supply chain disruptions. We are accelerating growth in Q2, as we reduced the back orders in several key markets.
Speaker Change: The combined trauma and NSO business declined 8% in Q1, driven by integration related supply chain disruption related to facility validation.
Speaker Change: This was partially offset by continued strength in our core trauma, which did deliver 34% growth for the quarter to.
Speaker Change: The supply chain disruptions have been remedied and product is being released for sale to the markets. We're seeing the overall trauma and NSO growth returned to high levels in Q2.
Speaker Change: In April.
Speaker Change: We completed the purchase of all shares of the never Corporation for an all cash transaction of $250 million.
Speaker Change: The acquisition of never further expands our reach into the musculoskeletal market, adding an additional $3 billion market space for us to compete and grow.
Speaker Change: We believe the paresthesia free pain relief enabled by high frequency technology offers a clinically superior solution that is altering the standard of care for patients suffering from chronic pain.
Speaker Change: <unk> technology has potential beyond its current application to benefit our cranial enabling technology next.
Speaker Change: Next generation spinal implants, adaptive AI painful diabetic neuropathy and other areas of our business.
Speaker Change: <unk> patent portfolio strengthens our already best in class Musculoskeletal innovation suite by Globus as scale and customer base will accelerate market penetration of the differentiated high frequency technology.
Speaker Change: We see this move as an expansion of our continuum of care and complementary to our current spinal portfolio offering.
Speaker Change: The strong and dedicated Neuromodulation sales force will be able to leverage our existing spine team to drive uptake and penetration while our spine team can offer more solutions to their surgeons.
Speaker Change: <unk> financial strength to accelerate investments in neuromodulation to expand existing product reach and future product development.
Speaker Change: Combining never went to globus as existing infrastructure will improve the profitability and cash flow of the <unk> business generating more cash for future investments in growth.
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. We have at our fingertips everything we need to realize this I want to thank the global team worldwide for your dedication and support building the pathway to becoming the preeminent muscular skeletal technology company in the world.
Keith: I will now turn the call over to Keith.
Keith: Thanks, Dan and good afternoon, everyone.
Speaker Change: On Q1, our quarter delivered a mixed set of results while revenue was down slightly to the prior year quarter, we saw a meaningful expansion in profitability and cash flow. We continue to make disciplined progress across our strategic and operational pillars, which will fuel our long term growth.
Speaker Change: This afternoon, my comments will focus on Q1 performance operational updates and impacts discussed and never acquisition.
Speaker Change: Slight tariffs and potential impacts and comment on insights as to our performance for the remainder of 2025.
Speaker Change: We view many of the Q1 impacts are short term and are encouraged by the good start we've seen across our business in Q2, now, let's turn our discussion to the first quarter.
Speaker Change: First quarter revenue was $598 1 million declining one 4% as reported and down eight tenths of a percent on a constant currency basis over the prior year quarter as Dan mentioned earlier. The main driver was software, enabling technology sales as well as temporary integration related supply chain disruption and the timing of international distributor orders.
Speaker Change: Which were partially offset by growth in U S spine.
Speaker Change: Our Q1, GAAP net income was $75 $5 million translating into fully diluted GAAP earnings of 54 cents per share growing 59 versus the prior year quarter due mainly to lower merger related costs Q1, non-GAAP net income was $94 $8 million, resulting in 68 of fully diluted earnings per share or an eight five.
Speaker Change: 5% as reported improvement versus the prior year quarter.
Speaker Change: In the prior year quarter, I highlighted a one time <unk> <unk> favorable noncash adjustment related to the useful lives of assets acquired from the invasive merger. Excluding this onetime favorable adjustment in the prior year quarter operationally, our Q1, 'twenty five non-GAAP EPS improved 11, or 19, 5% versus Q1.
Speaker Change: <unk> for.
Speaker Change: The earnings improvement is driven by synergy capture partially offset by lower revenue Q1 free cash flow was a record $141 $2 million.
Speaker Change: Musculoskeletal sales in the first quarter of 2025 or $575 $9 million essentially flat to the prior year quarter.
Speaker Change: The U S. Spine grew two 2% it was offset by declines in other areas of musculoskeletal, including neuro monitoring wound care and the timing of international distributor orders. In addition, temporary supply chain issues related to manufacturing integration impacted core spine and trauma.
Speaker Change: The neuromodulation packages driven by a change in reimbursement approach by a large insurance provider, though case volumes are growing the declining reimbursements is negatively impacting revenue or.
Speaker Change: Our biologics business was impacted by expected changes in the reimbursement landscape for wound care products, specifically, the placental tissue used in diabetic foot ulcers in response to this shift in market dynamics, we are proactively realigning our biologic strategy, we're positioning our tissue manufacturing capabilities to support direct business opportunities that provide more stable.
