GMED - Earnings call transcript Q2 2018

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Operator

Good afternoon. My name is Deidre and I will be your conference operator today. At this time, I would like to welcome everyone to the Globus Medical Quarterly Earnings Release Conference Call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question-and-answer session. you. Thank like call now host to turn Mr. to would over the your I Kearns. Brian begin Sir, conference. you your may

Brian Kearns

Thank and today. you, with being Deidre, thank you for everyone us

Demski, Anthony call Dan Paul, today's from Medical be Joining Globus Executive Chairman. Scavilla, President; Williams, Dave CFO; and David will CEO;

this let statements. during are we statements begin, some the be remind me Before or that may you of made review forward-looking considered

cause the certain XXXX statements XX-Q quarter and in could with for factors filings identify Commission the projected second actual differ Securities Form made to Exchange Our subsequent and those results materially our that our today. from forward-looking any

Our developments. to available on update SEC or result our undertake statements XX-Q, forward-looking information not a as do filings, including any of the or website. events are new We future

the certain We should the financial With believe pertinent most non-GAAP to Relations with the additional Dave the measures. most the press to and CEO. schedules measures GAAP should and over today on comparable that comparable that, with GAAP to performance. be also measures read release our I'll on accordance in provide non-GAAP together considered now discussion are Reconciliations directly these are of accompanying website. financial section available GAAP. accepted directly Globus call the measures Medical the Investor turn Demski, calculated will accounting or our business not for information generally be include financial replacements financial measures principles not Our These

David M. Demski

share, last per $XXX XX.X% was QX is report and third per outstanding respectively. for the quarter an second double-digit at the Thank of XX% XX.X% increase million, increase organic non-GAAP XX%, stand at you, million afternoon, revenue growth. XXXX. Non-GAAP revenue Year-to-date Worldwide of our Brian, second was quarter. quarter $X.XX excited This good quarter We're share, over EPS $X.XX an and consecutive up year. an everyone. $XXX.X and to of for EPS over

X.X% are believe continues U.S. the experiencing into over growing business growth no we largest the accelerated take back last year, for market or to our by of we competitors are poised share in while XXXX. half Furthermore, XXXX and negative U.S. Our business in Spine domestically. growth

Our second non-competes half last very of on to off good XXXX The their last relationships. match recruits majority our currently success year, to pace we have the individuals recruiting and territories. are competitive old rekindle an rolling and recruiting record as Historically, former quarter year. many those first the uptick started in was are so, of seen growth for we from reps returning of in

in for Finally, see Technology, and our remarks year as whom will our implant navigation robotics the business. U.S. an of many of schedule this Emerging technology Globus and, factors by surgeons, to I discuss of adoption my implants. significantly, with on launch we combined second users continued robust of more to system Spine rapid aggressive ExcelsiusGPS continue share market point half are These new of the increases sales for

strong. on The constant be business spinal in business International grew or X.X% Our a continues by currency QX basis. Japan X.X% to implant

was as Japan this than will optimistic growth out quarters, that we in we slower accelerate of year. technology in growth Globus recent Although remainder the additional over roll are

quarter Germany, by solid Italy as driven sales Technology key improvement ExcelsiusGPS such several was seen revenue our to the markets million, year-to-date Emerging of UK also in for primarily lag. $XX.X System. have We Spain, other Australia, continues and second while the

targets internal of exceed We is and deals continue to potential our our pipeline expanding. sales

number of using surgeons number exceptional implants used of promise we performed the to a the A robotics of and Globus are utilizing not have starting come who being results. seeing early as been clinical technology accounts to see the the ExcelsiusGPS are fruition enthusiastically by with we is before procedures adopted importantly, More growth good technology. have in significant

early solidify area. to strategically our ExcelsiusGPS, the in important leadership of making Given this investments are of we number a success

utilization of add not on value must patient we care used is in focused the have and installed. To of relentlessly are the continuum, We Simply systems driving ExcelsiusGPS lot goal. selling be our a robots surgeons its for in of To by that the with we feel end, world-class surgeons that regularly more clinical providing must their happen, system in support. procedures order comfortable and to capabilities. are

