Q3 2025 Globus Medical Inc Earnings Call
Welcome to Globus Medical's. Third quarter 2025 earnings call at this time, all lines,
Will be on mute and a Q&A session will be held after the prepared remarks.
To ask a question during the session, you will need to press star 1 on your telephone. You will then hear an automated message advising that your hand is raised to withdraw your question. Please press star 1 again. Please be advised that today's conference is being recorded.
I will now turn the call over to Brian Kearns senior vice president of Business Development and investor relations Mr. Karns please go ahead.
Thank you, Stephanie, and thank you everyone for being with us today.
joining today's call from Globus, medical will be a Keith file president and CEO and Kyle Kline 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.
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 10K for the 2024, fiscal year, and our subsequent filings with the Securities and Exchange Commission.
Identify certain factors that could cause our actual results to differ materially from those projected in any forward-looking statements made today.
Our SEC filings including the 10K are available 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 Keith file, our president and CEO.
Thank you, Brian and good afternoon, everyone.
We are extremely pleased with our overall Q3 performance, delivering sales of $769 million and non-GAAP diluted earnings per share of $1.18, growing 22.9% and 42.6%, respectively, over the prior year quarter. In addition, free cash flow is a record for the third quarter, delivering $213.9 million.
Digging in a bit further. Our base business delivered revenue of 669.8 million growing 7% as reported and 7.1%. They adjusted versus the prior year quarter with the same number of selling days in the US and 1 fewer selling day in Japan.
The recently acquired never a business delivered 99.3 million of Revenue during the quarter.
Overall the Globus business saw a meaningful expansion in profitability driven by improvements to adjust the gross, margins, operating leverage, and the continued realization of synergies from cost actions taken resulting in the base Globus business, delivering adjusted Eva margins of 35.3% growing 435 basis points, over the prior year quarter.
The never business. Also delivered a positive adjusted Eva margin finishing at 16.2%.
We remained active with Sherer purchases spending forty million dollars during the quarter, bringing our year-to-date repurchases to 256 million, which Kyle will expand on later with his remarks.
Our overall results, reflect continued Market, penetration and earnings expansion. That is sustainable and enduring.
In short, the business delivered on nearly all of its objectives during the quarter driving results and establishing confidence as evidence in our ability to. Revise upward, our full year Financial guidance, which Kyle again will discuss later in his prepared remarks.
Before I turn it over to him, let me first go a little deeper into the business.
Consistent with our us consistent with last quarter, are us spine, business. Led the way growing 9.6% as reported
We continue to see growth in U.S. spine during every week in Q3, which is carried forward into Q4. As we now sit at 32 weeks of consecutive growth.
Competitive recruiting remains at bright spot for us spine as we continue. Our Relentless focus on hiring top talent.
Whether we look at competitive rep visits, new reps on boarded or business. Converted all signs point to strength within this core objective.
The expansive product portfolio team approach and financial strength create stickiness within our business.
We remain laser focused on attracting and retaining the best long-term sales Talent who will help us drive sustainable growth.
2025 is setting up to be a record competitive recruiting year.
Overall our team as double down its Collective cross functional efforts to ensure. We are beating internal goals, set for us spine Revenue, product, development projects, sets, and inventory, deliveries recruiting, as well as enabling Tech placements.
Q3 enabling Technologies. Revenue was 28 million declining. 27% to the prior year quarter driven primarily by lower sales of egps systems.
While our view of the pipeline and its strength remains positive, we have not closed sales at the same pace and Cadence as we have in years past.
We have increased our flexibility of capital deal structures, as our overarching goal remains focused on achieving increased spinal implant growth.
Our install base continues to drive strong. Recurring Revenue growth with implant pull through
Service contracts and Disposal Revenue with robotic procedures. Now surpassing 115,000 cases
The globe is robot Remains The Pinnacle of robotic technology in spine based on customer feedback.
We launched Excel XR during the quarter which is a wearable extended reality navigation, headset designed to seamlessly blend, visualization and control for the surgeon, increasing their focus on patient on the patient during enhanced ergonomics and uninterrupted workflows.
Earlier, in Q4, we received FDA 510k clearance for additional excelsis GPS instruments for use with additional inner body. Fusion devices, including modulus X lift, modulus tilith, oh, coher X, lift, coher, T lift. Oh, Hedren L and Hedren p.
The new Excel Celsius GPS, instruments consists of verification, adapters and various surgical instruments, including inner body, inserters, and trials for use with excelsis GPS or excelsis hub.
Thinking back to the new days of merger and revenue synergies, we can now offer to use pedicle screws and inner body, solutions to those customers who are using evasive products.
the excellus platform which delivers a single vendor spine, ecosystem across Capital implants and software provides for consistent workflow data, continuity and training across the oh,
When stepping back and looking at the broadening competitive INR landscape, Globus continues to be a standalone when it comes to Parenting, navigation, and Robotics together.
If a surgeon desires robotic navigation and imaging they can pair an egps with an e3d bringing together best-in-class robotic, functionality, and state-of-the-art intraop imaging capabilities, working seamlessly together.
