Q2 2025 Globus Medical Inc Earnings Call

Welcome to Globus Medical's second quarter 2025 earnings call. At this time, all lines are muted, and a question and answer session will be held after the prepared remarks.

I'll now turn the call over to Brian Karns senior vice president of Business Development and investor relations Mr. Karns please go ahead.

Thank you, Haley. And thank you everyone for joining with us today. Uh, joining today's call from Globus medical will be David. Paul, Globus founder and executive. Chairman Keith file president and chief executive officer and Kyle Klein Chief Financial Officer.

This review is being made available via webcast accessible through the investor relations section of the Globus Medical website at www.globus.com.

Statements our form 10K for the 2024, fiscal year, and our subsequent filings with the Securities and Exchange Commission. Identified, 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.

We do not undertake to update any forward-looking statements as a result of new information or future events or developments.

Our discussion today will also include certain Financial measures that are not calculated in accordance with generally accepted accounting principles or gaap.

We believe these non-gaap Financial measures provide additional information, pertinent to our business performance.

These non-GAAP financial measures should not be considered replacements for and should be read together with the most directly comparable GAAP financial measures. Reconciliations to the most directly comparable GAAP measures are available in the schedules accompanying the press release and on the investor relations section of the Globus Medical website.

with that, I'll now turn the call over to David Paul, our founder and executive chairman

Thank you, Brian, and good evening, everyone.

I want to begin by congratulating Keith file on his promotion to the role as CEO of Globus. Medical effective, July 18th, 2025

Keith will lead Globus on setting and executing our strategy to become the preeminent muscular skeletal technology company in the world.

Before joining Globus medical, Keith built, nearly 2 Decades of experience in corporate finance operations and strategic leadership.

He began his career in public accounting with Arthur Andersen later. Transitioning to KPMG where he was primarily focused on financial Audits and compliance.

Keith later, moved into the consumer products industry, where he Advanced through a series of finance and operational leadership roles including serving in a divisional CFO role for several years and ultimately serving as Executive Vice President and CFO.

His tenure included extensive experience leading financial planning, M&A, due diligence, investor relations, manufacturing, and sourcing initiatives, as well as large-scale restructuring initiatives that improved liquidity and operational efficiencies.

Beginning in 2019, when Keith started at Globus as our CFO, it was obvious to me and our board that he was destined to 1 day. Be in this CEO role. We quickly began exposing him to all aspects of our business over the last 6 years.

In addition to finance, Keith was given responsibility within the company in it operations pricing regulatory quality and Commercial finally. Keith led the financial due diligence and the entire integration planning effort for new Vive and Neo and has made amazing progress in a short period of time with both,

Keith has become an integral part of the global executive team, providing steady positive and committed leadership. That will now extend to the entire organization to drive our strategic goals.

Opportunity to thank dance gavilla for his many contributions to Globus over the last 10 years. He has been a great partner to Globus and me and has served with distinction for the last 10 years beginning with his role as CFO and his last 3 years as CEO. We wish Dan well in his new position at dense play

I will now turn the call over to Keith and Kyle for their comments on our quarter. And we'll have a few words to say in closing at the end,

Thank you, David good afternoon to everyone, and thank you for joining us on today's call.

And this is my first earnings call as CEO following our July 21st, announcement regarding a leadership transition. I'd like to take a moment to thank David, Paul and the board for their confidence. In me, I also want to take a moment to thank Dan, Dan, skilla, for his contributions to Globus as well as his guidance and mentorship to me over the past several years.

I sit here today excited for the opportunity and ready to begin. A new chapter of the globe of story.

Before I jump into a discussion on the Q2 company performance, I'd like to take a few minutes to step back and talk about who Globus is and where our strategy lies.

Our strategy remains grounded in the same principles that have driven our success. For many years, our mission remains unchanged Globus. Medical is a global muscular skeletal technology company, dedicated to improving, clinical outcomes and solving unmet clinical needs to improve the lives of our patients.

We innovate with passion provide world-class dedication and clinical support and Advanced Care through our comprehensive product portfolio.

We will continue to support and Advance care and focus on the patient with the goal of improving, muscular skeletal care doing. So, in a manner that exhibits Financial discipline,

Global assisting tremendous growth and change starting with eclipsing 1 billion in annual revenue. In 20, 2022, followed by the transformative merger with new invasive, in 2023.

And then, most recently, the closing of the Neo acquisition.

all of this coming from a company that was found at just 22 years ago in 2003,

The growth and evolution of the company remained second to none and highlights the Strategic, focus of living its mission.

The change of the past, several years has helped further positioning us within the muscular skeletal market. And we are at a point where we want to finalize and fully integrate the merged and acquired entities.

Our team is intently focused on accelerating our product development engine to launch new and exciting products.

These exciting products will add to our best-in-class bag which will further Propel, our ability to retain and grow our sales force through competitive rep. Conversions.

We will continue to do this in a manner in which Globus maintains Financial Prudence with strong, earnings, cash and cash flow, and overall balance sheet strength.

All of which is consistent with our history. In short, I want everyone joining us today to know that Globus has many opportunities in the pipeline to fuel future, organic growth, and we remain confident in our position within the market.

Knowing that our business has undergone dramatic change. In the past few years, we have invested heavily in our leadership, team to ensure focus and strategy development occurs at the right level within the organization. Such that m&a. Activities. Don't distract from the existing businesses

Those leaders are specifically focused on our core categories of spine, Ortho, trauma and Interventional pain and are responsible to execute commercial strategy while maintaining responsibility for product development timelines. Now, let's move into our update on the second quarter.

I will start by touching briefly on top level financial performance, then provide more qualitative updates on our business and Q2 performance. I'll then turn things over to Kyle where he will go into greater details on our Q2 Financial results.

We are growing 18.4% and 14.1% respectively, over the prior year quarter.

Free cash flow was 31.3 Million growing 18% despite the impact of the never acquisition, as well as higher capex spending.

Our base business delivered 5 or 651 million dollars in Revenue during Q2 growing 3.3% as reported and 4.9 day adjusted versus the prior year quarter with 1, less selling Day in the US and 2 fewer days in Japan.