our demanding surgeons curriculum hardware offerings. moving training perform complex technically are through to continuously our more and and are to enhancing them enable software we procedures We and

working development are initiatives the to we procedure pedicle other on beyond of several aspects of improve screws. Finally, placement the

our rollout. business, The some on the supply taxing some into has delays potential schedule. of targeted the systems launch be we have magnitude number our the experienced have to challenge, full-on growing bullish in we long-term pains proven to to Trauma heading and a logistical and of remain short-term to chain although continue resulting national SKUs of We our manufacturing our effort

systems and Trauma are core the of expect to achieve year. launches We this all capacity addressing full this external internal expanding by end by issue and

to On Dan side, was success. the Sales. a he we recognized and their leader a VP very at excited contributor Dan sales of Trauma after XX-year have start to where a us comes as career great to are Gregoris DePuy Synthes

an efficiency our sales of join The We this solutions our technology excited of industry-leading cost all known a are top force been to successful still achieve in cost adjusted and a is that bringing talent as very sales company we in team have carry margins. competitive Trauma attracting organization testament EBITDA. It's for reflected orthopedics. our whom the can to to to

and see becoming a over the is we a important As fully on year impact investment we an space to sales to years. committed EBITDA we this in leader adjusted expect Trauma in us remain margins. later the deploy sets coming positive XXXX, and to grow

pricing, over manufacturing logistics, oversight until expect his well and operations, complete we happen as finance. the to will him his building drive remain of three next I while corporate outstanding search as well Medical prospects of retain Officer. he will Dan. first-class his of months. financial for the turn we Scavilla I replacement Vice role been contracting which Dan supply a be announce responsible we In a very role in his Finally, which acumen, in President, been Chief by key and three position years, CFO over to continued the the the pleased Commercial in business Executive new first to for XXXX am will half and chain our of Dan's role the our has promotion to In summary, serve our strategy Dan for commitment two future. driving CFO the Globus for all contributor past and Dan call has to now will organization. overall in and excited

Daniel T. Scavilla

constant and or EBITDA U.S. free selling growing million, Thanks, diluted improving GAAP net country. Dave, strong the $X.XX market million million, with XX.X% growth year. and in day non-GAAP $XX income $XX.X non-GAAP net versus QX and throughout were adjusted of international markets sales was strong and ExcelsiusGPS more resulting was in good afternoon, everyone. of XX.X% in the currency QX $XX.X of We're quarter flow. share million per one $XXX.X income above reported, cash in the and in the prior delivering earnings fully robot hospitals pleased the from XX.X%, gains uptake with by as business, financials

XX.X% U.S. XXXX quarter day-adjusted XX.X% on on Focusing sales basis. the for were million, a $XXX.X higher sales, and than QX

timing Spine increasing through distributor robot. continued of coupled were and performance, pull-through using hospitals achieved sales million, resulted a versus strong growth with continued in QX X.X% the and ExcelsiusGPS growing in delivering market healthcare markets, from quarter rep sequential growth Japan Gains competitive in XXXX. sales currency implant budget recruiting constant offset key in for and UK or by pressures other from partially penetration were International system. X.X% orders in as Our the reported $XX U.S. our X.X%