Speaker Change: Reimbursable and greater long term business opportunities.
Speaker Change: Moving into supply chain impacts, we experienced temporary issues driven by the timing of in house manufacturing scale up.
Speaker Change: This disruption mainly impacted legacy invasive products and was driven by finalizing validation activities associated with production. These.
Speaker Change: These issues resolve themselves late in our first quarter and production has since come online for the impact of products are.
Speaker Change: Our Q1 international distributor revenue was impacted by the timing of stocking orders as well as integration impacts driven by supply chain disruption mentioned above earlier as well as some limited distributor consolidation.
Speaker Change: As we move through 2025, this disruption will subside as integration supply chain challenges ease and restocking orders are placed to replenish orders filled at the end of 2024.
Speaker Change: Overall, we estimate the impact of these business issues to total approximately $20 million to our muscular skeletal revenue in the quarter.
Speaker Change: Q1, enabling technologies revenue was $22 $2 million declining 36% as compared to the prior year quarter. We do note a tough Q1 comp as we did not see the usual sequential drop off between Q4 23 in Q1, 'twenty four where revenue only declined two 3% sequentially. Despite the tough comp.
Speaker Change: Q1, enabling tech revenue was clearly soft mainly in robotics, driven by extended timelines to close deals. This further underscores the lumpy patterns. We can see it we see in revenue from time to time, we do not see softness as a sign of demand destruction and we remain bullish on this business and are encouraged by our good start to the second quarter.
Speaker Change: First quarter U S revenue was $483 $9 million essentially flat to the prior year quarter driven by my earlier comments is cross musculoskeletal and enabling technologies Q1 International revenue was $114 $3 million lower by seven 7% as reported and lower by four 6% on a constant currency basis the dry.
Speaker Change: Her of lower international revenue ties back to my earlier comments, mainly distributor orders supply chain disruptions and lower robotic sales.
Speaker Change: GAAP gross profit in the quarter was 63, 6% compared to 55, 3% in the prior year quarter with the resulting improvement driven primarily by lower inventory step up amortization and synergy capture partially offset by sales mix.
Speaker Change: Adjusted gross profit was 67, 3% compared to 69% in the prior year quarter. The prior year quarter. Gross profit includes the onetime favorable noncash Johnson adjustment that I mentioned in my earlier comments. This nonoperational adjustment was worth $9 $5 million and one 5%. Thus normalized Q1 2020 for gross profit.
Speaker Change: Was 67, 5%.
Speaker Change: Adjusting for this this quarter over quarter 20 basis point decline was driven by the mix impact of lower enabling technology sales and lower neuro monitoring reimbursements, primarily offset by synergy actions.
Speaker Change: Research and development expenses in Q1, 2025, or $33 1 million or five 5% of sales compared to $57 3 million or nine 4% of sales in the prior year quarter.
Speaker Change: Included in the prior year quarter was a $12 $6 million charge related to the acquisition of in process research and development, which did not occur in the current quarter.
Speaker Change: Adjusting for that Q1, 2024, R&D would have been $44 7 million or seven 4% of sales.
Speaker Change: The resulting decline both in dollars and as a percentage of sales is attributable to synergy capture resulting in lower head count and third party spending.
Speaker Change: SG&A expenses in the first quarter of 2025, or $242 8 million or 46% of sales compared to $248 7 million or 41% of sales in the prior year quarter. The decline in spend is attributable to synergy capture mainly from lower back office spending partially offset by higher sales and marketing costs driven by the mix impact.
Speaker Change: <unk> of lower international revenue, which carries a higher fixed component to compensation costs.
Speaker Change: Q1, net interest income was $1 7 million compared to $1 $9 million of interest expense in the prior year quarter to.
Speaker Change: The $3 $6 million favorable change is being driven by lower interest expense on convertible debt.
Speaker Change: The GAAP tax rate for Q1, 2025 was 27, 2% compared to 16, 8% in the prior year quarter. The Q1 2024 rate was abnormally low driven by the discrete nature of the IP R&D acquisition in the prior year quarter higher GAAP pre tax profits in the current year quarter and lower valuation allowances on foreign derived income.
Speaker Change: Our non-GAAP tax rate for the quarter was 24, 1% in line with the prior year non-GAAP rate of 24, 5%.
Speaker Change: Cash cash equivalents in marketable securities were $461 3 million at March 31, 2025, compared to <unk> $956 2 million at December 31, 2024.
Speaker Change: The declining cash is driven by two main factors one in March we fully repaid in cash the remaining $450 million outstanding convertible debt assumed from the new base of merger with the repayment of this debt instrument Globus has now returned to being debt free. In addition, during the quarter, we spent $193 million to repurchase approximately.