If the surgeon desires freehand navigation, they can combine the excelsis Hub and the XR augmented reality headset with the e3d Imaging system. The features and benefits of these products working seamlessly together is second to none.
Looking ahead, we will continue to expand on our ways to sell capital, as well as driving greater attention to operationalizing how capital is acquired versus the traditional CapEx model of procurement by hospitals.
Q4 is typically our strongest quarter for Capital and we continue to act with urgency in converting pipeline deals.
Over time the mix of Revenue may change. However, the overarching goal remains focused on driving Capital placement and launching successful durable, Capital programs that enable implant sales growth.
Our International spine business grew 5.6% as reported and 6% on a day adjusted basis. Driven by 1 fewer selling a day in Japan which I had mentioned earlier.
The EMA geography continues to be led by our largest markets, including the UK Italy, Germany, and Spain. As we go, deeper, however, smaller countries, Within These geographies are beginning to contribute meaningfully, as we continue to emphasize the broadness of our portfolio, Innovation and service quality.
The asia-pacific region saw an uptick in Revenue growth led by Australia and Japan.
Australia, delivered. Its strongest Q3 performance with a growing share of fixation sales while Japan realized growth within cervical, expandables and bio.
Our latam region saw growth primarily within Brazil and Colombia. While we refocus our commercial efforts in targeting higher volume categories, where we maintain a low share position, which ties back to our larger strategy of driving further penetration in the countries in which we operate.
our Cadence of inventory and set, deliveries has continued to improve across our International locations and will continue to do so, as we move through Q4,
Longer term, we still see our International markets as having the ability to grow revenue and the 10 to 15% range.
A business delivered, a strong third quarter growing 17.2% with the highest quarterly Revenue figure since its Inception.
Challenges experienced with precise manufacturing are now behind us, which will drive continued growth. Looking ahead, both in the US as well as our International markets.
Our continued investment in the manufacturing of the full line of NSO products, will further accelerate growth moving ahead, as we bring these online over the next several quarters.
Reviewing our Legacy trauma portfolio. We add it to our Anthem plating line with the Q3 launch of our comprehensive elbow plating system.
With this launch, we have now reached the Milestone of 80% plus of matching. Our competitors portfolios.
when surgeons request our products in their health system,
Shifting the joints. We've been working closely with several large institutions to secure our first e-flex deal.
We have shown and demoed the robot to numerous surgeons and many have commented on the ease and use or ease of use. And its ability to accurately perform TKA procedures in both imageless and image guided workflows.
Surgeons have come away impressed with the ease of auto-registration between eflex and e3d.
We've made great strides with product development and our seeking to complete the modernization of the primary procedure. Portfolio by early 2026, and then use 2026 to complete our revision portfolio. While adding procedural applications to eflex namely hip
As noted earlier nevro Revenue totaled 99.3 million growing 4.9% sequentially representing the strongest quarter of 2025 for this business on a pro forma basis.
We are seeing the uncertainty subside from the pre-acquisition, Neo Financial condition, as well as post acquisition changes that have been implemented since we closed the deal on April 3rd earlier this year.
We'll integration activities, still continue. We've seen positive progress since making significant organizational and procedural changes as this business is rolled into the larger Globus organization, we believe the positive results seen thus far, sets us up well as we look ahead.
operationally the team is focused on fully digging into the supply chain and production activities, while we work to centralize shipping driving additional scale and efficiencies
Commercially, we've seen ability to drive growth within Niro as we focus on surgeon conversions, and competitive rep recruiting to expand our footprint.
Shifting our attention to strategy, we remain focused on partnering with surgeons and helping to solve unmet clinical needs, with a focus on our product development engine to improve outcomes.
Our sales force will penetrate markets through surgeon conversions and continued sales force. Expansions, we remain laser focused on driving operational excellence while maintaining prudent Financial discipline.
Our investment thesis shows a business with an ability to grow in the mid to high single digits with Revenue stickiness.
Our capital structure and lack of debt maintains the maximum flexibility to organically invest in R&D and dip disciplined capex to self-fund growth.
We've demonstrated belief in our business while providing a return to shareholders through our share repurchase program and we've deployed capital for complimentary m&a without creating balance sheet, stress.
The earnings profile and free. Cash flow profile suggest. Strong conversion and high-quality cash generation simply state. It we are a compelling business focused on Innovation. Operational excellence, and execution,
Thank you to our people for another successful quarter. We look forward to closing 2025 strong, and moving into 2026.
I will now turn the call over to Kyle.
Thanks, Keith and good afternoon everyone. The third quarter of 2025 for Globus was exceptional. We posted record results, this quarter in Revenue earnings and cash flow generation. The Stellar results were driven by Revenue growth in our domestic spine business growing 10% over the third quarter of 2024 and accelerating from the 7% de adjusted growth. We saw on the second quarter of this year.
As we move into the final quarter of the year, Globus is in a great position to close out a record-setting 2025 and capitalize on the acceleration we've seen in the middle two quarters of the year.
Today's prepared commentary will focus on providing insights into our quarterly business performance. Including the impacts of Nevo reiterate, our Capital, allocation, priorities, and update our guidance for the remainder of the year.