QX be tax to in and commercial the $XX.X million reform $XX.X future effective due the share for Robotic million compared resulting X.X% savings EPS compared The a increased diluted expenses sales QX from SG&A second offset deductions XX.X% $XX or our and quarter. tax of XXXX Technology non-GAAP U.S. to in and XXXX drive our and an impact approximately of cases the were change or partially QX the for million QX net reinvestment instruments XX.X% for by primarily surgeon and stock to sales XXXX, for QX project from by exercises in profitability, of compared full The quarter. to per compensation margin expenses approximately negative capital was Technologies force, increased second quarter to education reflecting diluted per P&L, rest U.S. XX.X% QX approximately for higher to Spine. $XX.X income $X.XX $XX.X investments XX.X% with was out experiencing the planned compared were development the Robotic gross gains for base income investment. million profit quarter to mix approximately option increased was $XX.X was to to investments Spine stock XX%. and were in was We GAAP investments Trauma to the driven were Adjusted implemented Robotics, U.S. teams, QX share rate scale our rate Research reflecting year line the erosion. is Turning business XXXX net Robotic of EBITDA us projected pricing reform for depreciable Non-GAAP option reflecting for due continues lives The is Trauma GAAP up tax second the the XX% pressure, XXXX. gross $X.XX. increased and instruments. to $X.XX gain increasing force $X.XX. QX QX Spine. in rate deliver in income Full the impacted was quarter building tax the year Emerging to the favorable of compared negatively sales, profit XXXX, million strong and without Spine year XXXX business Emerging Expanding net and and sales strong XX.X% XX.X% in margin effective to growth. reduction XXXX. or growing in and cases earnings by X% are in biologic million XX.X% XX.X% XXXX. in the allowing profit full gross primary earnings our Japanese QX in GAAP or drivers in

for equivalents and margin cash XXXX was QX year $XXX with the EBITDA million $XX.X million, per be remains is driven payments increasing to debt-free. projected of mid-XXs. XXXX and company tax $XX.X and We earnings was the quarter. of marketable $X in The cash year operating securities. million. quarters approximately cash, by tax provided typically share guidance million to cash may year of is in diluted payments. QX $X.XX increasing $XX.X $X.XX. sales cash to other million the in by planned full The We two company free activities by ended non-GAAP flow Net was quarter million the than flow by lower $XXX.X full Our

board promotion in to want potential our an a organization Dave, me giving for next firm team through our difference and to the long-term in a realizing have believer and I of to larger potential. I'm I thank the role of making a Globus' phases the David, Finally, in look the shaping opportunity role. directors growth. and this management this forward new

the for open now call will questions. We

Operator

we And from have question a Lawrence do Biegelsen.

Larry Biegelsen

Can afternoon, Good okay? hear guys. me, you

Daniel T. Scavilla

Yes, can you. we hear

Larry Biegelsen

Great. Great. Okay.

me ask on one the one guidance, let the So, on robot.

on Dan, second about by growth on think was my top guidance, math. the line I year-to-date the X.X% implies guidance half line, about bottom top Just, the XX%, and

the half, EPS as it's the the down lower guidance $X.XX like of And color half and in half. in can years the half any EPS the first on growth growth half looks why I the or absolute of haven't the recent implies And I tell, Globus. it far expecting part first also at second year-over-year guidance first a half we on second X% number. think Just about versus second half second second XX% question the of than as you're EPS, versus slower seen

helpful. any that color on be So, you. Thank would

Daniel T. Scavilla

Thanks, Larry.

of get We sure gone first look this again a a make ahead done normalize. So, through to time we before way. that Robotics, appropriately this, want to until taking just year raise not the a one and us with cycle certainly that with look but thing we is guidance of conservative that have quarter this. seen stronger growth let and outperform being having at really We top we're line. not We're not let's start a full

we beat are really that's just is. certainly top meet what the what and, if sure but is. It's line nothing that to So, making just possible, able

On some you the bottom things, in. things line, factor want similar two to

in the As both we that's and the taxation. comp QX occurred benefit QX talk in about stock

QX or having don't in out happened not I model yet. those QX So,

I think to again that's an take. appropriate move

look continue have and keep quarter in in the we ramp In of to to addition, primarily favorableness and with expenditures to spend up mind some and revenue pre you do want due Trauma. third invest timing the towards

really of us don't coming the expect out full two so, when come windfall year And from I think with up those what it's in front of factors guidance I'm with or repeat that to what I the is we impacts.