Speaker Change: <unk> two 4 million shares with this action we've completed our current share repurchase program.
Speaker Change: Since closing the merger in September 2023, we have paid off the remainder of the $871 million of debt inherited from the merger and invested $508 million to repurchase eight 4 million shares at an average price of $59 62 per share.
Speaker Change: These actions over the past 16 months call attention to our focus on operational cash flow discipline to maintain a strong balance sheet, while exhibiting conviction in the merger as our share repurchase activities resulted in us buying back over 20% of the dilution created in a stock for stock merger with new basis.
Speaker Change: Q1, net cash provided by operating activities was $177 $3 million and free cash flow was $141 2 million both of which are records for our first quarter. The increase is.
Speaker Change: Attributable to higher cash profits from the business driven by synergy capture and working capital improvements within accounts receivable, partially offset by higher capital spending predominantly machinery and set investments to in source production and drive sales growth.
Speaker Change: Operationally, we remained focused on in sourcing key products across our manufacturing facilities machinery ordered in 2024 has been landing in our facilities is coming online throughout the year, while we continue to assess and reduce third party spending.
Speaker Change: Despite the softness in our top line. Our Q1 results showed a meaningful expansion in profitability with Q1, adjusted EBITDA, finishing at 29, 7% versus 25, 4% in the prior year quarter. As a result of synergy actions achieved the expansion of profitability of profitability occurred despite the neuro monitoring reimbursement challenges.
Speaker Change: Mentioned earlier, which is negatively impacting consolidated adjusted EBITDA by a full two percentage points in the first quarter. Thus, excluding neuro monitoring adjusted EBITDA would have been 31, 7% in Q1 2025.
Speaker Change: Looking ahead, we remain confident in our approach to grow profitably, while addressing specific areas of investment and business improvement we remain on track to delivering synergy savings, which will be reflected in the P&L as we move ahead.
Speaker Change: Subsequent to the quarter on April three 2025, we closed our acquisition of never incorporated after narrow shareholder and regulatory approval, we pay $250 million using existing cash reserves to fund. The acquisition. We are actively rolling out action plans to get this business right sized to drive profitable sales growth, while reducing excess spending.
Speaker Change: To quickly adopt a globus mindset as we seek to improve cash generated from this business. We've been actively reviewing and assessing tariff impacts for the legacy Globus business as well as the newly acquired <unk> business overall, we do not see tariffs as materially impacting our business through supply chain disruptions or from a cost increase perspective much of the <unk>.
Speaker Change: <unk> business is vertically integrated and predominantly U S. Based thus minimizing tariff exposure, where we do see tariff impacts we have launched a series of cost action offsets, including but not limited to targeted price increases vendor resourcing and vendor cost renegotiations, we are actively and aggressively engage on this initiative to ensure minimal impact.
Speaker Change: Our business.
Speaker Change: Now I'd like to turn our attention to the financial guidance upon announcing the <unk> acquisition on February 6th we communicated 2025 net sales guidance in the range of $2 8 billion to $2 9 billion.
Speaker Change: And fully diluted non-GAAP earnings per share between $3 10 to $3 40.
At the present time, we are reaffirming the guidance for net sales in the range of $2 8 billion to $2 9 billion, but we are decreasing our guidance for fully diluted non-GAAP earnings per share to a range between $3 to $3 30.
Speaker Change: This 10 cent decrease on the top and low ends in EPS guidance is to account for the additional carrying costs of expenses related to closing the <unk> deal earlier than planned to summarize although Q1 topline results were softer than anticipated, we delivered meaningful gains in profitability deleveraging and free cash flow key priorities in our valley create.
Speaker Change: <unk> strategy Q2 is off to a good start highlighted by U S spine and enabling technologies, we are well positioned to build on this momentum and remain focused on executing a seamless integration of never acquisitions to drive future growth in closing I'd like to thank the entire globus team, including our newly integrated <unk> colleagues for their focus and execution.
Speaker Change: As we continue to strengthen our core portfolio and unlock new market opportunities our priorities remain clear disciplined profitable growth operational excellence and sustained shareholder value as we build a leading musculoskeletal company of the future. We will now open the call for questions.
Speaker Change: Thank you at this time, we will conduct a question and answer session.
Speaker Change: As a reminder to ask a question you will need to press star one on your telephone and wait for your name to be announced to withdraw. Your question. Please press star one again, please standby will be compile the Q&A roster.
Speaker Change: Our first question comes from Matt Mcclintock of Barclays. Your line is now open.
Speaker Change: Hey.
Speaker Change: Good evening Phil.
Speaker Change: No.
Speaker Change: Goes without saying I think this is the quarter anyone was expecting.
Speaker Change: And maybe if you could talk a little bit about your confidence here.
