GMED - Earnings call transcript Q4 2018

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Operator

Welcome to the Globus Medical's Fourth Quarter 2018 Earnings Call. [Operator Instructions] I will now turn the call over to Brian Kearns, Vice President of Business Development and Investor Relations. Please go ahead.

Brian Kearns

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

Joining today's call from Globus Medical will be Dave Demski, CEO; Dan Scavilla, Executive Vice President, Chief Commercial Officer and CFO; Anthony Williams, President; and David Paul, Executive Chairman. made of webcast, at the being Investor through www.globusmedical.com. is section Relations Globus review available accessible via the This Medical website

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

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

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

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

Dave Demski

XX% a everyone. year. per afternoon, our fourth EPS announce an of to and record also pleased and digit quarter record $XXX very QX Brian, last of increase an share, growth. quarter, the double I'm of million consecutive $X.XX Non-GAAP increase of you, for good XX.X% was over Thank fifth organic XXXX revenues over

EPS year and in share, increase of full over an XXXX. non-GAAP million, at the $XXX $X.XX came XX% up per XX% revenue was For

growing over Our by U.S. fourth last of business to the year. quarter X.X% accelerate continue spine

recruiting back drivers. second well for and with half we continued these to underlying momentum year, the the going bodes finished the when the intensely with U.S. by well pull-through as product sales strong grew anticipated X.X%. growth launches from year Our our full where at above year placements the grew both of Implant X.X% and of which into of business the overall focused market combined XXXX, lineup back for force a primary areas record robust remain growth. years We on ExcelsiusGPS

international XX.X% on constant currency Our in and by basis. grew spine business QX XX.X% a

around Brazil. business continued Our in strong performance significantly the business growth Japan Italy its and quarter, QX, turned in in in strength saw it's the outstanding continued Spain during we

grew and Australia, full our Brazil. constant by business reported and For by a X.X% X.X% led the as international Italy, year, on basis currency Germany Japan,

going our of are excess spine XXXX to the grow business rates We international that at U.S. optimistic in business. poised spine is into

remain and caused in year's last transform is navigation, $XX.X the This done. surgery an considering pent-up the spine imaging system the We For of from of fourth of number ExcelsiusGPS which way over potential demand to our surgery, delay computer-assisted in quarter was million. bullish the launch. extremely on our robotics revenue is increase particularly quarter significant the reflected initial the year, by XX% last fourth is

buyers. the driving are the area adopters We key investment wave of a focus of the This base. early adoption us is for essential to encouraged across is our highly installed by as and experienced level next value of by

to head-to-head technology continue battle majority vast in of a the evaluations. We win

of compete nascent business progress inventory solutions. to we by progress product The all offering and are we be us continuing enhancements core nature are capital with production tailored making business market remain to in towards sheet great national the combined our with flexible are. made enables We this to who than trauma strong competitors of focus rollout customers with quarter our our our We effectively systems. of responsive balance during further constraints much larger support and the to the

want not it we presence is have where expanded in have pace and the increased to many While external our be, markets. greatly our we production internal capacity and

the in becoming of to growth highest envy the a EPS, promise continue an by record remain our Globus, organic our the leadership profitability public and and of excellent world industry. heavily salesforce company sets our and The we strong leader to did continue and it flow was invest technology been was this committed fully and a since cash of entry of been surgery we've year XXXX only performance expenditures been into not terms has We and position. revenue validated the space. our for in robotic to has sales be achieve

stand the XXXX driven across Dan. on will bright of innovation passion a our we enter businesses. the by of cusp future I turn all very a we As call to now over for

Dan Scavilla

XX.X% versus $XX.X adjusted share flow. the good as constant of business, million benefits. net in and U.S. $X.XX Globus by million everyone. record financial and million, one growth, quarter markets the tax operational U.S. million in reported and market $XXX non-GAAP XX.X% per in EBITDA both share effect XXXX. non-GAAP selling XX.X% Dave GAAP one strong diluted net $XXX.X year. the reform as more per and earnings ExcelsiusGPS Full income or of and reported net $XXX.X was XX.X% flow. cash with non-GAAP above was of Thanks, day continued systems. driven $XX.X in placements in delivering and more $XXX.X with the million, million, diluted net was free growth revenue and EBITDA afternoon, income earnings $XX.X one-time GAAP accelerated day QX year delivered were free was of was QX fully growing income with prior full strong currency results was and of tax year growing in adjusted XX.X% revenue non-GAAP international of million $X.XX gains billion $XXX.X income with selling an cash Fully

