GMED - Earnings call transcript Q1 2020

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Operator

Ladies and gentlemen, thank you for standing by and welcome to Globus Medical's First Quarter 2020 Earnings conference call. At this time, all participants are in a listen-only mode and later we will conduct a question and answer session [Operator Instructions].

Thank you, I'll now turn the call over to Mr. Brian Kearns, Senior VP of Investor Relations.

Brian Kearns

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

Senior call CEO; Medical President, Dan Officer Keith today's Demski, be Chief for Chief and and and President Scavilla, Pfeil, us from will Globus Dave Commercial Financial Joining Officer. President Vice Executive Vice Webcast being section Investor Globus Website via the through at the This review www.globusmedical.com. available accessible is Medical made Relations of

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

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

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

measures discussions for, that measures these Accepted Principles certain be not or today GAAP. measures. with replacements financial directly be to measures These financial are read should non-GAAP should not financial additional include will comparable believe Generally Our the in accordance our most business with, Accounting provide GAAP considered financial We together performance. and information pertinent also calculated non-GAAP

are the Relations and available Reconciliations GAAP press Globus of the comparable most Medical the to the on schedules accompanying directly section on Investor measures release the Web site.

Dave President and our Demski, CEO. I that, to the now will over With call turn

Dave Demski

handful company team off and required challenging has on contracted our by virus our during Thank you, support everyone start these I'm Medical Brian, continued and only Globus crisis in and as safe times. relatively have and thankful thanking to everyone. good care. call have a hospital this want of for of afternoon remained the the members uncertain none I that your interested

to I'm opportunity. proud team way this has responded the our of

we help. patient made safety focus and a can have on with top care our priority how We

last weeks. have We new products technology the three innovation to launching in five drive continued remarkably

our procedures in disrupted, have and record manufacturing future. anticipation back near been inventory at the current in our substantially levels elective built teams in supply bounce While has revenue chain a of

us this having Our positioned long-term to has initiatives. commitment to conservative growth any financial to time philosophy difficult important ride reduce without well our out

our to $XXX have our are position, we seriously given repurchase stock fact, several opportunities. strong over and opportunity own million the taken In evaluating of tucked-in acquisition liquidity we

and and We use of to our clinical aspects will business numbers to digitally techniques, surgeons all and our analyze our salespeople, believe and are serve introduce communities technical also In strengthen more a emerge new short, to of than stronger we downtime and been. ever company the time from of of. products as record carefully efficiencies increase acumen to opportunities the support for a that cohesive look have part I aggressively Globus we will this

we had quarter $XXX.X first increase million, built the while the X.X% Musculoskeletal as internal projections COVID-XX was implant two in including our the would growth for that in in significantly indicated With March. The business. revenue XX.X%. just in Enabling of increased the The last by spinal March U.S. Our for revenue XX% over first created grew technologies an growth the quarter of we weeks with our year. over crisis solutions finish remaining, in we double-digit momentum business XXXX. strong impacted on quarter was X% quarter

all Strong to contributed U.S. robotics traction new recruiting, from our products pull-through from and the performance. spine

significant We disproportionate three every year, the three a quarter. last segment last in the in over was number as in close of of grow did technologies particularly two weeks this launched deals more in typically of spine two impact products QX new COVID to enabling and While April.

XD most printed portfolio in our HEDRON of from products comprehensive the several in the interest strong seeing spacers are interbody We family, industry.

The on feedback. met to our SABLE, we very as launched with spacer significantly MIS was comps call declined business International not TLIF by that the generation up quarter, business challenging expandable were interbody COVID-XX, X.X% in and XXXX we our QX impacted last fourth the alluded of also quarter. also strong against spine was only QX, great During by demand from

business over XXX% by to continues from over up make and steady progress, QX trauma Our up sequentially XXXX QX.

track several and the We new second year products the are double this expect on sales the half size footprint of to of our launch year. to in

development systems. significant some made commercialization caused several efforts, COVID While delays of in in the we progress INR

the plan to FDA and submit expect interbody the to imaging module third cranial anticipate roll We module In we the for we FDA in system second out to ExcelsiusGPS. of the the quarter. quarter clearance

remainder the we forward early volumes assess are too procedural to upward in encouraged over trend the we but to it's back month. As the to we of normal the when last year, look be might by

spine on first are again. April, Our current Volumes in point, the reach of roughly levels. several steadily by commence for XX% have surgeries of off two-thirds Since from the risen about week pre-COVID U.S. full pace bottomed our weekly have elective as begun our to business week allow to that to pre-COVID volumes pace. states

in At growing attendance some as in spike virtual to of market quarters, we surgeons point backlog procedures to we prolong expect patients during the at pandemic weeks. work and of have surgical extremely had need two recent development even robotics over Interest the to three in strong intervention. events in next record remains treat the

expect do hospitals purchasing not as but in the process through deals of have work lost some the crisis. this any financial delays We implications

in reduction Our surgeons than a to from more capital patients; robotics to a be that's sheet standpoint, of flexible busy backlog their and of about hospital Whether clinical us to on constraints treat concerned robotics trying value strong offers patients a tremendous now clear payback. potential of in for stays is hospitals compelling. or the the and promise ever, balance response enables hospital shorten to load the cognitive being

challenging Globus health-related. only navigate, the economic has the we to to While this has been thankful and are time been impact family that not

the this platform year. healthy a will infrastructure latter liquidity the also maintain We the financial which in are of grateful business to provide we have half growth strong that and strength for