Consistent with last quarter, 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 Nevo on an as reported basis.
moving into the quarter, our third, quarter Revenue was 769 million growing 22.9% on an as reported basis and 22.3% on a constant currency basis as compared to the third quarter of 2024,
Gaap net income in the third quarter of 2025 was 119 million in gap. Fully diluted earnings per share was 88 cents. Non-gaap net income was 159.4 Million compared to 114 million in the prior year quarter growing 39.8%.
Our fully diluted non-gaap earnings per share were a $118 growing 42.6% over the prior year quarter.
Flow during the quarter.
The growth in both earnings and cash flow generation was primarily driven by 1, the overarching sales growth in the quarter across a majority of our businesses, led by us, spine International spine, trauma and neuromonitoring.
2 execution of our operational goals to drive synergies, across the businesses and 3, the impact of the recently, acquired nevro business, which achieved sequential sales growth and will now be a creative to non-gaap earnings per share in fiscal year 2025.
Our Legacy Globus adjusted margin was 35.3%. Legacy Globus operating cash flow was $238.3 million, and free cash flow was $205.4 million.
Standalone Neo, adjusted IBA margin was 16.2% for the quarter growing from negative 1.4% in the second quarter of this year and generating operating cash flow of 11.4 million.
And 8.5 million of free cash flow.
By comparison in the second quarter of this year, Standalone nevro represented, an operating and free cash, burn of 26.3 million and 29 million respectively.
Our third quarter, net sales of 769 million reflect Legacy, Globus sales totaling, 669.8 million growing 7% as reported and 7.1% on a day adjusted basis with the same number of selling days in the US and international and 1 fewer day in Japan, compared to the prior year.
The growth in our Legacy globe, of sales was primarily driven by us spine, which achieved 9.6% as reported growth.
In international spine, which achieved 5.6% as reported and 2.9% constant currency growth.
Trauma which achieved 17.2% as percent as reported growth and neuromonitoring which achieved 15.8% as reported growth.
Partially offset by lower enabling technology sales of 10.3 million.
Never contributed 99.3 million of Revenue during the quarter growing sequentially. Over the second quarter of this year, by 4.9% inclusive of 83.3 million of domestic revenue, and 15.9 million of International Revenue,
Musculoskeletal Revenue was 741 million, growing 26.2% over Q3 of 2024.
Legacy Globe is muscular skeletal. Revenue was 641.8 Million. Growing 9.3% as reported
enabling Technologies Revenue was 28 million. Declining 26.8% as reported.
We continue to remain optimistic on the overall enabling Tech business as our pipeline remains strong and we believe we have the best Capital portfolio in the industry.
Us Revenue during the third quarter of 2025 was 617.6 Million. Growing 24.6% as reported Legacy, Globe, is US Revenue during the third quarter of 2025 was 534.3 Million growing 7.8% versus the prior year quarter.
Our Legacy Globus us growth was primarily driven by our us spine, trauma and neuromonitoring businesses, partially offset by declines and enabling Technologies.
Our us spine business, took another step forward, this quarter growing 9/4 9.6% as reported reported after posting 5.7% as reported and 7.4% de adjusted growth. In the second quarter of this year,
We continue to see the strong momentum in October, in early November as we seek to stabilize as a high single digit above Market grower.
Trauma saw an acceleration in domestic growth with both our core. Trauma and NSO portfolios achieving 27.6% growth,
Our neuromonitoring business grew 15.8% as we anniversary the reimbursement. Headwinds, that occurred in mid 2024,
Q3 2025, International Revenue was 151.4 Million. Growing 16.5% as reported and 13.5% on a constant currency basis.
International Revenue for the Legacy. Globe is business, was 135.5 Million growing 4.3% as reported and 1.6% on a constant currency basis. Compared to the prior year quarter,
Have seen sequential growth each quarter throughout 2025.
Gaap gross profit in the quarter was 64.2% compared to 53% in the prior year quarter with the resulting Improvement driven primarily by lower inventory, Step Up amortization.
Consolidated and Legacy, globest, adjusted gross profit was 68.1% compared to 66.5% in the prior year quarter.
Primarily driven by favorable sales mix and the impacts of synergy execution.
Never adjusted. Gross profit was 67.6%.
Manufacturing initiatives remain a key focus for us as we close the back half of the year. We continue to see the benefits of our efforts in adjusted gross profit percentage, with four straight quarters of sequential improvement and a 70 basis point boost between Q2 and Q3.
This endeavor continues to pay dividends in cash spending on inventory and will ultimately drive a return to mid-70s. Adjusted gross profit for 2025. We expect total adjusted gross profit to be in the range of 67 to 68% of Consolidated Revenue,
Research and development expenses in Q3 2025 for 38.1 million or 4.9% of sales, compared to 35.4 million, or 5% of sales. In the prior year quarter Legacy Globus R&D, expenses totaled, 33.9 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 and leverage from higher sales volume.
Never R&D was 4.2 million or 4.2% of nio sales for 2025. We now, expect total research and development expenses to be in the range of 5 to 5.5% of Consolidated Revenue.