Larry Biegelsen

And then the are guys. pretty your the important you five unveiling a on half things, second be year? with questions, of of this to a in is Dave, the different for taking we can talking your going what lot at us helpful. and timing some four about to Thanks expect or to from competitors about share systems enhancements robot, NASS. enhancements That's you for competitors, to What Excelsius? new that can going they're Globus be NASS obviously you've talked of meeting

David M. Demski

we're things probably our right the to in the internal Thank going a and plan. on now Larry. go Sure, FDA few year you. to Yes, late working is

launched be next it's we'd some year potentially the before quarter enhancements. see end So, first of more at of like the probably year,

Larry Biegelsen

I have on you prior touched mean some on calls? those enhancements, color Any on Dave,

David M. Demski

Yes.

to we're that the aspect As say, on is working thing the the, next the in improve a way we alluded of past, the case. to inner-body

Larry Biegelsen

good the on for quarter. All taking a right. Dan, questions, congrats congratulations. and guys, Thanks And

Daniel T. Scavilla

Thank you.

Operator

question Jonathan with next comes our And Morgan from Stanley. Demchick

Jonathan Demchick

taking the guess, with to, guess the off for a start Thanks role. Wanted Hello. questions. about I Dan question and new I

how Dave, to wondering, you bundled kind contract any in change if could I off, like Commercial role and Chief us time a first why right but was the the new this with I this of is let for or perhaps So, customers you more Does of know a mean on congrats Officer? way? in using plan signal strategy Excelsius

David M. Demski

signals a think in No, I it strategy. don't change

areas done an for management talent we done CFO we company, what from a lot and expand capability outstanding as us a new general to you job and in grow need As a as if move into pool, our and Dan's will, demonstrated also he's of standpoint.

we and you us So, build that the area to CFO to our to folks his bring in utilize that into if him opportunity, allow in new give role will. want skills out bench,

Jonathan Demchick

just follow-up And then Excelsius. Understood. a quick on

quarter-to-quarter? with relatively you kind stable to flow larger for three first market three be of expecting great. the would be been give what guys clarity forward? see Thank on capital progressing was going can up market quarters, Robotics. been – there guess Early I this For any you either I coming down Are variations would there guess, lumpy it's order how it's first the a from quarters. in you'd to be relatively you. more, especially think curious and or How's you I the

David M. Demski

signs of other the we feel we're from an believe that enthusiasm what units would to long mean, translating I important industry like XX Sure. early lumpiness Yes. to X, capital lead don't know our technology, sales some utilization the a expect. to going the I I that the area of this years. those assume all period time I be to over the do going me to is X, experienced. like X, providers see in would have of technology for factors next of for really of to into seeing that's

we where our assisted are computer is early I'm bullish in industry terms going of everything and seeing makes extremely about on me So, where technology.

Jonathan Demchick

Thank Understood. you.

Operator

question Bijou comes Cantor Craig next our And with Fitzgerald. from

Craig William Bijou

taking I start want Emerging with guys. the Hi, Thanks for to Technologies. question.

But you've guess XXXX Technologies your think just about Emerging you of think, terms guidance $XX Emerging in not pent-up in that I be get of, we there number thoughts first strong for might wanted I the that your pretty the now for – wanted then and half. the half? extrapolating number QX. second QX implied in to kind that got some what's last have the might over And in call I well, million should Technologies? of in the Dan, I built demand kind guess full-year about How the from warned was on

Daniel T. Scavilla

Thanks, Craig.

each item you to to-date. things what had would we're to yet even be So, line cycle. a we tend historical It's occur QX not QX pleased don't certainly out see Again or call normally with and both results in know, annual and having break the of individual and we really as full out hard will truthfully that same kind QX do think just It's say lift, unknown. QX. an we

not to-date. models off yet. cater through far kind and of would what's of go again this and go their in kind ahead of we've people just that I So, to I to talked path several wouldn't run about folks

we'll think make and We year can going better a be more have able full understand I understanding. more pipeline through the into calls future. stable a little a to

Craig William Bijou

Okay. That's a the helpful. on And follow-up robot. then

that I call robot you last placements. versus your guys was competitive XX-XX think accounts the split talked on about your a maybe with

So, to pull-through also, just certain greater there's anticipated? seeing any wanted trending had to you And that you're number accounts, see way. if that the competitive you that is a than the in at if update then that see if

Daniel T. Scavilla

So, areas. they something if hospital, they're are with right And before competitive we're Certainly, lifts not an at through of things that. with still both with pleased so are far launch not looked depends, hospitals strong it's a there tracking this. we've seeing some of off with those weren't from I perfectly three far Globus the and it that existing quarters really in everything approximately we're couple but – of them all XX% think first XX% whether we or it's really but just in it's now.