We execute unique this on are capitalize technology time. sectors our utmost and our I positioned in the leading key well have to team confidence in well to

call will over turn I the Keith. now to

Keith Pfeil

everyone. Dave good lower driven longstanding improved and Profitability by Thanks, it's company Globus working a primarily to losses the as its continued capital from growth COVID-XX, expenditures. over and the was trend commitment was impacted stemming by impacted free innovation. prior flow sales and COVID-XX, of technology quarter result capital of by top-line year cash improvements however, afternoon

growing compared quarter in of million, Our as QX reported the $XXX.X revenue constant first to was or X.X% X.X% currency XXXX.

million share. Net million income be COVID-XX. significantly million, non-GAAP Dave $X.XX delivering net and XX.X% As income March was cash the by impacted We was was of was of approximately sales the our for non-GAAP EBITDA earlier, quarter. $XX.X earnings $XX mentioned flow $XX Adjusted was impact and revenue estimate diluted free COVID-XX per our million. $XX.X fully to

higher of our U.S. by currency. from pull-through revenue the $XXX.X first new million Shifting constant of X.X% or launch down impacts products. a in or than to quarter business reported quarter of by the was of revenue implant of was the for driven International and the lower spine X.X% result combination recruiting, continued strength XXXX; the million, sales, X.X% attention $XX.X our U.S. as

in year addition faced to internationally year-over-year in orders the to XXXX. were with Dave in repeat large distributor comps by mentioned of that driven earlier, difficult the not first placed of we expected As last COVID-XX, impact were half

product a first XX.X% from profit labor QX decline musculoskeletal planned by mix additional within in XXXX. and gross businesses was within warehouse was sets, and of product results and trauma primarily our compared Our costs; in depreciation stemming to costs driven business. XX.X% higher of higher our quarter expense The profit instruments spine gross from transition the

Research quarter X.X% sales primarily of the quarter to the by and the development first investments our $XX.X platform. for of million compared or prior year expenses sales million $XX.X increased in within were or INR of X.X% driven

million of $XX.X for SG&A compared in quarter the by first year. tax within or of XX.X% effective the for million quarter prior quarter primarily rate sales first $XX.X were the the the XXXX robotic rate first was in driven investments with or in XX.X% income the our expenses infrastructures. line The spine continued XX.X% and quarter XX.X% to

previously Adjusted million business by This impacted estimate which primarily EBITDA COVID-XX was our QX negatively we as margin XX.X%. $XX revenue have driven for the impacts margin to spine and infrastructures margin gross investments was of robotics within by approximately the across adjusted increased the low with coupled for to and the impacts EBITDA That unusually quarter. previously mentioned resulted noted. in an

relate of to the To discretionary the measures it company help the COVID-XX, institute containment cost has across to spending. address as business steps impact proactive taken

of education actions taken include of and surgery and non-essential of all functions related spending. related events, our hiring the elimination of temporary labor travel, cancellation non-sales Some freezes reduction of

of area securities. in investment Net while million development. we move by long-term remaining in drive flow committed growth scrutinize we and will quarter to marketable will all with remain further of cash cash In spending ahead. ended cash million opportunistic and We million. areas CapEx was particularly was provided research free the operating $XX.X addition, and activities strategic $XX the We as that $XXX our equivalents cash,

operating currently company company its it's the conclusion additional on repurchase quarter, cash the QX, announced $XX.X cash. the Since share A connection $XX the million will $XXX $XX.X The an excess has and million share fund During million and common approximately the its authorization. company with program. shares the to spent Class has in with remaining repurchase original previously of million flows repurchase repurchases to and spent shares authorized

the previously As results. reasonably duration At specific of the financial on we April year and its announced extent company XXXX fiscal guidance. operating this predict has on the the time, company withdrawn its cannot or impact COVID-XX XXth,

now will open We questions. for the call

Operator

Suisse. Instructions] the comes [Operator of from Miksic of Credit Our question Matt line first

Matt Miksic

and sense, areas follow-up. talk, since So, Can week the types kind the you or of what about what then one of I'd and progress, of love Dan seeing the centers, Dave, to at week. first kind encouraging I trends your you all the tracking where of country, potentially, mentioned have trends you're April that get of this

Dave Demski

from following it's are think the the standpoint pattern on, another back on following back so Georgia using Well, elective I up economy early was and being states. the California to an governors just, one is open is where opened that Texas up it's is