Never a contributed 95 million in Revenue during the quarter.

Operational challenges noted in our first quarter, comments have largely subsided as a supply of product has dramatically improved across our business. Delivery of us spine sets and inventory return to our normal Cadence while a supply of international spine, and growing rods increase gradually throughout the quarter.

Overall, we exited Q2 on a strong position with product and sets. We will continue to ramp up our supply. As we enter the back half of our year to accommodate for anticipated growth, including the normal Q4 seasonal bump.

Our U.S. spine business led the way commercially, growing 5.7% as reported or 7.4% on a daily adjusted basis. The key procedure categories leading growth included expandable, T.E.A., and lift, with our Sable implants in posterior cervical, with 3-line C.A. I.F.T. procedures with Hedron and Modulus implants, as well as continued increasing contributions from Mease Medical scooters, namely Relined, Mass, and Creo.

Biologics, as well as our Dura. Pro oscillating drills.

Growth in US spine has been consistent and sustaining driven by increasing focus on key areas of the business.

Every week in Q2 had shown growth versus the same week in the prior year. We are now at 19 consecutive weeks to August.

Growth in our Core. Business is being driven by several factors including increasing set and inventory. Availability driving targeted product conversions. Competitive rep hiring as well as a key focus with increasing our surgeon engagement.

all of these factors are key to growth as we continue on the basics of launching new products growing, our sales force and to provide driving robotic, pull through

To highlight the importance of new products, I'd like to take a minute to talk about our Dura Pro drill system.

As a refresher, this product was launched in 2024 and features an oscillating technology designed to be soft tissue. Sparing, allowing surgeons to treat Anatomy adjacent to delicate tissue,

We are seeing accelerated levels of growth in this product since launch fueled by surgeon to surgeon testimonials.

Moving forward. We see this product as a game changer and have ramped up Supply with increasing levels of sets being delivered to our field to fund this growth.

Growing 58% sequentially to finish at 35.2 million. Despite the sequential Improvement Q2 sales were lower by 4% compared to the prior year quarter driven by lower sales of egps robotic systems, partially offset by growing sales v3d Imaging systems

While we close, many robotic deals from q1. In the second quarter, we are still experiencing an elongation in the selling Cycles. We see these deals as alive and active and seek to drive a strong second half.

Importantly, feedback from our surgeon customers, who use our robotic systems remains incredibly positive with respect to its features and capabilities as they exist today.

We will aggressively seek to close down open opportunities as we move ahead.

Over the long term, we expect robots and robotic procedures to grow within spine and believe that robotic surgery will be the standard of care for patients suffering from spine disorders. To date, we've seen almost 110,000 procedures and expect this number to continue to grow as adoption becomes more widespread.

Our International spine, business grew, roughly 4% as reported, but was essentially flat on a constant currency basis.

Commented earlier on the improvements in the supply chain. As we move through the quarter, I'd like to take a few moments to provide some additional insight.

Breaking our international business into regions and key countries. We see growth across our EMA region, led by the UK Spain, Germany, Ireland, and Italy.

The interesting Globus products across EMA remains High driven by our key. Differentiators namely, our product portfolio Technologies and service levels. The combination of these factors drives interest from our customers while. Also attracting competitive reps.

Our second quarter saw the quarter over quarter growth improve versus q1. We expect this trend to continue looking ahead. As a supply of product continues to drive incremental growth

within the APAC region. We're continuing to focus on our largest markets which are Japan and Australia. Recent Trends are showing success in these selling markets. However, we continue to see opportunity to generate additional share growth in these core markets. Moving ahead.

The LATAM region, our smallest international region, has been most impacted by sales shortfalls in Brazil, which are a combination of a slowing market as well as isolated supply issues. We will continue to focus on this key market moving forward and see the flow of product improving in Q3 and Q4.

Strategy of our international business is to focus on key markets and go deeper in those markets to drive higher share positions. As we continue with our International integration, we view this strategy as key to overall long-term International success.

Well this may result in some near-term impacts on growth rates. We view this as the right approach long-term to ensure the health of our international business.

Our core trauma, business grew 35% in Q2 compared to the prior year quarter. While our NSO growing broad business declined during the quarter. However, this was largely due to the lack of Supply to our International markets, The increased supply of growing rods, that hit the market in Q2 was focused on replenishing. The US market, first, followed by International locations, reaching a steady state of Supply. With manufacturing of our precise line has allowed us to serve a larger scale of patients including pediatric patients during the summer summer months, which bolsters our position in the US. While ramping Revenue internationally, which will favorably impact us. Moving ahead

The core trauma, portfolio continues to grow rapidly driven by product investment and a keen focus on driving density. In our business, our per approach to growth using a density model is focused on areas and institutions, we see driving the greatest long-term benefit key products such as our autobahnd line of nails and Anthem plates provides for differentiated product offerings versus competition, which are surging. Customers, recognize these products along with our precise line of products is allowing us to break down doors, and open new accounts across the US.

Our core trauma bag can compete with the competition. Adding precise only Fosters, a strengthening position for us in the marketplace that coupled with our desire to continue to innovate positions this business. Well for the future. As we grow, we will add to our direct sales force in a manner that supports our density model Innovation will drive opportunities. Allowing us to Target the right accounts in a manner that will drive sustainable Topline profitable growth which will create a flywheel of attracting the top selling talent in the industry.

Our neuromonitoring business performed in line with expectations in Q2, showing a sequential Improvement and a narrowing quarter over quarter decline.

Our expectations for this business for the remainder of the year are consistent with our initial expectations coming into fiscal 2025.

To a portfolio Synergy with the product and service overlap.

I'd like to spend a few moments, discussing Niro and provide some additional insights behind the strategy to add this to our portfolio.

Thinking back to some of my opening comments about Globus.

Its Mission and approach. We've been focused on providing the best solutions to address the Continuum of Care for patients suffering from muscular skeletal disorders.

Acquiring neero allowed us to expand our Continuum of Care and address this submission from our product portfolio.