Sgna expenses in the third quarter of 2025 were 313.6 million or 40.8% of sales compared to 240.1 million for 38.4% of sales in the prior year quarter.
Legacy Globus sgna, expenses, were 264.5 million or 39.5% of sales.
Current period sgna expenses, included 1 time, net charges for estimated litigation of 28.3 million. Excluding, these 1-time charges, which we adjust out of our results for non-gaap reporting. Our Consolidated sgna expenses were 285.3 million or 37.1% of sales and our Legacy Globus sgna. Expenses, were 236.2 million or 35.3% of sales, the decrease, in spend. After removing the 1-time estimated litigation charges is attributable. To decreased employee related costs from Synergy actions lower employee, benefit costs, and
Or bad debt expenses partially offset by increased sales. Compensation costs from higher volume.
Never contributed 49.1 million of sgna expenses in the quarter or 49.5% of never of sales.
Q3 2025 net interest income was 1.5 million compared to 0.8 billion dollars of net. Interest expense in the prior year. Quarter, the 2.2 million. Favorable change is driven by a decline in interest expense from the pay down of the remaining 450 million outstanding convertible debt in q1, 2025 that was assumed from the new invasive merger.
The Gap tax rate for Q3 2025 was 17.4% compared to 9.1% in the prior year quarter. The prior year rate was impacted by a reserve reversal which favorably impacted the rate by approximately 11%.
The current year rate includes favorable impacts from legal entity restructurings of both Invasive and Darrow.
Our non-GAAP tax rate for the quarter was 20.8% lower than our projected rate of approximately 25%, resulting from a discrete benefit in the quarter related to certain invasive restructuring activities. The favorability in tax resulted in 7 cents of non-recurring, non-GAAP fully diluted earnings per share. For the quarter, we expect our full year non-GAAP tax rate to be approximately 24% to 25%.
Cash. Cash, equivalents and marketable securities were 407.2 million at September 30th 2025 compared to 956.2 million at December. 31st 2024. The decline in cash, is driven primarily by 3 main factors.
an invasive merger 2 in April, we acquired Nevo for a purchase price of 252.5 million and 3 during the past 3 quarters, we spent 255.5 million to repurchase approximately 3.5 million shares
In Q2 2025, we announced that our share of purchase program was expanded by an additional 500 million.
During the third quarter, we repurchased 40 million, or 0.7 million shares and have 435 million of authorization remaining under this program at September 30th 2025.
Since 2020, Sheriff purchases have been an important part of the Globus Capital, allocation strategy as we strive to balance internal and external investment for future growth with creating value for our shareholders.
From 2020 through the third quarter of 2025, we've spent $815 million to repurchase 14.5 million shares at an average price of $56. On average, we've spent $136 million per year to repurchase 2.4 million shares.
Upon closure of the invasive merger, we sought to drive an increased use of our share of purchase program. And since Q3 2023, we repurchased 566 million or 9.5 million shares representing approximately 1 quarter of the deal dilution.
share of a purchases remain, an integral part of our Capital allocation strategy as we seek to First, prioritize internal investment and Innovative product development efforts
Build sets for our sales Personnel across the board, globe, and increase our manufacturing footprint through capex.
Secondarily we seek to opportunistically repurchase shares as we demonstrate our confidence, in the business, and our commitment to creating long-term value for our shareholders. Finally, we will continue to evaluate complimentary m&a while focusing, the use of our capital on driving investment for long-term profitable growth,
Q3 net cash provided by operating activities was $249.7 million and free cash flow was $213.9 million. This quarter's free cash flow generation represents over 50% of all free cash generation in the record-setting fiscal year 2024. On a trailing 12-month basis, we've generated $715.2 million of operating cash flow and $579.6 million of free cash flow.
This strong cash flow generation is driven by continued sales growth, execution of synergy actions and working Capital Improvements.
Specifically in accounts receivable.
Turning our attention to integration. Our goal with Nero is to aggressively Target steady state as soon as possible and the team has performed tremendously in making decisive and meaningful impact to the cost structure within the Legacy nevro business.
Given the Synergy actions taken in operating expenses and the sequential sales growth seen in the business. In Q3. We are updating our initial comments in relation to Nero. As we now expect the business to be, accretive to earnings in fiscal year 2025 versus our previous expectation of being a creative to earnings in the second year of operations.
Pivoting the financial guidance. We are adjusting our 2025, net sales guide to be in the range of 2.86, billion, to 2.9 billion dollars compared to our previous range of 2.8 billion to 2.9 billion.
The revised Revenue guidance implies growth over 2024 ranging from 13.5 to 15.1%.
We are also adjusting our 2025 fully diluted non-GAAP earnings per share guide to between $3.75 and $3.85, an increase from our previous range of $3.00 to $3.30. The revised fully diluted non-GAAP earnings per share guidance implies growth over 2024 ranging from.
23.2 to 26.5%.
We feel confident that our guidance represents our best estimate of anticipated results for 2025.
We also want to reiterate that the Q3 2025 results included 7 cents of tax favorability that we do not expect to recur in the remainder of 2025.