our QX was derived quarter accounts on million, higher U.S. robot for from implant Focusing continued than with The and increased growth performance strong and reps competitive International by the sales systems. of key revenue driven placement sales, pull-through XX.X% constant continued implants coupled XXXX. other was was through $XXX.X from or achieved quarter XX.X% XX.X% growing $XX.X million, market were Spain, as reported in penetration onboarding, currency. Italy ExcelsiusGPS sales. revenue the and Gains with in markets ExcelsiusGPS Japan, for

spine, strong mid-XXs. Turning future investments, $XX.X to QX surgeon areas. $X.XX was $XX.X robotics revenue The trauma diluted in in $XX.X cash, diluted cash is per growth. building primary $XXX quarter is of QX and stock X.X% force XXXX be The QX XX.X% globally. and EPS by force was in cases U.S. were share over earnings the diluted $XX.X growing continued increasing earnings program sales is year Expanding XX.X%. X%. that QX the manufacturing $XX.X remains of rate depreciation XXX Research fourth in reflecting gross increase year $X.XX, deliver and education in in compared the our was resulted non-GAAP growth. education or of gross XX%. QX manufacturing credits growing non-GAAP QX line the was revenue for expand per including cash XXXX income XXXX reaffirms planned included and EBITDA year compared technologies the XX.X% margin reinvestment Full margin million X% million in and securities. for equivalents to tax XXXX of was $XX.X profit free. sales sales surgeon and year best-in-class margin change the tax QX investing XXXX. GAAP and XXXX points include for cash reform period share robotics reflecting the EPS remains ended compared net instruments, an $XXX.X we income capabilities drive XX.X% tax from the GAAP profitability the to of free million We in basis is tax for the growth continues QX and the teams, $X.XX XX.X% year net debt by savings $X.XX. full expenses million gross INR operational in income XXXX while share year were rate U.S. emerging approximately in increased was to investment $X.XX, XXXX per The benefits $X.XX reform non-GAAP mid-XXs. million. XX.X% manufacturing guidance projected or as quarter the in for in million. the profit fourth million XX.X% EPS trauma future and of which commercial and planned and rest with resulting benefits, in $X.XX. XXXX, sales of to expanded The provided activities impacted that for one-time EBITDA in while $XX and option force quarter flow programs. stock and out or of Japanese The $X.XX created increased negatively implied one-time were the for diluted for EBITDA or broader GAAP trauma exercises Adjusted be credits in and due are reflects reach the of investments rates, planned million tax reform in force, manufacturing to QX SG&A credits. to in XXXX to to meaningful the to company XXXX. robotic one-time fourth expansion XXXX. for X.X% quarter drove GAAP income federal Implied through the charge. our In earnings XX.X% XXXX a XXXX sales diluted U.S. Full per not company P&L. non-GAAP spine, sales the reduced million effective was and benefits company included to was tax share with marketable Net for growth primarily investments which and million tax was compared option we stock related earnings to We The forces project by XXXX, development XX%, operating to investments exercises for non-GAAP the XXXX, an full were spine Full $XX exercises one-time guidance. full $XX.X development sales platform. globally, are at tax QX in rate projected Normalizing margins XX.X% were expanded and expenses non-GAAP in a Full INR option million year of profit repeat of XX.X% current

now for questions. will We open the call

Operator

Larry Thank Instructions] you. from Fargo. Biegleson comes from Wells And first [Operator question our

Your line is open.

Shagun Singh

Excelsius? for What clearance in here? received you alongside robot I a January Shagun first for is question you that Thank Is This is recent second is question. in my taking plan so Acurate. guess for this strategy Larry. much the to the you regarding launch

Dave Demski

Thanks, from engineering IP Shagun. leadership. the we're and that any of Yes, Acurate robot, in portfolio. our all we our efforts plans and immediate have options team KB our of but development to we the evaluating acquired with to respect terms forward commercialize The don't a our platform going is significant part of the

Shagun Singh

finer point said Thank we up, should as EBITDA growth. two But come expect a Okay. And it you very versus be relative can I flat You've about for on does to put then but we it just and in XXXX XXXX? future mid-XXs, row is how a question, margins down years have it line wondering, to or mean much. down you to drive a XXXX? second was should top think

Dan Scavilla

it's Dan. Shagun, Hey,

out those So funds a some U.S. XXXX things. beginning at we've reform, We tax intent called our and the and the that. couple from of use invest of to done of

real if versus thought still My EBITDA where possibly high have, is I anticipate a industry. I would into you it same range, bit think we and that. better consider, little healthy at what there, it is expect. the I very or The would worse, XXXX what it's we looking that is. down think get we don't a go And carry So question

Shagun Singh

Got it. Thank you.