Final Court stimulation has been proven to Be an Effective therapy for patients. Who had a previous fine surgery that did not resolve their back or leg pain as well as her patients who suffer from back pain. That is not addressable by spine surgery.

Since announcing the transaction feedback from spine surgeons as well as pain Physicians has been universally positive.

Pain. Doctors are encouraged with, Clover's acquiring the Nero brand knowing that high frequency spinal cord, stimulation will continue to be available for their patients.

Neuromodulation and the novero high frequency approach is an effective therapy for other disorders. Such as painful, diabetic neuropathy in addition to pain. We see value in the intellectual property of this business to explore other applications of electrical stimulation.

We excited to explore these areas, including treating, gait disorders, and Parkinson's disease patients, as well as other unmet clinical needs.

Our long-term goals are to drive Topline growth with these products. As we enter a new addressable Market to do this, we've already recast their product development approach as we seek to drive organic innovation,

Integration activities are underway with our first, major actions to address cost occurring at the end of Q2. We seek to drive a swift integration. Such that we put never on a sustainable path of growth and profit.

Since the beginning of 2024, we have launched a total of 21, new products, 14 products within spine 3, trauma products, and 4 joint products with the most recent product, being the envoy acetabular shell launched. During our second quarter, the envoy acetabular system is a contemporary acetabular system for cementless, reconstruction and total hip arthroplasty procedures. This product is launching to further, improve our competitive position in primary hip

Filling gaps in our portfolio. Over the next 12 months will allow us to more aggressively scale our hip and knee business in the next 12 to 18 months.

I'm pleased to announce we recently received FDA clearance for excelsis. XR our head, man at augmented reality navigation, headset use with Excel Seth and excelsis GPS. As well as ex excelsis. XR allows for real-time surgical visualization by projecting 2D data and 3D models to allow the user to look at the patient and virtual navigation.

Data, at the same time.

Excelsis XR also provides instrument tracking capabilities for navigated placement of screws. And in our body, Fusion devices and contains hand tracking cameras that allow the user to manipulate the head-mounted display.

We look forward to bringing this exciting Innovative technology to surgeons in the coming months.

Looking back on Q2, I'm encouraged by the progress made across the business. Our U.S. spine business is showing tremendous strength, positioning us for a strong second half.

We remain positive about our enabling Tech business with the size of our Pipeline and the energy of our sales, force to close open opportunities to foster a strong second half.

The supply chain challenge is noted in q1 have been larger than resolved while we remain active with manufacturing initiatives. We are positioned to deliver inventory and sets across the business to facilitate planned sales growth.

The base Globus business delivered, a justatee but a margins of 32.3% growing 210 basis points over the prior year quarter.

Significant progress was made with rolling out cost controls within Niro as a benefit. As a business finished at a near Break, Even adjusted Eva without seeing the full impact of all cost actions planned.

Aligning, the cost structure position will position us well looking ahead, while we continue with this integration.

we remain debt-free or we continue to invest in the business and are generating strong free cash flow.

we are driving Synergy capture including identifying and realizing non-operational synergies from our recent m&a, activity,

All of these are aligned with the long-term Globus philosophy.

My strategic priorities are focused on continuity to build on the existing strategy, which will be achieved via a framework of accelerating innovation and operational excellence. Driving organic growth, we will cultivate a culture of leading and invest in our people to develop the Future Leaders of Tomorrow.

Looking into the vision of this framework, we will develop new tools within the R&D pipeline Drive manufacturing initiatives to return to a mid-70s adjusted gross, profit profile achieve market share gains accelerate. Our first mover strategy while creating career Pathways for our employees.

Work and dedication to get us to this position and remain encouraged with our trajectory. As I feel. We are well, positioned to drive sustainable growth.

Before turning the call over, I'd like to take a few moments to introduce our new CFO Kyle Klein.

Kyle joined Globus in 2017 as an assistant controller after a successful, 10year career with Deo,

Since joining Globus Kyle has held several roles of increasing responsibility each time learning more about the underpinnings of our business.

When I joined Globe is in 2019. Kyle was integral to helping me develop a team and more importantly, a mindset on how to approach things. He is a trusted Confidant of mine and I couldn't be more thrilled to have him become the next CFO of Globus. Kyle will do great things in this role and I wish him continued success. Congratulations. Kyle. I will now turn the call over to you.

Thanks, Keith and good afternoon everyone. I'd like to start today by thanking David Paul the board of directors and Keith for this opportunity. I am thrilled to be taking on this role and partnering with Keith in The Talented Globus leadership team.

In my 8 plus years with Globus, we've seen remarkable growth and change in our business. And it's been a career highlight for me to be part of what we're building here. Alongside the best and brightest Professionals in the industry.

As Keith mentioned in his prior comments on April, 3rd 2025. We closed our acquisition of Nero Incorporated after Nero shareholder and Regulatory approval.

The purchase price of $252.5 million was paid using existing cash reserves. The resulting impact of the April 3rd acquisition of Nero is such that my discussion on our results will seek to identify the underlying legacy Globus Medical results as well as the contributions from the inclusion of new financial information.

Our Q2 20225 results include 3 months of Legacy Globe, as financial information and 3 months of Nero, reflective of the April 3rd, acquisition closing date.

my comments today will provide insights into our quarterly business performance, including the impacts of Nero, our Capital allocation priorities, as well as views on overall, guidance, for the remainder of the year,

As I move through my discussion this afternoon, I will first comment on our as reported results providing insights into the Legacy Globus business as well as high level comments on the contributions from Nero on an as reported basis.

All information is presented based on Globus accounting policies and is consistently applied in the ads, reported results from Legacy Globus and Legacy, never, we are extremely pleased with our second quarter results. Both with and without the impact of Nero,

The headlines for the quarter include 1 above market sales growth in our us spine, business 2 record non-gaap earnings per share of 86 cents and 3. A bounce back in enabling Technologies sales adding to Keith's comments are sales results. Clearly demonstrate that we are driving market share growth in our executing our strategies around product Salesforce and integration.