The Globus team has done an exceptional job of executing our vision and strategy this quarter and our results reflect our Collective effort. We posted record-breaking results in Topline Revenue. Non-gaap fully diluted earnings per share and free cash flow.
Open the call for questions.
Thank you. At this time. We will conduct the question and answer session. As a reminder, to ask a question, you will need to press star 1 1 on your telephone and wait for your name to be announced to withdraw your question. Please, press star 1 1, again please, stand by while we compile the Q&A roster.
Our first question comes from Richard newer from truist Securities, your line is now open.
Hi thanks for taking the questions. Um so I just was hoping to get a little bit more color on the strengths and, and the uh, the acceleration in US, correspond in particular. Um,
Anything specific going on there, uh, tend to be easily weaker quarter, um, would love to just just get a feel for what's driving that how sustainable it is, is that pull through, um, from robotics kind of, uh, uh, you know, showing up in new base of accounts, uh, any any, any caller there, and I have a follow-up.
Sure, thank thanks Rich. This is Keith. You know, like I said earlier in my preferred remarks, we are running at about 32 weeks of consecutive sales growth. And the 1 thing that I see is that our strength is Broad, meaning that in substantial or in basically all of our categories that we track, we're seeing growth in spine. So it's not just kind of
Expandables, it's not just pedicle screws, we see it, broadly across the entire portfolio. You know, within that we're also seeing good uptake on our on our, um, durapro drills. Uh, but still, when I think about where the growth is coming from, it's coming from the core implant business. Uh, you know, I think it points to a healthy Market, but I think that as you look at our business and the steps we've taken where it's coming from or or the how yeah, you have the robotic pull through. You know, we launched a bunch of new products last year but also competitive reps. You know, when I, when I think about, you know, the last, you know, several quarters, we've been, we've been really leaning into that aggressively. Uh and and we've been starting to see the results of that come through. Uh, you know, since assuming the role a couple of months ago, that's something that I personally want to make sure that we're focused on both myself as well as the rest of the leadership team, because I, I really think that we have an opportunity to continue to drive growth and differentiate ourselves in spine.
Maybe.
Be enabling Tech. Uh, I was jumping around calls, but I think you mentioned look, you know, that was a little weak. But uh, obviously more than made up for that elsewhere in the business but I'm just curious. You mentioned operating leases, what, what does that mean? As we think about our models, um, you know, into the into the future period. Should we be dialing down near-term Revenue? But but obviously the
You know, the the the the longer term cash flow, you know, it is there, we just kind of smooth it out and increase it into the out years, was it too early for that? And then, you know, what is the strategy change their that you're referenced on the call? Thank you. Yeah, so so great question. So as I think about Globus historically, um, most times we're selling, we're selling robots, they're Straight Cash sales. What I what we've seen more recently is our pipeline is, is is strong, it's still strong. We're not seeing that we're losing material deals to competition, but what I see is an increase in the ask of how a Hospital May acquire the capital, there are some hospitals where we've seen a propensity to not spend capital and they've come back and asked for other ways to acquire that capital in those situations, where you your model changes to, maybe more paper, click models, or a fair market value. Leases in those situations. You're not going to get that full Revenue recognition up front. And I'll go over a period of 3 years. 5 years, whatever. What?
Whatever term you enter into. Uh so as you think about modeling I don't want to get ahead of myself and and and call out kind of how you should guide. But note that over time, we see the model changing a little bit more aggressively away from outright purchases up front.
Thank you.
Thank you.
Thank you.
Our next question.
Is coming up from the line of Vic Chopra of Wells Fargo, your line is now open.
Hey, good afternoon, and congrats on a nice quarter. Um, 2 for me, maybe just starting off on the Nero business. I think you see, I think you said 16.2%, ebita margin this quarter, I'm just curious. If you can talk about your expectations for margin progression over the next, uh, 12 to 18 months, perhaps, and how you're driving, uh, future profitability and then add a quick follow-up.
think about kind of the what we've done so far, you know, we want to drive
basically getting this business integrated into the global umbrella. So Kyle commented on moving aggressively, you know, as you think about some of the near-term impacts that have occurred already really was around, uh, you know, redundant spending trying to find ways to reduce spending. We've done that, but we haven't touched sales and Manufacturing operations because we want to make sure the continuity of that business continues forward. As you look to move in the next year. It's really getting a better. Hold on driving new product development, but more importantly, making sure that the sales force is set to grow. We want to make sure that they move from the standpoint of maybe more of their traditional model they had prior to merger. But getting more aggressive with things like surgeon rep, conversions, uh, or I'm sorry, rep conversions and really driving more and more Outreach to the surgeon Partners. Um, as we brought them in under the global umbrella, we really want to seek ways to drive growth to drive, Topline growth, which should hopefully expand margin as we move further out.
But secondly, we're going to continue to work to find ways to make the business more efficient. Uh as you look up and down the p&l never had a about a 67.68 gross margin. You know, our goal is to continue continue to try to find ways to advance that to make it more profitable. And then, you know, Kyle commented that, uh, you know, our sgna Opex was still running at about 49% of sales, uh, that's something that we still want to continue to look at as time passes.