Speaker Change: Coming into into April I think you mentioned the operating on.
Speaker Change: At or above your metrics.
Speaker Change: How much of what happened in Q1, maybe spilled into Q2.
Speaker Change: What what amount of what happened in Q1 do you think it could.
Speaker Change: Could recover somewhat in Q2 in rapid fashion was going to take a little more heavy lifting and then I have one follow up if I could.
Matt Mcclintock: Yes, so Matt I'll go first.
Speaker Change: At the end of the day. It was a couple of things, yes, we transitioned facilities into new ones and validate them more as we continue to.
Speaker Change: Scale up our in house manufacturing right. There are some things that took longer than planned that created some back orders I think that coupled with <unk>.
Speaker Change: Timing of distributor orders again heavy in Q4 light in Q1.
Speaker Change: I'll be coming back and then ultimately the real thing here is the elongated selling process that we experienced in Q1 with all the market uncertainty that really is the impact there.
Speaker Change: What I think is without getting deep into Q2, we've seen positive effects in our U S spine business.
Speaker Change: A solid.
Speaker Change: We are remedying NAND supplying the products from the back orders I'll see that as a temporary issue that will recover in second quarter.
Speaker Change: That will have an impact throughout international and trauma as well as U S.
And we are seeing deals occur at a decent pace within the robot so it's going well.
Speaker Change: In all of those aspects. So if you ask me I have confidence that this feels like.
Speaker Change: A blip and we're moving back to who we need to be and look we own a bad quarter, we're going to fix it and drive it forward and come out with the right results here.
Speaker Change: Okay.
Speaker Change: That's helpful color and then maybe.
Speaker Change: On the synergy side or narrow.
Speaker Change: Maybe talk a little about now.
Speaker Change: Now that the deal is closed any additional color or confidence you can express about the pace.
Speaker Change: Areas of opportunity for Kurt.
Speaker Change: Driving efficiencies are aligning the organization in a way that debt.
Speaker Change: That gets to you at or above your your dilution expectations for this year.
Keith: Hey, Matt This is Keith thanks for the question.
Keith: Great question as you think about bringing never online.
Keith: Place, we're really going to focus on coming out of the gate is really the operational expenses. If you walk down the P&L <unk> gross margins in the high <unk>, we think that overtime, we can work to expand that but I would say in the near term near and medium term. The key focus is going to be figuring out their operation operational expenses and working to reduce those.
Keith: As we look at the P&L. The SG&A expenses candidly are too high for that business to operating profitably long term. So those are the things that we're going to focus on right out of the gate.
Keith: Alright, I appreciate the color.
Keith: Thank you.
Keith: Thank you and one moment for our next question.
Speaker Change: Our next question comes from Vicky Chopra of Wm.
Keith: Wf Your line is now open.
Vicky Chopra: Hey, good afternoon, and thanks for taking the questions.
Keith: Two for me.
Keith: I appreciate your comments on the elongated selling cycle for robots, but I'm just curious if you've seen any impact from recently launched spying robot some of your larger competitors.
Keith: And whether people are asking for more alternative forms of financing or an increase in your rental program and then a quick follow up please.
Keith: This is Keith thanks for the question in terms of the elongated selling cycle I havent seen situations, where other competitors are slowing down the process in terms of looking at the mix of how we are selling robots rentals leases I would say still our mix. This quarter is still heavily focused on.
Keith: On outright sales.
Keith: But the options of what we're quoting I would say are increasing whether it'd be third party financing or rentals, but I would say that that may have slowed some things down it really contributes to some of the elongated selling cycles, but I don't see competitor robots, thus far as driving a delay in us closing deals.
Speaker Change: Okay. Thank you that's super helpful and my follow up question is.
Speaker Change: I know you don't guide to EBITDA margin, but just maybe directionally help us about EBITDA margin in 2025 as you fold in the number of deal. Thank you.
Speaker Change: Yes, we don't guide to EBIT margins, but as I think about kind of where we're going I would say that.
Speaker Change: Our goal is to achieve.
Speaker Change: Achieve the <unk>.
Speaker Change: But adding on never on the timing of bringing it out earlier will have a slight impact. So I would say that we should be in the high <unk> this year.
Speaker Change: Thank you one moment for our next question.
Matthew O'brien: Our next question comes from Matthew O'brien of Piper Sandler Your line is now open.
Matthew O'brien: Hey, this is Phil on for Matt. Thanks for taking our question understood that there are a lot of moving parts between some of these headwinds enabling tech purchases supply chain, but wanted to hear maybe more specifically how your rep count has been holding up.
Matthew O'brien: Maybe just confirm that you aren't seeing any uptick in legacy <unk> sales reps, leaving at this point and thanks for the color on the pipeline looking good but just any any further color on that thank you.