Moving into the quarter. Our second quarter Revenue was 745.3. Million growing 18.4% on an as reported basis and 17.6% on a constant currency basis as compared to the second quarter of 2024,

Net income in the second quarter of 2025 was 202.8 million and GAP, fully diluted earnings per share was $149 reflective of the impact of both a bargain purchase gain of 110.6 million and partially offset by 28.8 million of merger. And acquisition. Related costs, resulting from the April 3rd, acquisition of Nero.

The bargain purchase gain.

Which for accounting purposes is recognized in the period as a benefit. To the pnl is primarily driven by the value of certain deferred tax assets specifically Federal net operating loss. Carry forwards with indefinite lives that were acquired in the Nero acquisition as the Legacy Nero business. Did not historically generate profit. These tax benefits were not able to be utilized.

Under its structure. However, upon acquisition the combined Globus profit profile allows us to recognize and utilize 141.5 million of these deferred tax assets which will generate cash tax savings over a prolonged period.

In our acquisition of Nero Globus acquired, net, tangible assets from Nero of 168 million, which consists primarily of inventory, and accounts receivable and another 144.5 million of the Deferred tax assets described a moment ago.

Coupling this value with the intellectual property portfolio and the deal rationale that Keith discussed in his opening remarks highlights why we feel the Neo acquisition was a strategic opportunity for us.

returning to

John Gap Consolidated. Net income was 116.8 Million compared to 102.7 million in the prior year quarter growing 13.7%, our fully diluted non-gaap earnings per share. Whereas 86 cents, growing 14.1% over the prior year quarter,

Consolidated adjusted Eva was 28% and we generated 77.9 million of operating cash flow and 31.3 million of free cash flow during the quarter.

Our Legacy Globus adjusted Eva was 32.3%. All Legacy Globe is operating cash. Flow was 104.2 million and free cash flow was 60.3 Million.

Our second quarter, net sales of 7445.3 million reflect Legacy Global sales totaling 650.8 million growing 3.3% as reported and 4.9% on a day. Adjusted basis with 1 less selling Day in the US and 2 fewer days in Japan compared to the prior year.

the growth in our Legacy globe of sales was primarily driven by us spine which achieved 5.7% as reported in 7.4% De adjusted growth

Neo contributed 94.6 million of Revenue, during the quarter inclusive of 82.1, million of domestic revenue, and 12.5 million of International Revenue.

Musculoskeletal Revenue was 710.2 Million. Growing 19.8% over Q2 2024 Legacy Globus musculoskeletal Revenue was 615.6 Million growing 3.8% as reported

Enabling Technologies Revenue was 35.2 Million. Declining 4.4% as reported but growing sequentially 58.5% over q1 2025.

We saw a bounce back in, enabling Tech during Q2. However, we continue to be impacted by extended timelines, to close deals in the quarter. Despite the headwinds created by these extended timelines. We've remained confident in our enabling Tech business driven by our robust Pipeline and the sequential improvement from q1 to Q2,

Us Revenue during the quarter. The second quarter of 2025 was 600.8 Million. Growing 20.3% as reported Legacy Globus us Revenue. During the second quarter of 2025 was 518.7 Million growing 3.8% versus the prior year quarter.

our Legacy Globus us growth was primarily driven by our us spine business and Trauma partially offset by declines, in enabling Technologies and neurim monitoring

Our us spine business continues to build momentum. Getting us back to high single-digit growth in a highest growth on a pro-forma basis. Since prior to the new invasive merger in September of 2023.

Our us spine business continued, this momentum in July and early August and our confidence remains high, in our ability to capture above market growth in this business.

Q2 2025 International Revenue was 144.6 Million. Growing 11% as reported and 7.5% on a constant currency basis International Revit revenue for the Legacy Globus business, was 132.1 Million, growing 1.4% as reported and declining 1.8% on a constant currency basis.

Compared to the prior year quarter.

Legacy Global saw growth. In many of our direct markets primarily in emea partially offset by lower International distributor sales as we felt lingering impacts of the q1 supply chain interruptions and integration driven by consolidation of Distributors and transitioning. Certain Geographic markets from distributor to direct

However, as Keith mentioned, the supply chain, impact dissipated. As we move through the quarter, with each successive month in Q2 growing sequentially, overall, we saw sequential Improvement in Legacy Globus International Revenue, growing 15.6% over. Q1 20125.

Gaap gross profit in the quarter was 63.3% compared to 55.2% in the prior year quarter with the resulting Improvement driven primarily by lower inventory. Step Up amortization, adjusted gross profit was 67.4% compared to 67.2% in the prior year quarter primarily driven by Synergy capture and partially offset by sales mix.

Legacy Globus non-gaap. Gross. Profit was 67.6% versus 67.2% primarily driven by favorable sales mix. And partially offset by increased appreciation from capex investment in sets and instrumentation.

Novero non-gaap, gross profit was 66.4%.

Facilities in Pennsylvania and Ohio as we remain focused on manufacturing initiatives which are beginning to pay dividends and cash spending on inventory and will drive a return to Mid 700s adjusted gross profit.

Research and development expenses in Q2 2025 were forty million dollars or 5.4% of sales compared to 37.7% of sales in the prior year quarter.

Legacy Globus R&D expenses totaled, 33.1 million, or 5.1% of sales.

The resulting decline in Legacy Globus R&D both in dollars. And as a percentage of sales is attributable to Synergy capture resulting in lower headcount.

Never R&D was 6.9 million or 7.3% of Nero sales.

Sgna expenses in the second quarter of 2025 were 303.6 million or 40.7% of sales, compared to 239.5, million or 38% of sales. In the prior year quarter Legacy Globus sgna expenses, were 242.9 million or 37.3% of sales.

The increase in spend is attributable to increase sales, compensation costs from higher volume increased, third-party spend and higher employee B, higher employee benefit costs partially offset by lower bad debt expenses, never contributed 60.7 million of sgna expenses in the quarter or 64.2%

Of nio sales.

Q2 2025 net interest income was 0.7 million compared to 2.3 million of net. Interest expense in the prior year quarter, the million dollar. Favorable changes being driven by a decline in interest expense from the pay down of the remaining 450 million of outstanding convertible debt in q1, 2025 that was assumed from the new invasive merger.