Great, appreciate the caller. Um, and then another follow-up question that I had was, you know, with Q4 typically, being strong for Capital. Um, just curious how you're thinking about Q4 growth in your data, link Tech business, especially if you talked about evolving, your Capital sales strategy around flexible deal structures. Thank you.
Yeah, great question. Uh, I don't want to get into kind of, calling out the parts and pieces of our of our Q4 numbers. We're confident in the overall guy that Kyle, uh, presented. Uh, there's puts and takes everywhere. But as we look into the fourth quarter specifically, you know, I like I said earlier to, to Rich's earlier, question feel really good about the pipeline, uh, you know, the year so far. We we haven't sold quite as many as as we have in years past. But as I look about the, as I look at the revenue uh that we've generated and the deals that we've placed, they're still strong ability for us to close more deals. But again, the the overarching goal is to drive the long-term ability to get the implant growth, the service revenue and Disposal for Revenue.
Our next question.
Mix of Barclays. Your line is open.
Hey, thanks so much for taking the questions and congrats on a really, uh, impressive quarter. Um, so I had had 1 on Nero and then a follow up on robots. So um,
On Nero and and the sort of Interventional spine business, this sort of uh, the platform that you're you've established there and, and, and are starting to sort of build and and enforce and reinforce. Can you talk a little bit about, um, the other types of things that, you know, cuz cuz never reps and other reps in in neuromod and pain. Um, you know, have more than 1 thing in their bag. And I'm just wondering, uh, you know, what types of things. And when we might start hearing about products, getting dropped into that bag. And as I mentioned in 1, follow up on, on the robot side.
So thanks. Thanks, Matt, this is Keith. So as you think about never first and foremost, you know, never as a spinal cord, stimulation business. Uh, you know, that's the majority of the market. Um, as we think or the majority of the business as you think about adding to the portfolio As Time advances, uh, I think peripheral nerve would be an area that we could continue to or start to look at. But also step back and look at other areas of the business like when when we looked at acquiring never just wasn't for the business that it was today. There was great interest in the, uh, in the patent portfolio and the freedom to operate. So, as we think about other areas, uh, it's looking at diabetic neuropathy, uh, ways to potentially treat Parkinson's tremors.
Those are the areas that you would think we're going to work to develop as time passes, uh, but that's not going to happen overnight, that's going to take some development. Uh but that's those are some of the areas that we're focused on
Got it. And then on the the robot side and and uh and enabling technology, I appreciate the comments around like the shifting preference for, uh, for more flexible payment and models. Um, can you talk and that's consistent with obviously, what? What most of the other robot? Uh, manufacturers and competitors have done over time is is just increasing mix of leases and things like that? Can you have you seen a step up in leases in Q3
Some of the the same, you know, 7, you know, more than 50% of leases over time which is kind of where, where some of your other other competitors, both in muscular skeletal and elsewhere, have gotten to, um, any color. There would be great, thanks. Yeah, I would say that. I'll keep my comments brief here. I would say that we're definitely not approaching over 50%, uh, but I will say that when I look at 2025 the mix of rentals Lynn, leases is higher significantly higher than it was in previous years. Um, you know, as we look to move the business forward, we look to get more flexible in how those deals happen, but I would say that as you think about some of the customer asks and offerings that we've presented throughout the quarter. Uh, I think the um, having additional ways for them to acquire the capital may have slowed some deals down here and there, but by and large. The key takeaway though is that our pipeline Still Remains very strong. Yeah. And Matt, the only thing this is Kyle. The only thing I would add is um you know the fact that while
All the deals that we have closed, our primarily cash deals. We continue to really make all those offers out there in terms of leasing rentals, um, per click Etc. So, the options that we put out there to the customer base are all across the board.
Thanks so much.
Our next question is from Matt Taylor of Jeffrey's your line is open.
Hi, thanks for taking the question. I wanted to dig in a little bit more on the progress you've made with the Nero margins; it was really impressive. Sequentially, could you talk about where you've been able to get the cost outs and drive synergies so far, and what's yet to come, just qualitatively?
Yeah, uh yeah, man, this is Kyle. Um so I think you know, 1 of the first places we started was really in R&D and we took a look at the Neo approach to R&D and our approach to R&D and a lot of it was really just kind of focusing the team on specific projects. How do we run a project Etc? Pretty much, bring it under our specific approach to R&D. So from that there was, you know, ancillary and redundant costs that we were able to take out of the R&D line and then separately sgna is is the other large 1 and that 1 is really as you think about um back office staffing right, where do we need? Headcount in terms of Finance, HR legal Etc, there's opportunity there. Um, as well as thinking about some of those ancillary spends, you know, in terms of software um, Consultants etc. Those are some of the big Focus areas right out of the gate. As we look to try to move, you know, through the rest of 2025 and into 2026. As Keith mentioned, we want to start
Focusing on the cost of goods sold, how do we bring that gross profit up from the mid-60s up into the 70s? Um, as well as taking further looks at sgna, to say, where do we have further? Redundancies? I would say, we've kind of started here in in the back half of 2025, but we still have opportunity there when you think about that 50% sgna margin.