Speaker Change: Yes, Phil I'll answer that we're not seeing any unusual or high volume departures occur for many of our sales reps, regardless of where they used to work.
Speaker Change: We're actually seeing them dig in and do well the U S is really a strength outside of the back orders and they are doing well the momentum is increasing there and so not only are the teams staying together, but they have sequentially reported to five months significantly move the average daily sales up and so theyre digging and doing well they are staying together as a team we've not seen any.
Speaker Change: Interruption that would cause concern and certainly there are no rep.
Speaker Change: Departures that would have impacted our results in the first quarter.
Speaker Change: That's helpful and then shifting gears on the positive one to focus on the cash flow that you currently you consistently deliver thinking.
Speaker Change: Thinking path to narrow deal what are your expectations for cash you might we see more M&A or maybe some more share repurchases that sort of thing. Thank you.
Speaker Change: That's a great question, so as I think about cap structure moving forward. Obviously, we want to continue to generate strong cash flow, we still view ourselves as a growth company. So the first priority is going to be internal investment.
Speaker Change: We've done several deals here over the last couple of years, where M&A is still part of our cap structure.
Speaker Change: I think about that moving forward I would say that anything we do in the near term would be more of a tuck in nature, and then thirdly share repurchase they have been part of our of our cap structure, we see them continuing as part of our cap structure, but it's not the primary driver.
Speaker Change: And I would just add if we were to experience any overreactions in a market. We would take advantage of that and probably go back and buy stock Opportunistically applied towards future acquisitions. We know the strength of this business long term and so we're going to stay focused on delivering that.
Speaker Change: Okay.
Speaker Change: Pick them up.
Speaker Change: Thank you. Our next question comes from Richard <unk> of <unk> Securities. Your line is now open.
Richard: Alright, thanks for taking the questions.
Speaker Change: I think I know the answer and I think that yes, but could you just confirm that all of that ROE in the guidance.
Speaker Change: The lesion and revenue.
Richard: Good.
Richard: What's the.
Richard: What's your organic growth guidance.
Richard: So rich this is Keith I will tell you that yes. It is included in our in our business we.
Richard: We haven't broken out the parts and pieces of it though as we move forward. When we report we are going to show base business globus versus prior year versus acquisitions.
Richard: Okay. So okay got it so can you maybe just tell US then because we had all been thinking a few standalone and we know who those are.
Richard: It covered.
Richard: That covered never we never forecast.
Richard: The consensus but are the components of your organic guide dramatically different.
Richard: On a standalone basis.
Richard: Now the components of our organic guide or not materially different on a standalone basis.
Speaker Change: Okay, and then maybe just for my follow up on the capital outlook. It sounds like you've seen some may get better in April may.
Richard: Maybe even into early May.
Speaker Change: Just trying to get an understanding of what the long dated.
Richard: Selling cycle looks like and.
Speaker Change: Thats occurring what gives you the competent.
Richard: <unk> again.
Richard: Short order I guess it sounds like you expect somewhat of a snapback where through some sort of uncertainty period on some level.
Richard: Could you give us a sense of.
Richard: To reconcile that dynamic with your comments that things are getting better.
Richard: Yes, rich and I want to make sure we clarify we're happy with the progress in Q2, and we're seeing deals close I don't know if an elongation will snap back you have market uncertainty whether it be with tariffs.
Richard: Or other things along the line with capital market disruption and different things that are going around.
Richard: So at the end of the day, our job is to make sure. We've got a potential portfolio and we actively work with them when we closed that and if that winds up shifting a month or two over the long term that's fine we'll neutralizing go the.
Richard: The market is really not penetrated and the potential is great and as I rattled off more and more of our former newer products are now available on a robot. So we're positioned to really go back to the initial reason of that acquisition, which is double our Tam and place our robots with our customers and provide them those products all of that.
Richard: Oh of course and Thats, Okay. If it takes a month or two we're playing this game for the next five to 10 years with each one of them not for the quarter.
Matthew Blackman: Thank you. Our next question comes from Matthew Blackman of Stifel. Your line is now open.
Matthew Blackman: Good afternoon, everybody. Thanks for taking my question I have a couple in my first one is I think along similar lines of riches.
Matthew Blackman: And maybe come out of a different way, but wanted to just push a little bit on that reaffirmed top line guide and the assumptions backing. It this was a pretty substantial miss in the first quarter and so with the reaffirmed guide again, so much of a rich rich was asking does that mean, you expect to claw back. This last <unk> business throughout the year or again I just want to make sure did you change something and how you really.
Matthew Blackman: Layering in contribution or even dis synergies from never or new base and then one follow up.
Matthew Blackman: I would say that there's not a material change in the guide Dan made a comment that.