The Gap tax rate for Q2 2025 was minus 7.8% compared to 33.2%. In the prior year quarter, the current quarter includes a 34.8 million, 1-time tax benefit which is primarily driven by the discrete nature of the release of evaluation allowance against previously. Reserved R&D credits acquired in the new invasive merger, the restructuring of our business post integration and the cost actions taken to increase profitability of the combined business have provided for this tax benefit, that results in cash tax savings and future periods.

Our non-gaap tax rate for the quarter was 25%. Adjusting for the 1-time nature of the valuation allowance benefit, mentioned a moment ago, we expect our full year. Non-gaap tax rate to be approximately 25%,

Cash Cash equivalents and marketable securities were 229.4 million at June 30th 2025 compared to 956.2 million at December 31st 2024.

The declining cash is driven by 3 main factors 1 as mentioned last quarter. In March, we fully repaid in cash the remaining 450 million outstanding. Convertible debt assumed from the new invasive merger.

2 in April, we acquired never for a purchase price of 252.5 million and 3 during the past 2 quarters. We've spent 215.4 million to repurchase approximately 2.9 Million shares

As mentioned during our Q1 2025 earnings call, our existing $500 million share repurchase program was completed during Q1 2025. In Q2 2025, we announced that our share repurchase program was expanded by an additional $500 million, and we have $475 million of authorization remaining under this program as of June 30, 2025.

Q2 net cash provided by operating activities was 77.9 million and free cash flow was 31.3 Million.

Trailing 12-month basis, we've generated 669.2 million of operating cash flow and 527.4 million of free cash flow.

This strong cash flow generation is driven by continued sales growth.

Our Capital allocation priorities remain unchanged as we will continue to prioritize internal investment and product development sets and capex. Evaluate complimentary m&a and opportunistically repurchase shares while focusing the use of our capital on driving investment for long-term profitable growth.

Upon closure of the Neo acquisition, we established that our primarily primary goal is to drive Topline growth while right-sizing the profitability of the business to accomplish this. We immediately recast their R&D approach to product development began work on integration planning and started evaluating Synergy opportunities as we've commented on previously. Our plan for integration is aggressive as we seek to achieve steady state. As soon as possible, we remain bullish on our previous comments in relation to Neo being a creative to earnings in the second year of operation and are beginning to see the impacts of our Synergy actions on results.

During the quarter, we began seeing impacts from tariffs on both, the Legacy Globus and Legacy nevro businesses as expected in previously, communicated. These tariff impacts were not material to our results, although we continue to monitor the impacts of changes.

Turning our attention to financial guidance.

We are reaffirming our guide of 2025 net sales to be in the range of 2.8, to 2.9 billion and fully diluted non-gaap earnings per share between 3 and 3.30.

The Globus team continues to execute key initiatives of developing and launching products competitive, recruiting integrating systems, and processes and driving, cost actions that set the stage for continued long-term profitable growth and value creation. The above market growth, in our us spine business, and our Relentless pursuit of operational. Efficiencies drove our record, non-gaap earnings per share this quarter and the momentum of that business along with enabling technology, sales sets us up for sustained, growth in the back, half of the year the entire Globus team, including the new Neo colleagues, continue to execute our vision and strategy, I am proud to stand by their side and drive further success in 2025 and Beyond as we build towards being the leading musculoskeletal technology company in the industry.

Before we finish our prepared remarks. David would like to make a few closing comments. Thank you, Kyle and congratulations on your new role. I am looking forward to working with Keith in his new role as he leads Global business forward. I have never been more excited about our future prospects. As we are, re-imagining the operating room and muscular skeletal surgery to drive better. Patient outcomes. Our Excel CS ecosystem will play a lot

Large role in this transformation with our suite of Imaging, navigation, and robotic systems leading the way our unwavering commitment to improving surgical outcomes and solving unmet clinical needs continue to be the motivation. For all of us to work toward we remain, committed to Bringing exciting Technologies to Market. With our R&D engine to achieve our goal of improving. The lives of patients with muscular skeletal disorders. Thank you for joining our call today. We will now open the call for questions.

And you will need to press star 1 1 1 on your telephone, and wait, for your name to be announced.

To withdraw your question. Please press star 1 1 1 again.

Please stand by while we compile the Q&A roster.

Our first question comes from the line of Matt mythics from Barclays. Your line is now open.

So much for taking the questions. Um, and uh, looking congrats on on the quarter um, and grassy and Kyle on a new role and and I just want to see you, David. It's nice to hear your voice on the call. Um,

so um the first question or first part of the question uh maybe just on um,

You know, the progress you've made so far would never. I think last time we talked you were just about to begin or beginning some of the the um sort of uh, cost and and efficiency programs. Um,

And weren't really sure how that was potentially going to affect the organization particularly on the, on the sales side and wanted to get a sense of how that's going, you know, what your read is at this point and then I had 1 follow up. If I could

Positive for us, going along with working on Cost, Containment activities, you know, as we start at the quarter, you know, we really overlay the Globus approach to controlling third party spending. And I think that that started to show uh, for, uh, benefit early on in the quarter but the large cost actions that happened didn't really happen towards the until the back end of the quarter. So as I sit here today, I I feel positive about where we're going. And again, leadership is very focused on working with the sales force because the long-term goal, like I spoke about earlier, is we we want to re we recast product development, but we want to grow this business, long term, and I, I think that commitment is going to go a long way with the sales force.

Great and then just to follow up on um robots of course, and enabling technology. You know, they've had time to get through the, the tail end of Q2. I mean, it was it was a lot of questions. I think still after q1 is to, you know, what exactly happened was that the shifts towards financing? Was it something to do with the uncertainty in that moment? Um, you know what what what have you learned or what can you tell us about? You know, uh, the pipeline and and and how deals are closing and what factors, if any are are, are are shifting or changing? The way that business is, is running in terms of the placement side. Thanks, sure, sure. So, you know, enabling Tech had a bounce back here in Q2, obviously, q1 was soft. Uh, you know, what I saw on the quarter was us being able to close the deals from Q.