Thank you. Can I ask 1 1 follow up on growth margin. I mean, you've talked about getting back into the 70s for a while here and making good progress. Is it still right to think you're going to have kind of gradual progress?
With maybe a bigger step up towards the end of 26. When you start to see some of the manufacturing improvements come in,
Yeah, ultimately, we won't guide to a 2026 number Matt, but I think that's the right way to think about it in terms of the smaller sequential Improvement in my prepared remarks. I commented that for 4 you seen kind of that uptick in margin. I think the same thing continues as we move through 2025 and into 2026, ultimately with that goal of getting back to Mid 700s gross profit.
Excellent. Thanks so much.
Our next question is from shagan Singh of RBC. Your line is now open.
Oh great, thank you so much for taking the question and congratulations on. On all the business momentum here. Um, I'm, I'm hoping you can give us, um, you know, some directional color on 26, you know, maybe just walk us through the puts and takes, uh, you know, as I look at course, my, you know, really solid quarter this year, um, very solid performance. This, this quarter and, you know, how does that translate into into the upcoming quarters into 26, you know, never looks like it's improving. How do you think about growth for that business? Uh, you know, trauma Recon is they are opportunities into next year and then even down margin. You guys are already, you know, close to that mid 30s. Um, you know, even down margin uh, that you guys have guided to longer term. So how does that translate into into next year? So any puts and takes would be helpful. Thank you.
26. I think the, the comments and feedback I would provide to you is, you know, right now the spine Market looks looks strong. Uh, in the US, our business is performing well. Uh and we feel very positive about our our spine business, our international business, we've talked earlier in the year having some challenges which we feel that the the worst of that is behind us. So we think I I had I had said in my prepared remarks that I could see that business growing back to the 10 to 15% as we as we move forward. Uh, and I, when I say, move forward that's looking in, into the outside of 25 and into 26 and beyond our trauma business. We commented earlier in the year that we had some challenges with, uh, with our precise manufacturing. I commented today, that I, I see a lot of that behind us, and we're really getting back to fully supplying the us, as well as International that coupled with, uh, our Legacy trauma portfolio. Really getting to that point of having 80 plus percent of the of our competitions. Uh, portfolio that positions us well to grow. Our model still is going to be a density model where we focus on level 1 and level 2 Center.
I had some previous comments on joints. So as I think about the, the structure of the business, we feel positive going in the next year, uh, and that's even more why we want to focus on, you know, closing down. All the integration activities is we think that we have a lot of organic growth opportunities to drive this business forward, as it relates to Nero. I don't want to get too far ahead of myself because the reality is, is that we're only a couple of quarters into owning the business. Uh, we have still have a lot of work to do, but early signs are are positive.
Say anything on the ibida, margins, the mid-30s looks like you already tracking there and there's more Improvement ahead.
I would say that, um, encourage where we landed, because if you remember, when we announced the Nova deal and and the reasons back in February 2023, uh, we talked about, you know, scaling the business driving commercial Outreach, having in and I and I think that we've done that Innovation and Spine and Ortho between both of the Legacy portfolios as well as both in spine and Ortho with their, with their growing rods. I think we've done that. There's still been a, an enduring commitment to product development and we we want to be known as innovators. We've expanded our operational capabilities, we're continuing to insource. Kyle touched on the force, sequential quarters of, a just across profit growth and really getting back to the value creation synergies. We talked about 170 million, we have no reason to move off of that. And mid-30s I thought we said over 3 years we've gotten the base business. The base Globe is business X, never to 35 here, in the third quarter. Um, you know, some of the parts and pieces are different. But uh, you know, from a profitability standpoint, we feel that where we're at as a business points us to a solid future because they're
There's still more work to do, but our goal long term is to be in that mid-30s range. I'm not going to guide to that though for 2026.
Thank you so much.
Our next question is from Caitlyn Roberts of canaccord genuity. Your line is open.
Hi, thanks so much for taking the questions and congrats on a great quarter.
So, you know, touching again on enabling Technologies. I mean, what is hospitals really given is the reason for the silver decision making and then as you launch more Nimble Solutions you noted, you know, the navigation capability with, um, you know, the new XR headset. So customers be receptive to, you know, these lower cost options, um, you know, to purchase instead of, you know, higher costs uh, full robotic solution.
So, the first part of your question was focused on, uh, can you repeat the first part again?
It was really just what a hospitals given as, um, you know, the kind of that solar system. Yep.
Is 1.
Now for several years, there's more competition, that's hit the market, 1 of the things that we see is that hospitals are requiring surgeons to go through the review of all the offerings that are out there. I commented earlier, that we still view our our technology as best in class, uh, but I think that that is kind of elongated. Some of the deals number 1, number 2, as as we think about how the year has progressed with some with uh, things like the big, beautiful Bill and and how Medicare Medicaid funding may change.