Matthew Blackman: <unk> talked about the biologics impact that that was contemplated in our guide going into the year and I would also call out that the neuro monitoring impact was also contemplated in our guide coming into the year I talked about about a $20 million impact on musculoskeletal and it's fair to say that roughly $7 million to $10 million of that is the.
Matthew Blackman: <unk>.
Matthew Blackman: Things that I mentioned earlier related to.
Matthew Blackman: Related to the wound care as well as the neuro monitoring when.
Matthew Blackman: When you look at Q1, and the thing that we remain positive and optimistic about is calling back the enabling tech sales and seeing an uptick in our spine business as we move forward we commented on the.
Matthew Blackman: The impacts of supply chain issues, we see those is behind us and as we move forward. We see people ordering ordering again, we don't view that as a as a lost sale, we see us getting that back as we move forward.
Speaker Change: Okay I appreciate that and obviously there are a lot of moving parts and I don't know that you do this traditionally but could you maybe give us a little bit of help at least on the second quarter in terms of the cadence here with the down step the step down here in the first quarter, but then layering in narrow just.
Speaker Change: Any sort of sense of where we should be landing on the top or the bottom line relative to where consensus may be today or just some sort of how it might be would be appreciated. Thank you.
Speaker Change: No I appreciate the question. So we don't get down to that kind of granularity or even on the quarters. If theres an after hour call and you have a few questions, we'll be glad to entertain that but we're not in a position to break out the quarters or get into granularity within the sub businesses.
Speaker Change: Alright fair enough. Thank you.
Speaker Change: Thank you. Our next question comes from Chevron thing of RBC. Your line is now open.
Speaker Change: Thank you so much for taking the question I guess just.
Speaker Change: I wanted to take a step back and.
Speaker Change: I'm, hoping you can address them one of the questions I have been receiving from investors that.
Speaker Change: <unk>.
Speaker Change: It is the right acquisition, just given that the new visa acquisition integration is still ongoing.
Speaker Change: And.
Speaker Change: Opened you up to.
Speaker Change: Potential execution misses and we've seen a little bit of a.
Speaker Change: Choppy quarter in Q1, so can you maybe talk to us about Neville why it makes sense and then new laser where exactly are you in that integration and how.
Speaker Change: How confident are you that this is behind us.
Speaker Change: Hit a snag.
Speaker Change: Down the road and 25, thank you.
Speaker Change: Thanks, Doug and I'll try and address some of that you can help me if I missed a few of the points you put out but let's start with your investors and let's keep it fact based.
Speaker Change: Never wasn't part of anything that we did in the first quarter and so that question is more of a head scratcher there.
Speaker Change: While timing is never great with some of the acquisitions. It was an opportunistic buy that I did go through in my prepared script, so for $250 million, we enter into the neuro Mod business and we're able to get a clinically superior solution out there that we feel we can scale up to expand our continuum of care and really help treat patients. In addition, the patent.
Speaker Change: Portfolio strength is where we want to get too with future things, we're working on and their technology is applicable through multiple areas of our business that I laid out. So this is a buy that has great long term potential we focus on the long term and while we have people working on it there. They are separate from anyone else doing robotics and anyone else doing U S spot.
Speaker Change: Theyre not interfering with it and there is nothing related to supply chain manufacturing from never that would come into our robots are our spine. So theyre very different that way.
Speaker Change: If you want you can pick some of your other parts of the question, but I think that's the major message out to the investors I think again. This is Keith just to add on and yet you had a follow up in there that talked about you know how do you know that these issues are behind you for what you experienced in the first quarter. When I think about Q1, the two big things that jump out to me or the soft enabling tech sales and.
Speaker Change: Some of the in sourcing supply chain disruptions that we saw.
Speaker Change: I commented that coming out of the quarter production is coming online and we're back to shipping.
Speaker Change: We've in sourced a good bit of products, primarily on the basic side.
Speaker Change: I view that as it really is a onetime change bringing it in I feel confident as we move forward that we have the worst of those issues behind us machinery is coming online we have product flowing both from our manufacturing facilities as well as our third party facilities and we're getting product to enhance our sales reps, enabling tech I really fall back on the earlier comments, we see the Lumpiness we had.
Speaker Change: <unk> like this I think three years ago coming into Q1 that in that time, we said that the pipeline wasn't developing the situation here is a little bit different we have a robust pipeline, we're just seeing a bit of an elongated selling cycle.
Speaker Change: Got it and just I guess, a quick follow up and sorry, I was I got disconnected earlier, but any update on the FDA warning letter and then should we expect you to continue to focus on M&A like you had mentioned thank you for taking the question.
Speaker Change: Okay.