1. I still see that elongation pipeline as I think about uh how robots are sold. You know, we're still, we're still selling outright the majority of our robots. But again, we have the ability to offer multiple ways of selling the robot and we're taking advantage of that. Um, as I look at our pipeline, I don't see us losing deals to competition. That's that's been a question from folks over the last couple of months and I don't see that happening by and large as I look at as I look at Globus and egps, I view our number 1, competitor as Medtronic, and we go ahead to head with them, but we still think this is pure argue of our technology. Puts us ahead of the class.

Okay, well thanks so much and congrats again.

Thank you. Thank you.

Heidi.

Haley.

Can you so sorry about that? Our next question comes on a big shower from Wells, Fargo. Please, go ahead.

Oh, hey, good afternoon and, uh, thanks so much for taking the questions. Congratulations to both Keel and kite. Uh, Kyle and Keith. Sorry, um, 2 questions for me, maybe first 1 on a high level, maybe just talk about how you plan to evolve your investor communication strategy, especially around Global, Medical, guidance methodology and adequate follow-up. Please.

So, in terms of, uh, investor relation strategy, I think that in near term, you'll see us out on the road a bit more. Uh, we've been fairly active with investor relations, thus far here in in 2025, coming off. What I would call a fairly heavy second half in 2024. Uh, we'll continue to evolve this time passes, uh, you know, and in in the future uh we're going to have an investor day. We haven't announced the actual date yet, but there will be more investor Outreach occurring as time passes. Yeah. And and the only thing I'd add to that Vic is, you know, as we've been doing, you know, more of of the investor relations activity over the back half of the year, I've started to come along on some of those. So I expect to be out there as well. Um, more front front and center and and working with you guys out in the field.

Right. And congratulations on your uh, approval for the augmented reality headset. Maybe just talk about the latest on the timelines for launch and how this will integrate into the product Celsius ecosystem. Thank you. Sure, sure. So we're in the process at the beginning quoting. Uh, XR, you know finish, good Supply is ready and really now it's about rolling out the launch plan. Um, you know, as I think about XR the team spent a ton of time doing

Extended viability testing with surgeons and everyone that's been part of it has come away, very excited. You know as we think about XR. The value proposition is line of sight for the surgeon surgeon control, allowing them to keep their eyes on the patient. Uh, and the surgeon will be able to to have hand tracking uh, with that will keep sterility. So they're not going to have to touch a screen or do anything like that as we think about XR really. What we're looking to do is is pair that with our excelus company 3D, or pairing it with egps. But for now we're focused on HUB with XR and e3d. We think that would be the best navigation package out there in the market and we're excited to move it forward.

Thank you. Our next question comes from a line of Shaun Singh from RBC

Oh great, thank you so much. Thank you. Um I wanted to touch on on the CEO transition and the leadership transition. So maybe this question is for Dave, since you're on the call, you know, we've seen 2 within a matter of a few years, you know, both around Acquisitions. And you know, I was just wondering if there was any commentary you can share for investors who may be wondering about this and the company's internal leadership. Uh, you know, I'm very aware of the of the, of the established internal leadership succession plans that you have. So, so really no surprise there. Uh, but uh, just they, maybe you can also comment on how your involvement, uh, may have, or is evolving, um, here with the company. And then I have a quick follow. Thank you chef.

Thank you. Shaun, for your question, our leadership bench is always been Broad and deep and we're always developing leaders. The 40 leaders we have within the company at the senior level, have on average, 20 years experience in Medtech. Um, the board has always been very deliberate about succession planning.

Uh, Dan found an opportunity, he wanted to take and Keith was ready to step into his role. So we found, uh, this was the right timing for this. Uh, we're 100% confident in Keith and in Kyle.

So we feel that this is uh, this is an inflection point in in global business growth rate. As far as changes, we've always cherished continuity in leadership. And we've had that over the years and we've had 4 CEOs over the last 22 years, and 2 are still in the within the company. So, I feel like our continuity in leadership is second to none in our industry.

And as far as my involvement shagan, I I keep the same involvement that I have had. I work heavily in R&D, in product development in strategy, I've been working with the CEO and the CFO and the presidents and the heads of product development. And that's where I see my biggest benefit. For Global business is to focus on R&D.

Uh, great, that that's really helpful. Thank you for the color. Uh,

Just, um, I guess it's my second question. Um, I wanted to touch on Nero. Can you maybe, uh, elaborate a little bit more on your strategy to get nevro back to growth? You know, obviously, you've talked about the sales force, you know, them being part of, um, uh, globalist medical having, um, you know, uh, having a new, uh, sense of energy there. But, uh, you know, what are you hearing from the field? What are what are what would the the key issues? Um, at Nero? When it was a standalone company that that you can address with your leadership? Uh thank you for taking the questions.

Thanks again. I think there's there's a couple of parts to that uh, I think. First and foremost, 1 of the things that we want to bring to nevro is stability and approach. I commented on really taking and recasting their product development approach. And that's really looking at and what, what's in the pipeline from the standpoint of true new product development versus sustaining projects. We've really worked to hone that and get them on a path to move forward. Number 2 is just the Strategic approach from a commercial perspective. We want to be consistent in our application and as we as we talked to people, it seemed like there was maybe some moving around of what the strategy was at Nero historically, prior to acquisition. So really, we want to get them on a stable course forward. The third thing, I would say is really bring them into the global umbrella really allowed the the customer and the hospital and surgeon Community to know that this business is going to be around long term, I think given some of the financial challenges that never had previously. There was a question as to whether or not that they would be around. I think bringing that all together here position.

Us. Well to take this business and grow and it really ties back to what I had said earlier regarding an earlier. Question that the the sales team is really galvanizing pumped up about that because they see a path forward with with Globus 1 thing. I like to do that is never has the only differentiated technology within neuromodulation also. The only technology that has level 1 clinical data showing superiority using high frequency for pain

So, I think it's very exciting to have a clearly differentiated product. And now having the certainty of Globus behind them, the Salesforce is pumped up. As Keith said, to continue growing.

Thank you so much.

Thank you. Our next question comes from the line of Matt Taylor from Jefferies. Your line is now open.