Operator

Fitzgerald. from Thank you. comes question And next from Cantor Craig Bijou our

Your line open. is

Craig Bijou

product also Excelsius. got questions. robotic the And the addition start to SI to with joint for Acurate, guys. taking use on approved your I for you in a Hi, Thanks want one.

new we of the expected of the incremental kind throughout to that magnitude And to just some can that then could any applications the just role, – attributed expect kind given you of And guys can indications are saying maybe So of in year? contribution just of those. hear what wanted be timing the terms you additional of or applications?

Dave Demski

year Sure, at at as we're talked to the Craig. solution the as looking of we're application on an inter-body we've And ExcelsiusGPS. past, this I think half second working the as go ride Yes, on in of about don't that's than They're cranial point. well launch. going the nearing put verification, completion it well. have going to the finer can whole a that before the want those point development we the cycle process FDA But both on we to and that. are validation I through,

hard of offering. going that terms it's to to to value impact, add In we're say. really really product the It's

that, systems. hopeful that we're will So us more help sell

aspect definitely us incremental of I but improves will the and applications even will more be offering think it versus I think the As differentiate that alone, competition. don't those significant, product

Craig Bijou

also just then on search. it's for And kind know Great. to been a out the I wanted of ask CFO little there while.

talk really but at. remarks, to guys just about anything see You prepared where your in didn't wanted that's

Anthony Williams

or really just and to and my to board. into is asking. It's probably that. getting with matter dragging me going through processing continuing great several things of we've a candidates together interest some of for truth a The that. with got as Thanks heals the We've gone opposed do other deal through

really seeing. to little it the anticipated I with candidates that just situation else. So and create anything balancing taking up, It's would've longer versus just bit I'm pleased than sums several that's things we're more a

Craig Bijou

questions. taking Okay, the guys. Thanks for

Operator

Thank you.

Matt comes Miksic Suisse. question from next Credit Our from

is line Your open.

Matt Miksic

for questions. A taking of couple our Hi, thanks questions.

on one of tone the the business. maybe Just

sort of I into follow-ups price in terms some in the on pond. the we fish of the And had you're expectations what I if QX volumes there's quick just you of talked – been sort and are for that not think I maybe and a know then couple and what the I stability about Excelsius, of of biggest But metrics market things, could. kind in your of thought past, of XXXX?

Anthony Williams

you Hey, to good Matt, talk again. to

would mostly for about get to market I seems counterparts So tell again, which and data, at you I your that right look from you, I X% if zero us.

us That's I XXXX, year, constant really really we've the moving wind projection. we digits, a say in you even time truth. not as mid-single as into that that Price all for our has look so tell built the been up well. a I'll what And would that forecasting that's pressure lot, whole the throughout and we

everything that offset future, one look ongoing the for and know, erosion. the that. helps is So, at again, rapid of that XXXX models as of that project innovation would I us launch, I of rate we into do to And forward you which

that path. I we think on So continue

that think I pressure. continued will see will to range X%. think it zero the of price market I And be in

Matt Miksic

robot position. much Could of of sense the on pedicle inter-body guess, from That's of how towards the we working your – you're features working since probably often you're wanted the and of, or sort to, great. for tackling on as to the facedown with in there, posterior you And are folks, plans things position. centers know the outlook I seem using that screws thing to the appreciate get sort lateral that of geared talked I some either application I the the you guess, And on the some and these this that to applications. some new as I

of be on one The out is that of competitor place of is last coming things, question this a they these quarter. this in lot data they the second placing large the put lot of seem a points robots of the contracts to just

to a sort that of point too in is putting your how who lead than without but volume. the I And compare with without competitor fine you're half what's there? a wanted doing with the of are I experience? just get just U.S. for on contracted necessarily, know interest them of sense does seeing it, Your Thanks. more a