Craig William Bijou

Okay. the taking Thanks for questions, guys.

Daniel T. Scavilla

welcome. You're

David M. Demski

Thanks, Craig.

Operator

BTIG. from question next Ryan your with Zimmerman And comes

Ryan Zimmerman

question. ...the

guidance out pricing. but up recognizing specifically you that some follow around commentary you're around gave on Larry's continue to did mention going and to the want Trauma, margins to you build just I So, gross question earlier

to what your curious seen the the just of so, given thoughts in headwinds first guidance year, given you performance and the pricing expect of year the thus half in hear the we've And kind far? of back on your half

Daniel T. Scavilla

Hey, couple Ryan. Thanks. It's things. a

we SKU pricing on basis, So, basis. look an on remember not at a procedural always

year a years. it through difference little any But out pricing even seen our different call last way. bit not we So, the anything some than differently few marked this we in yet have of competitors from that or

So, we see what we always anticipate. mid-single that's and truly say digits and

We're tend half second referring our through building margins, So, the saying for carry we're those and to as there. what Japan a lower that again the year. slightly a launch, conversion, things have I I'm conversions always will heavier second growth as half so year. just cases in that's then our they expect get would great the the of biologic Trauma those forward of And to having not only have and impact as we instrumentation, active the well, more the both Alphatec I'm

Ryan Zimmerman

to That's a it, on questions just say too Dan. ask you then your very pipeline is the not the many helpful, did And up just filling robot, about follow-up but and around sped taking for lead in your thoughts sales pipeline? up in it the better questions. you you are has from anyway, the cycle Thank conversion times to changed, noticing how has

David M. Demski

I choices. pretty there material Thanks. though market Yes. aren't a many a right It's now think competitive we've seen don't change. even

some think going our I competitors and same we of after are accounts. the

work it be terms very longer side of may the seeing little it pipeline extent fill But of we're to quickly up interest. in that the through to other from deals. taking So, bit a

among and to interest grow. continues surgeons So, that enthusiasm

Ryan Zimmerman

Very helpful, quarter, the on guys. Dave. Congrats

David M. Demski

Thank you.

Daniel T. Scavilla

Thank you.

Operator

Piper with O'Brien Matthew from comes question next our Jaffrey. And

William G. Inglis

of Matt. for curious I looking the quarter, there regards first just have taking some the question just I growth. understand technologies? specific Thanks. about but versus have Japan you newer their softness And on percent legacy for in of in product Will any is out what is to then I kind was your expect guess is o-U.S. questions. Thanks This to a mix follow-up. And sense have you I of the what quick if forward? going Japan

Anthony L. Williams

is This Anthony. Hey, Will.

than process PMDA – you're technologies going U.S. Japan. So, we is even in launch through of the face what to of are the our many is probably just now starting aware The lengthier we newer in

do We are being launched their five the a quite still of key probably doing, So, Alphatec. that they're and pedicle screws doing our is they're sort four majority one there legacy have or well. of systems, business products, and

And second the newer so, to conversion Globus onto the through the to into we of and significant there. as half we year products expect from the XXXX technologies see early launch continue

William G. Inglis

gross that Trauma, Great. the Thanks. would as that margins that. I just the your if a about assume driven given guidance? Thanks half, for XX% And back by then just in bit little as be softness talk you far could more

Daniel T. Scavilla

Thanks.

call wouldn't certainly softness. I So, it

think is these We're is, to beating range. as in looking XX% we're to and I'm we to a anything company than think saying market We've rollouts All looking is the that. any what stretch. look I conservative ourselves range normal it much that, not go by we balance we're out into gross higher will more a XX% we called back at and drive be, achieve mid-XX%s always for profit. that

the And I so, right favorability back it's and the we're going line to approach do the timing in it right in put that some half. created to really just just first investments, think

William G. Inglis

you. Thank Great.