Better, I guess the pathway from where you finish to that accretion goal.

Yes. Thanks. Matt for the question. This is this is Kyle, um, so where I start is pointing you back to what we talked about last quarter is as we go in and take some of these cost actions and change some of the business we're not targeting changing, you know, and impacting sales but there is some risk as we go through and and and make some changes inside the business that we could have a bleed over into sales, um, profitability, we we do feel good about but there's a lot. We don't know about the business, you know, 3 months in. We've been able to at the end of the quarter, come out with some Synergy actions you know related to uh headcount and Opex Etc. But we want to be able to have a little bit more time in that business before we truly see what that's going to look like. By the time we get to the end of the year. So the only thing I would add to that is just the looking where we're at right now giving some of the other comments, you know, we're cautiously optimistic, but there's still 6 more months of this year to go before we get to 2026.

Great, great, great fast, follow up on, enabling Tech, nice, bounce back to quench. Before you had made some comments that you you might still be able to get back to double digit growth this year. And I wondered, if that was still in play or or could you help us, think about how strong the back half could be

So I guess the way I would answer that is if you look at the back half of last year our enabling Tech business grew give or take 25% uh which was about uh I want to say it was about 25 million, 25 million, 25 million. If I was going to finish double digit this year, I have to grow 27. So it it's possible. And we feel like we have the pipeline to move the business forward. Yeah. And I think, I think it really goes back to how we feel about a, the momentum into Q2, as well as what's in the pipeline. The amount of quotes that are out there that says, right? We, we do feel good. It's it's in the realm of possibility that we can get the double digits in sales.

Great. Thanks guys. And congrats.

Thank you. Thank you.

Thank you. Our next question comes from the line of Ryan. Zimmerman some ETI your line is now open.

Ryan Zimmerman. Your line is now open for your question.

We'll go to our next question.

Our next question, counselor, line of Richard new Witter from truist Securities. Your line is now open.

Hi. Thanks for taking the questions, and, um, congrats to both of you on the new roles. I wanted to maybe just start.

Can you can you just run through the components and what's changed in the guidance? Um, to get to get to your um, updated Outlook with just the moving parts from 1 Q, to 2 q a special, since it's a really nice snapback.

In the US corresponding business, sounds like International is maybe we should, we should be dialing in a little bit lower there and, and specifically, what's the, what should we dial in for never to, you know, for uh, to Q to 4 q?

Yeah, thanks for the Tweet question.

Yep, thanks for the question Rich. Um so just to kind of step back and think about guidance, right? We set out initial guidance back in in Q4 both as a standalone and then with Neo in q1, when we finished our results and and announced that we were acquiring Neo, we re restated what our guidance would be, right? And we said it would be 2.8 to 2.9 billion billion dollars in revenue and 3 dollars to 3 dollars and 3030 cents from an EPS standpoint. Then, you know, we had q1, which was obviously, you know, lighter and a little bit disappointing. Both in top and bottom line. And now we have, you know, a solid Q2 beat from a sales perspective as well as on the EPS front. Um, you know, we feel comfortable in the range of our guidance and where we sit today. Um, we don't think anything that we've

Seen tells us we should necessarily increase it or decrease it based on where we're at 6 months into the year.

I guess could you just run through the components that you know what what went up? What went down. I know currency got a little bit better. How much does that kind of help and where the offsets are should we be dialing down International and led to some of your comments? Sounds like Capital? You still confident in in growth at a minimum, possibly double digits. Uh so just could you just help us think through the put the pushes and the polls since you're initial Outlook because you are reiterated thanks. Yeah. Yeah Rich. Yeah. We we don't get into those parts and pieces of the guidance. Um, but I agree with you. We feel we do feel confident on us spine that you've heard. We do feel confident with enabling Tech you've heard about some of the headwinds, But ultimately we feel good about a range of our guidance.

Thank you.

Thanks.

Thank you. Our next question comes from the line of David Saxon from Needham & Company. Your line is now open.

Oh, great, uh, good afternoon. Thanks for taking my questions and, uh, Keith and Kyle congrats on the, the new roles, um, in the script you. Yeah, of course. Um, you were talking about the manufacturing process, uh, progress to drive, uh, to mid 70s, gross, gross margin over time. I guess, how should we think about the next milestones and the Cadence to get there? I mean, is this like a 12 to 18 months Journey? Um, or or would it be any shorter or longer?

And really that's driven by some of the manufacturing initiatives. So, the way to think about that is that inventories on our balance sheet and that inventory will push through the p&l next year to drive that benefit. So those benefits of expanded gross profitability really are 2026 and as you think about that that is going to be a Cadence as the year moves forward.

The only thing I would add to that is remembering now that we have NeverRight and they're approximately the same in terms of our gross profit percentage; they were 66%, give or take, this quarter. We're obviously going to be focusing on the initiatives of manufacturing from our base implant business here, right? And then we'll focus on NeverRight after that. So that kind of gives you a little bit of a delay in that time period and how that will play out.

Okay, that's helpful. And then I wanted to ask a follow-up on the new invasive, uh, deal. And, you know, historically you talked about cross-selling, uh, with enabling Tech. I guess where are we in that, you know, does the macro backdrop, kind of delay that opportunity? Um, or are you still? Are you seeing deals? Kind of come through from the, you know, kind of accounts that are loyal to new bases. So, thanks so much. Yeah, that's a great question. Uh, I would say, yes, we're, we are selling robots to Legacy invasive accounts, uh, you know, as we comment it, uh, a quarter to 2 Go re line is available to be used on the robot. That was a big game.

Dating item that availability has helped Propel. Uh, additional coding of the Legacy invasive customer. Uh, there's, there's still more to do there, but from my perspective, from our perspective, we are active and cross-selling the robots to both Legacy Globus and Legacy invasive, customers stepping back from that. We're also cross-selling the implants across the entire portfolio.

Great. Thanks so much.

Thank you.

Thank you. Our next question comes from the line of Matthew O'Brien from Piper Sandler, your line is now open.