Dave Demski

Matt. Sure. Thanks,

screws Excelsius procedure, several in it flip position that safely of now. you can save right consistently. put the terms from the of and – the in lateral position, lateral a doing will time have surgeons In lot the we and do

makes second So and business long really the and of where that's question us customer. at you sense that a appeals got one makes us for deals is development And it definitely the the and business. done we a piece business is future out of you've opportunity do where appealing a all. your that a in for capital there, not was that to it actually yes, implant can your about sense, getting capital, it time, of help then the if They've into to there

that answer did So your question?

Matt Miksic

screws are was question The does. the well? inter-body, I'm in lateral the assuming I inter-body I lateral It thinking, know in as putting a that apply position, folks will but that – does to

Dave Demski

you the and help in the will hold The or instruments then the navigate position the retractor next application inter-body. can retractor

Matt Miksic

That's great. Thanks so much.

Operator

you. Thank

from comes next Company. Matson & question Our Mike from Needham

open. is line Your

Mike Matson

thanks. Yes,

been head-to-head that win system curious that to the [indiscernible] Just capability? has a competitions mean, continuing up, there when I about comment with that few majority navigation and Does months now. mean, we're given – you've of XXXX been with a with made into guess, your addition about I I stock think Excelsius. even – out held you I competing that have has newer the the you

Dave Demski

went centers not what say a up but Absolutely, west. two we're what they our big thumbs in to than They just they it's offering. to We But together of to not had. in the technology. head-to-head going pieced for couple things are, better equivalent it's and a clear Mike. I'm where

Mike Matson

And you implant great up it's pull-through to the also benefit. rep on Thanks. addition. has, And business then you're see Okay. but the had like pick commenting some it

actual kind $X were, that you the maybe which – are a really talked correctly? if over remember And impact measure the period, So three-year of about, I to does compare robot act how like numbers the think, million per pull-through? I of able to that you've adding

Anthony Williams

We don't having We a tell if the just disclose break because additional these before even ability can do you an having And we for that impact. procedure out. saying have occur remember pull-through. them would week that simply some the just may of reasons. for a you obvious about things of I to talked them concept have meaningful

see some in growth conversions well are and pull-through. We the there obviously is all. we whole it to gamut. see where is at the you that excess But see would as as think really don't the I I tell what It both depends rep that. places we on attributed

almost the the now. look things way think right contributing at I they're equally

Mike Matson

why an Okay. implant explain spine I'm the products on on you guess, newer I much that's little it finally you're a trauma, volumes can been producing more because are I Thanks. as just such side? maybe in And these Is because, guess, detail you mean, when these issues to production guys? I higher then issue just there confused for

Dave Demski

I that's best it. way the probably put There's to think of thousands SKUs.

we're So different. on they're similar, respects is taking and while in – And time. are they the at teams same are different developing a lot them they several the

Alphatec that's challenges from as growth big as spine in trying So just conversion take the posed well addition to gone in overall chain. supply design to has manufacturing our as we've put that our to some on strain on a in

Mike Matson

Okay. Thank you.

Operator

you. Ryan And next our from Thank BTIG. question Zimmerman from comes

Your line is open.

Ryan Zimmerman

Hey, taking thanks question. the for

it. little more I'll looks gross wanted separate forward? question speak you to robotic OUS up like the math, unit going And what with potential a should that you off little OUS, a this By trends I And then then question. to margins, answer ask about to follow-up non-robotic have which with follow there want thinking it how on historically. saw hold quarter Can was we be U.S., than the particularly bit is sales, sales one this to bit and until you I I So quarter? there my a respect around robotic a

Dan Scavilla

Dan. Hey, Ryan, it's

the would you U.S. I So that tell

you and We'll June. little QX know, fiscal underdeveloped can a to look you QX. too or talk now we on. what on picks about meaningful have see can we've comfortable because say then don't are at already trend. and deeper a have it. tends where somewhat have long we years a QX. think softer you that get in it I reasonably not. conversation bit any to with ending of as into I And we that later would as follow International larger seen, kind up is depends the differently right look I of know maybe where to and as too plan anything And we think U.S. at new I if don't that still be

well, take So and for we little as things a so predictable is opportunistic now, quite tend as that way. not language bit them. They to close that currency one for longer more type as