That also to me earlier in the year caused, uh, maybe a Slowdown in how hospitals spend. But as I think about what I've seen from hospitals, what I've seen publicly disclosed and just what I've heard, anecdotally hospitals are spending money on things, like growing out asc's or or building new facilities, that might not always be focused on surgical robotics. Uh, so if if a hospital is devoting their money to other things, we want to be able to make sure that we're able to address the goal of getting our Capital out there getting it placed. So that's where we see things. Like operational, leashes, leases taking a bigger bigger portion of our business as we move ahead.
Are a headset that XR needs to be part or coupled with our excelus Hub. I had said in my previous remarks, if a, if a surgeon, is looking for freehand, navigation, a great offering is our excelsis Hub with XR as well as our e3d.
Great. And then just a quick 1, you know, as you move, um, into further improvements for nevro. Um, I mean, how much of a risk do you think these changes could bring to the the Top Line moving forward?
Uh, you know, like I said earlier, to the previous question that was asked, I don't want to, you know, get too far ahead of myself with projecting out, never on the 2026 and Beyond. We're still early in, we're still in early Innings of the acquisition and working on integration. Uh, we're obviously mindful of the changes that we make to the business and how it may impact the business. But as we move forward into next year, we've taken a lot of the uncertainty out of the business just simply alone on the on the financial condition of the Consolidated Globus. Uh, and we want to get the business more focused on adding competitive reps. Uh, those signs point to positives. But as we think about the, the changes that have occurred, and the changes that still may occur. Uh, we want to be cautious with our with our comments.
Got it. Thank you.
Thank you.
Our next question is from Matthew O'Brien of Piper, Sandler, your line is now, open.
Hi, good afternoon. This is Samantha on for math. Thanks so much for taking our question. If we also wanted to touch on, you know, the profitability this quarter was really impressive both. Um I guess in the base business and Nero, um, I guess. Can you speak to the um I guess the sustainability of that and it never is specifically had a nice step up this quarter and um I guess what's the um Outlook or Runway look like um for that Improvement going forward.
Yeah, thanks for the question Samantha. This is Kyle. Um you know when you think about the profitability this quarter right it's really driven by a handful of things. 1 is the US spine growth so us growing 10% this quarter um that that is a a our most profitable business. So as that business grows and and becomes a bigger part of the entire company, right? That ultimately will drive a higher level of profitability that we saw that helped at lead to that 32% ibida and ultimately the dollar 18 of eps, the other was the Synergy execution. Both in base business, as well as Neo as we brought them online. Um ultimately right? We're trying to set up the business in a way where we operate efficiently under our Globus practice and
Are able to drive and continue with the sales growth on top of that. Um, so I think this is, this is a good jumping off point for us. Um, as we move throughout the rest of the year and just 1 thing, I would add to that at going back to your question on Nero. You know, I, you know, the the even a margin is impressive. But I think the, the thing that I focus on and it goes back to some of Kyle's earlier, prepared, remarks is, is the free cash. When you think about where we were in Q2 we commented that uh the free cash burn was 29 million in Q2 to get this Q3 and having free cash flow of 8 and a half million dollars. That quarter over quarter changed to me, is more telling than necessarily an even a margin because we're we're driving the cat, the business to generate cash, because at the end of the day, you take dollars to the bank not rate.
That's great. Thank you.
Our next question is from David Saxon.
Of needleman company, your line is now open.
Great. Uh, good afternoon guys. Thanks for taking my questions and congrats on the quarter. Um, maybe I'll start with uh, trauma uh, at least the Legacy trauma. So I think in 1 of the responses to a question earlier, you talked about that portfolio being around 80% of of kind of the comp, uh, competitions. Um, I guess portfolio breadth. So, you know, do you think that's critical mass or do you need to be at parody and
Get to the full 100% and kind of if so like when when should we expect you to get to 100%?
Okay, yeah, that's helpful and then just on simplify. So um you know, I think 1 of your competitors. Got 2 level approval over the last couple months, so just, you know, thoughts on that approval. You know what is a competitive 2-level approval due to simplify and then generally for the simplify growth that that you're seeing? I mean is that disc share or is that expanding the market and maybe getting into a CDF. Thanks so much.
Um, well I would say that, you know, as I think about simplify and, and kind of share gains, I say that the share gains are there. There's there's there's definitely some share gain in there, but as I think about 2 levels, we, um, I believe we do have 2 level approval. Um,
Yeah, yeah, we we do have 2 level approval but I I don't really have any further comments on that at this point.
Great. Thank you.
Our next question is from Tom Stephan of stifel your line is now.
Great. Hey guys, thanks for taking the questions. Apologies, if any of this has been asked just jump in between calls tonight. But um, just on Nero already returned to On the Top Line positive year-over-year growth in 3Q on a, on a pro-forma basis. So uh I guess as we're updating our models, I mean is it fair to think about Positive year-over-year Growth as durable uh, moving forward.
I would say that it's early to comment on that. Uh, Kyle commented on sequential growth, sequential, Positive Growth between the second and third quarters. Um, I think it would be early to comment on full year-over-year growth on a pro forma basis.
Got it, thanks.
At this time, we're showing no further questions. If there are any additional questions, please, press star, 1, 1, 1 on your telephone, and wait, for your name to be announced.
With no further questions, that concludes the Globus medical earnings call. Thank you for participating. You may now disconnect