Good afternoon. Thanks for taking that question. Um, and congrats to to Keith and Kyle on the new roles um

Kyle, I don't, I don't need to be confrontational here, um, with our first interaction on a call, but I do want to follow up on Rich's question, just because you guys have mentioned specific numbers on Nero for 25 and specifically when you bought it. It was a hundred million dollar business. Then you were kind of leaning everybody to about a hundred million dollar business, this year, pro forma only owning the asset for 3 quarters. So, kind of 225. So given the 95 million that you just did in, in Q2 that would, um, equate to 130 million for the back half of this year. 65 million per quarter. Is that what we should be using or is it a higher number than the 65 per quarter?

Yeah, thanks for the question, Matt. And, and back to you, we're not going to break out specific guidance. We wanted to give that as a directional understanding last quarter based on what, what you knew about Nero and what we knew about Nero at the time. Um, ultimately, right. I think regardless of where we fall kind of in the range for Nero sales, we feel comfortable about our overall range of the 2.8 to 2.9 billion. Matt the only thing I would add to that is you know it goes back to what we said earlier. You know we the big head count actions just happened here in the second quarter. There's still a lot more of the year to happen. Uh, you know, and as we get through the year, there's still additional actions that will be taken. That could impact potentially sales. So sitting here, 6 months in, we feel that our overall guide is appropriate for where we're at and like I said earlier to an earlier question we're cautiously optimistic with where the Neo business is but we think it's really still too early to make any broad scale changes to what our views are from a guide perspective. As we look for

Further out.

Okay, fair enough. And then on the Evita side, it was really good to hear that, um, that the, um, adjusted Evita for Nero was, was break even even though sales came in, you know, below what they did. Uh, this time last year. So I think this you kind of touched on this earlier. But is this kind of the low water mark for Evita for Nero? Or could it be a little bit lower back half of this year? And you know um what are some other potential areas of of cost center?

Sdna line over 60% of their sales are spent through sgna that's really the place. We need to focus our attention as we move through the back half of this year.

Got it. Thank you. Got it.

Thank you. Our next question comes from the line of Caitlyn Cronin from canaccord genuity. Your line is now open,

Hi, thanks so much for taking the questions.

So, it sounds like you're through the supply challenges related to the new insourcing. Um, but are you through just the new insourcing efforts? Generally, are there any more product lines to vertically integrate, and what's left from an integration standpoint more generally for new books?

So thank this is Keith, I'll take the call, thank you for the question. So stepping back, I mean the the manufacturing initi initiatives are really multifaceted. So as you're working on the invasive product, there's also additional Globus product that you're you're looking to further, I would say manufacturer internally. Um as you think about the year, the Cadence of output from our manufacturing facilities will continue to increase as time passes because as we commented on our Kyle said something earlier, the machines are coming online and their programmed will as everyone is learning that learning how to operate those machines. You would naturally expect outputs to become higher and higher as they become more efficient with running the machines. So that Cadence will continue as you think about the integration overall really the, the big things that are left is the international businesses and bringing

Them in onto 1 System. You know, we talked about some Supply challenges, which to me are largely behind us from the, from the flow of product, but now it's bringing together. The salesforce's internationally and bringing together where we're operating. If you recall what I said, in my prepared remarks, the international business, our goal is to go deeper in the countries that we're operating in. We're not looking to go broader and have a bunch of countries. We see the ability to take share in the in our major countries and that's a key. Focus might have some a short term impacts but long term that's our approach.

Great. And then you discussed,

With um enabling technology. Just with the you know elongated selling timelines thoughts on any other initiatives to really speed up the the timeline aside from from that financing flexibility.

I mean the financing flexibility. I mean, obviously, we can offer terms, we can offer subsidized financing from a, from an interest rate perspective. We can use third-party Bank financing. I mean, every kind of reasonable option that's out there. We, we absolutely look at and give our customers a variety of options to to pick from uh, really at this point, like I said earlier, the pipeline is strong. It's got, we got to continue to close the deals.

I don't think there's any shortage of offerings out there that were that were not doing.

Thank you.

Thank you. Our next question comes from the line of Jason wits from Roth. Your line is now open.

Hi. Thanks for taking the questions and congratulations on the promotions, Keith and Kyle. Um, so just a real quick 1 uh, sure. And just a quick 1 to First, you mentioned the nols from Nero was that part of the initial calculation you gave on sort of the profitability and and and uh delusion uh, when you, when you first announced the deal,

Yeah, that answer to that question is no. This is Kyle. Um, the NOLs were not part of that calculation.

So this would definitely be this would probably be upside towards just seeing I guess EPS or creativeness then if if I think about and and and related to that.

How long do you how, what kind of timeline should we be? Looking at for those nols to flow through the p&l?

Yeah, so it it it will not for it will not give us a creativeness to the p&l. Think about these as cash tax savings, right, that we, they've essentially taken that credit in the past, they weren't able to utilize it. We are now able to use it to reduce the amount of cash tax. That goes out the door um that 141.5 million it. I'm going to give you a broad range because it's a very detailed calculation. But think in the range of 40 to 50 Years it'll be over an

Extended period of time, okay? That that's helpful. Uh, and then maybe just 1 strategic question, um, on the Salesforce. Um, you know, I think you had mentioned, you know, that you pretty much done with the integration between Globus and neera, excuse me, Globus and invasive. Um but there's still some just synergies I think that are still kind of flowing through. How are those looking uh for this year and how, how should we be thinking about those going forward?

Energy, I look at how many competitive recruits am I bringing into the business and what is what I would call a relative scale of those of those competitive reps that we're bringing in, uh, you know, as I look at what we've done so far this year, we're really happy with our second quarter. And what I see is a, from a scale perspective, the Reps were going after could bring more dollars with them when I think about the average number of dollars per head. Um, so as we look at that and then look to the back half of the year, we remain very positive. If you go back to my prepared remarks, I commented on uh, you know 19 weeks of growth. We're seeing that growth across the business. It's not just like 1 territory. We're seeing good solid sustainable growth.

Great, thanks for the detail. I'll jump back in queue.

Thank you.

With no further questions.

Since the glob of medical earnings call, thank you for your participation. You may now disconnect