Operator

And question Newitter from our Leerink. with comes Richard next

Jaime L. Morgan

Hi. This taking for is for on Thanks question. Rich. my Jamie

The on I guess international the I one have first business. is

in should trending exit that or So, still year growth just how like over high-single wondering you the this possibly about half? I you territory even be digit if And second was the thinking can feel we better?

Daniel T. Scavilla

that's Thanks satisfied impact But appropriate to our really Yes. distributors business. healthcare truthfully at pleased out look that's the there. I on Jamie. international this, of question. quarter. pretty the Dan. a I some with with UK the big for Hey, had fairly think the actually an And called growth never system. timing way we're It's be that They We'll or

our continue products of for would into probable. we I education. look at looking is that Alphatec. outside think single-digit when international Globus point that think upper in I they investments exit our We surgeon transitions to stabilize, continue

Jaime L. Morgan

initiated you to fourth recently NuVasive online plans a follow-up the robot market? automation Okay. in how well just surgical And coming announced Spine on in an just given and robot their upgrade landscape, on competing ROSA about and thinking questions. get new that have that you I their Mazor quarter? how about are taking platform guys the with the trying just one I'm for my that then of And as thinking competitive platform. Thanks guys are Zimmer sense their for that the

David M. Demski

we've at that Thanks, anticipated competitors Jamie. It's all competitive it not a that us here in kind I the it And taking continue are we're highly something more always to and for make of and think on be surprising to would are the seriously affirmation technology surgeons this – onto folks interested available we're that useful patients. and improving. incumbent develop it's to and make it more it's

we're to leadership. to So, development try and technology It's it. more dynamic continue and and have ever why are going our that's how looking at That's a static investing we the into now a we in to situation. improve really be past not than maintain game

Jaime L. Morgan

Thanks. Great.

Operator

our Mike question comes And with next Company. Matson Needham from

Mike Matson

Thanks Hi. for taking my questions.

of force with really the sales the if force growth Just many sales how for And rollout. Thanks. is to that specifically under to factor and things could what curious with an non-competes portion you on is really the gating where off stand the give Trauma regard take update that there there? or us still

David M. Demski

sales non-compete still. almost Hey, now, under is Mike. everyone The force

systems the it's the of year. gating hired on but But got those systems, core and We've field to the non-competes. all at inventory by early they're availability availability of anticipate of this really under our XX that the having the equipment. full we think sales reps more anything. starting I hired about matter we've to a end of roll up do at systems do four all But partial to factor this wanted and than is of launches point, management We those are point. launches was off,

Mike Matson

someone's you're kind to I offering, selling do with they're their already to capital now that question. deals actually or call regard the their little better Thanks. robotics that And of do just their come types their (XX:XX) implants, and imaging with is contracts late. try having to apologize and and joined this their feel Medtronic, equipment, with either bundle competitor and these what their offer all primary the in M.O. stuff by sheet? compete it your able Okay. robotics But a with able a to I to if just balance product matching then by asked in you of those and area

David M. Demski

chain. Well, our have robotic balance a hospital when a it sheet we limitations don't really with comes any on deal financing a or to

we're a it's certainly of technology against. pricing. and we the an to said business caller, achieve decision anything not been been that part. We've head going of to But and compete to from we've we on think going out level standpoint, competitive winning And we're our I heads to product able better can We have the winning there. I majority So, a had have higher a be that be a technology to the as like environment we earlier is this to continue and to evolve forward. move match

Mike Matson

have. That's I all Thanks. Okay.

Operator

we have further no And questions.

Brian Kearns

can Thanks further up wrap Okay. for a have calling questions, to good no call. With night. everyone and the in we

Operator

Thank With no you earnings Medical quarterly us. further will for conclude Globus joining now we call. the questions, release conference all

You now disconnect. may

Globus Medical (GMED) 1 Aug 182018 Q2 Earnings call transcript