Speaker Change: We don't really have anything as far as the FDA warning letter we've made a lot of progress with that we're really waiting for them to come back and inspect the facility and move this we're actually excited for them to come back and inspect our facility and remove this where more of the ready we're more than ready 30 days after that so it's not a concern of ours, it's not an impact of ours, we just want to get this cleaned up.
Speaker Change: And put it behind us and as it relates to your question on M&A, I would say that given where <unk>.
Speaker Change: Finalizing the invasive and working to bring that in.
Speaker Change: Along with never I would say that will probably slow down a little bit in the near term on M&A and focus on final integration activities before stepping forward.
Speaker Change: Okay.
Speaker Change: Yeah.
Speaker Change: Thank you. Our next question comes from Caitlin Cronin of Canaccord Genuity. Your line is now open.
Speaker Change: Hi, Thanks for taking the question so.
Speaker Change: The U S performance up 2% and where do you see in terms of the market growth and just anything from an overall procedural health an end market perspective.
Speaker Change: Yes, Caitlin I don't really have a lot of good data for the market growth to answer for you said only a guess on my side, having talked to surgeons one of the things that they had told US is they saw some slowdown occurring. They also felt like somebody approvals were taking longer from insurance companies as we're going through it.
Speaker Change: But that was more conversational I don't really have a lot of data to say I think it's X I think there were some things going on that may have impacted it.
Speaker Change: I think ours is more about just creating the cadence and feeding the product and clearing back orders and launching new products and going.
Speaker Change: So to me I think it's just something we push through and get back on track to who we need to be.
Speaker Change: Got it and then just on the enabling tech I mean, relying now approved was has module has been approved for <unk> and how much of an uptick are you are you already starting to see with kind of the cross selling with the surgeons.
Speaker Change: Yes, it's a great question. So modulus has not yet approved but it's in the works we will get it there youre right with re line, we're seeing it and we are placing robots into new accounts. So we're seeing that continue so as thought with our plan, we're doing that of course, we'd like it faster.
Speaker Change: Going through but all of instrumentation don't want to rely on as you said all of the products are there modulus next and then we will look to really make sure that we have everyone trained we've been working on that and we will continue down the path, which is already at to me.
Speaker Change: Impact into new accounts.
Speaker Change: Great. Thanks, so much.
Speaker Change: Okay.
Speaker Change: Thank you. Our next question comes from David Saxon of Needham <unk> Company. Your line is now open.
David Saxon: Great. Good afternoon, thanks for taking my questions.
Speaker Change: I had a couple here that's actually one on net Roe.
Speaker Change: And then went on associate Flex, who never just can you talk about kind of the pace of the integration.
Speaker Change: You're trying to kind of meet their key key milestones, we should be aware of.
Speaker Change: Previous answer you talked about their SG&A being too high so I guess the.
Speaker Change: Real question is like how quickly can you get that down to where you want it to be and where do you want it to be.
Speaker Change: Steve I'll take that so in terms of narrow I mean, opex like I said it is going to be a key area of focus we are in the early stages of integration.
Speaker Change: Focused and working on that I'm.
Speaker Change: I'm not going to give a point number as to kind of what I say the future state is the key takeaway is when you look at Opex, it's not sustainable for that level of sales. So it is really unpacking, whereas a spending at.
Speaker Change: And we've identified those areas of third party spending we've got a control theres areas of internal spending we have to control.
Speaker Change: We're going to aggressively go after that as we move through 2025. The key is to make sure that the business is driving profitable sales.
Speaker Change: Okay, Great and then on flex I guess just level of interest in the system number of placements how does that order book building today.
Speaker Change: What are you seeing in terms of Delcath implant pull through thanks, so much.
Speaker Change: Yes, so we're still building out the book of capital placement and its actually going well, it's getting heavier Armenia is getting fuller with where we're going we.
Speaker Change: We have not placed any yet out into the market and what I would tell you there is no pull through as of yet but.
Speaker Change: If you ask me my thought would be we're probably going to enter the market within the second quarter based on what we're looking at now and push through and then to your point, we will start seeing that ramp up as we get into the future quarters from there.
Speaker Change: Great. Thank you.
Speaker Change: Thank you. Our next question comes from Steve Lichtman of Op Co. Your line is now open.
Speaker Change: Hi, guys. This is amir on for Steve Thanks for taking the question.
Speaker Change: I just had a question regarding tariffs can you guys talk about what impact you know that the mountain Terrace.
Speaker Change: You may have on your margins. Thank you.
Speaker Change: Yes, Great question, we don't see any real material impact here on margins like I said, we're predominantly vertically integrate it.
Speaker Change: Think about the countries will reduce source from the impacts to us are minimal because there's lots of other actions we've taken.