Ryan Zimmerman

Okay. us then can spoke And Thank taking how basis, you've trends, it gross us your margin an broadly Got units, as trauma we together of of you've gross cadence kind the you the do you you going it. understand, coming piece kind beyond? should know XXXX on, kind more on Helpful. about margins can you help forward for question. I robot annual of maybe think in introduce of but and help about

Dan Scavilla

this a line year, you been I the happening And in coming as way an start signaling as was think set expected we the of I they've increased know. year QX depreciation. throughout I reasons, lot that's think. for high to we really

of With biologics next is model today, somewhere be robotics, say And I XX%. everything the fits continued the the our XX% company growth trauma expect mix even to still we including calling a we ourselves a range few that I have range. for the that within years. think, the knowing that of still, mid-XXs I'll profits see between and comes, prices international, when would and in products, enhanced

Ryan Zimmerman

Dan. you, Thank

Operator

you. Thank

Will Our next question Jaffray. Piper Inglis comes from from

line Your open. is

Will Inglis

comments Hi, drilling pricing sounds based earlier. competitive questions. guess guys. some needs Is exchanging your the on the for side, Thanks flexibility the the that It in model, into your curious I accurate taking volume your of is like just the discounts? robot landscape for about robotic customers. there on just

Dave Demski

put we deal. there constraints, a volume we're I them to not pay are If over That's exchanging we'll allow package it capital probably but time. for wouldn't say together them discounts. accurate,

Will Inglis

rep of the reps And any their there makes year? reps off a hiring? out competitive back rolling this year, updates similar sense. level amount half fair Great. of noncompetes in rolling of on And is That Is last a noncompetes. then there

Dave Demski

XX-month a XXXX had noncompete. the We a year has rep and in typical strong very

And year, pipeline. So see a yes, is you will, into cadence, we're same XXXX. the we there the gates very this will of and out strong if pretty good

of So in and our our take liking Globus they I they're technology that's some to of disruption the other competitors is calling an see. at what happening interest and some people think

Will Inglis

you. Thank Great.

Dave Demski

Sure.

Operator

Thank from Leerink. SVB you. And Newitter next our question from Richard comes

is open. Your line

Richard Newitter

should for volumes, one need to? Hi. or to end any business are Two, models the taking providing Piggybacking willingness volume but questions. flexible you, you the what's And you first arrangement is on you're certain entertain for last maybe the perhaps may respect I the where Thanks considerations be robot. rebate financing of Dave. if types sorts on different over for placement discounting with a of there to guess, of thresholds your one not hit? back kind time the

Dave Demski

Rich. for I what And you can we're we to the do sense that profitable. grow. going always makes going be trust going Yes, to to we're mean, business, us to have. continue We're

going be of do will won't particular any all resources and going into to or to so. we what I'm specifics the but not do to the in competitive we're get situation, So have we

We strong sheet. a have we have very technology. great balance And

compete a I not So in I'm about – think we're it. concerned position we're great to and

Richard Newitter

you, the guidance. of Got then it. Dan, the maybe on maybe components And for

the Just slower think to little the million the to million right expected in is thinking the about launch contribution? range. than this of think trauma continuing $XX year, the I way a is bit consensus trauma into $X

about thinking sales. tech, range thinking year past. to the U.S. about into build and your the mid-single-digit that components, trauma revenue maybe I'm of Is up the international get line in something core in asking that while spine, that And brushed the right Is of actually placeholder? number? of the kind full double-digit the emerging kind You'd right

Dan Scavilla

think you're I Rich, that. ballpark with Yes, the in

of at look you and that for to I shelf, a if lower about makes have part and way. getting pull-through, for of than that half the look if kind contracting of be that mid think year uptick, on constant given right. for second on and My pressure half again, you assumptions usage, pick that going line. And of you're range large that's would thought given just in in cadence to the trauma rollout getting But your buildup that first more in are I that would us an think the anything is because I U.S. be sense. seeing

Richard Newitter

Okay. you Great. Thank very much.

Operator

you. fourth for and Thank further Medical this the evening. questions, quarter a Thank call. participating, And concludes good end have of no with earnings the Globus you

disconnect. may You now

Globus Medical (GMED) 21 Feb 192018 Q4 Earnings call transcript