Speaker Change: Whether it's vendor cost renegotiation or offsets such as targeted price increases I do not to be clear I do not see that having an impact on our earnings or margins this year or going into next year, Yeah, and I would say Keith says vertically integrated you know about 95% of our production is U S based and our sourcing of materials to producers.
Speaker Change: Actually U S based we've been on that that actually plays to our favor in this case and so what we calculated we don't see any need to pivot or change our strategy as we work through these tariff challenges.
Speaker Change: Great. Thank you guys.
Speaker Change: Thank you. Our next question comes from Craig <unk> of Bofa Securities. Your line is now open.
Speaker Change: Good afternoon, guys. Thanks for taking the questions.
Speaker Change: Dan wanted to ask on U S spine growth the 2% you guys have been talking about.
Speaker Change: The U S correspond.
Speaker Change: Has kind of held in there and that was the strength but.
Speaker Change: Was there an impact from any of these supply disruptions on on that number and if so what was the.
Speaker Change: What was the growth ex the one time.
Speaker Change: Yes, it's a good question Craig and the answer is yes, we're not going to split it out some of that is kind of estimates did you get the surgery did you not what it go so I'm not really feeling comfortable enough to put something out there, but the answer is yes with that there was an impact that occurred within the back orders that we know are behind us and we're improving on a daily basis here with that type of move also listen to <unk>.
Speaker Change: <unk> sales and prolonged sales. They also tend to have an impact in your pull through and different things that will play into those numbers as well. So both of those are a factor that would impact us spine.
Speaker Change: Got it.
Speaker Change:
Speaker Change: I'm going to try another quantification question.
Speaker Change: Not sure. If you can give me an answer or not but so on the enabling tech.
Speaker Change: Maybe.
Speaker Change: Would you be willing to quantify what the impact was in Q1, and then maybe just what those deals.
Speaker Change: What those deals where that closed in early Q2.
Speaker Change: Well and I apologize I'm not sure I fully follow right because I said it was down 31% those are $22 million sale. So are you asking what carried forward deal.
Speaker Change: Deals.
Speaker Change: Yes, I guess, if you could quantify what the impact was from the delayed sales that may have got pushed into Q2.
Speaker Change: And again I'm not being funny with us, but why don't we talk that in August when we get into Q2, just because it's in play now and you're at the beginning of May and so while we're seeing some lifts occurring youre right. The things that we're talking about some of those rollover, but some of them are new I would have to sort through it but one out of the three months. It's tough for me to make a call right now I'll just tell you that the sales are really related to both carryover.
Speaker Change: <unk> new ones that we had in our portfolio.
Speaker Change: Got it okay. Thanks, Dan.
Speaker Change: Yes.
Speaker Change: Thank you.
Matt Taylor: Our final question comes from the line of Matt Taylor of Jefferies. Your line is now open.
Matt Taylor: Alright, Thank you for taking the question guys.
Speaker Change: Apologies. This is really just a clarification I am a little confused on the topline guidance still because.
Speaker Change: Previously it was with the closing <unk> at the end of Q2 now you've got the same number but you closed that kind of a quarter early sort of implies something changed and I was just wondering.
Speaker Change: If you could on a high level talk about whether it's the different narrow expectation or a different base expectation or FX like what what's different about them.
Speaker Change: Two scenarios.
Speaker Change: Hey, Matt that's a great question. This is Keith I really would fall back on what I said earlier is that we're focused on driving profitable growth as it relates to narrow so even though the deal closed earlier.
Speaker Change: We're being conservative on the revenue view as we move the business forward, because we want to get the spending right.
Speaker Change: Okay. Okay.
Speaker Change: And then maybe just one.
Speaker Change: One follow up.
Speaker Change: In terms of your.
Speaker Change: Enabling tech.
Speaker Change: Delays that you saw in Q1 of the closing is there some factor in terms of the type of customer or the type of deal or the environment that you would attribute that to I just wanted to get more texture as to why you thought that that was happening.
Speaker Change: Yeah, I'll take that no. It wasn't any particular thing or a particular customer or anything like that I think it was really just a lot of interest and most of it was red lines back and forth to assuming they take longer than normal as I think hospitals are other caregivers worked through some of the more macro challenges.
Speaker Change: But again it was really kind of across the board on specific to one group or one customer.
Speaker Change: Okay, great. Thank you so much.
Speaker Change: Thank you.
Speaker Change: Thank you with no further questions that concludes the Globus Medicals earnings call. Thank you for participating you may now disconnect.
Speaker Change: Okay.
Speaker Change: Okay.
Speaker Change: [music].
Speaker Change: Okay.
Speaker Change: Okay.
Speaker Change: [music].
Speaker Change: Okay.
Speaker Change: Okay.
Speaker Change: Okay.
Speaker Change: Okay.