Matt Miksic

lack ASC's. of seeing you of types traction don't keeps lack a circling there is of, maybe just of because lumbar color the sort a any large barrier I recovery, in less channel the or or know alternative know, of cover, the of centers, any And types Are ASC the academic there's the if cases. around know, around of Any you centers sites? that important or you other question

Dave Demski

go I lot to there's up Well, ASC. bureaucracy less open think through to a an

they and can is itself they're, as still where hospital won't service we're under a really in it's just they're the up well the significant ASC. not and doing So where up opening it pressure across just areas open It's board seeing quicker. as a of medical probably that hospitals. full But that COVID for but while the centers

Matt Miksic

out, And year? last of, high. on do the being you got have have know, what still reexamined? months pushed these rest often holding being for the how, then deals also these projects, a just robot in are budgets color But, about budget or for they your pushed interest of kind sense for out three being up and your weeks. are the how you or being a sense Just weeks, two of demand robot these, follow-up on you for is or happen comments or Is, comment the and there do trends things the are

Dave Demski

crisis now see until the I, surgeries start Yes, really right coming get we kind it's hold elective then back. to through just on the and of we

that's focus are the administrators really the back. to and even of surgeons the been get I think itching

don't So, months. I but definite period it not a many think be, there's know, will you time

or it before going balance are month and weeks in, we're to their how flexibility will to back just it. they think understand two and to then have. between start and they think they I evaluate be much or And have where go sheets a

Operator

Wells next Our from of question comes Fargo. [Indiscernible]

Unidentified Analyst

know, trends specifically question. Could spinal Thank for enabling seeing you much get and that more May. in discuss you the so in on the technologies, May? guess I to I implants you're taking color you was hoping

Dave Demski

alluded this on, the out week remarks. strong last really to increase Sure, full but then we've week seen first bottomed an we've increase every as week. a since seen in, over week I We my and particularly

seeing that. new coming impact up, immediate I think we're So opening on as states on are and the

week. So, this two-thirds level were of we're roughly for at the pre-COVID we

we on terms activity will are we going still running quarter. expected It for will from out think before where the I but deals some In we early emerging emerging. of some. I, had in down some significantly the do technologies, the crisis close year there's be

Unidentified Analyst

a looks as May of as you XX%, April the I know, nicely. second know, you about it March has was cadence down of we follow-up it. like And think then, just rebounding got down half our the recovery, by about been math XX%,

probably know, it's than You to we second in know, half in of the you seeing be we that we QX, March, down somewhere the as be assume on you think QX but you do you improvement questions. levels you think could QX do what about still fair the will Thank and you're slightly sales know, expect saw line taking normalized to trends for could thus reach better based you sequential know, far? just in year-over-year,

Keith Pfeil

thanks This that say question. low the Keith, for to our QX would is be expected point. I is

our to back over close as we and QX would by into QX would QX work move we As we we that some see to year. to get improvement we hope did, normal things expect

Operator

Lewis question comes Morgan the next of David of Stanley. Our line from

Mason Austen

Mason question. taking is for Thanks on today. David the This for

robotics a usage to augmenting follow-up provide in question color based conversations you opposed leases could of So I but selling related is customers having there, or the robotics considering the to with more wondering interested Matt's strategy was you're agreements centers? if more as are on Understandably interest sales? on are or just the you some additional outright here, with as

Dave Demski

Mason, the point it's level kind administrative this things really talk I level to of that now. have the detail. progressed the right other Is, conversations at it's, where of really that can't we I about come at more back on we we're, cash to standpoint it flow. elective when come cases back with. We're clarity when when little the have to because a going deal have from an are that's to going haven't their to

close back. revenues they online, if capital their can front have, they're the what the as we're really Now, little looking how the buy as once get conversations the some you the to going they a as in coming company And I know, picture position serious be being spine not of procedures and that enviable first well of a are their better funding, understand like on government of then they think will robot. about

Mason Austen

And on your environment so XXX(k) year? changes much. but track XQ this around get I understand imaging chance comments, launch is a process prepared platform, submission is any or that on thought for from to Thanks the pushed the this the could there next in into

Dave Demski

in excited more advantage navigation competitive change is of We in imaging. at No that the ever. really segment, particular think We're and segment this all. than a for us

their So workforce, at a we're QX but be. to like in we hopeful bit down ahead year. it's as speed I as much us constrained launch a this full so can bit this terms we to submit little The are work to fully of the said, are expect development time in and ability slowed guys

Operator

line SVB the Our of next Richard from Newitter question comes Leerink. of

Richard Newitter

business I was underlying million spine think quarter. $XX that for the versus portions? impact first the, you called you how out out the you allocated COVID the capital impact break between know, Can

Keith Pfeil

back think U.S. business our of on is early growth. pace spine David's about to spine, what for I some double-digit our I comments would talking was refer

that that that of felt indicator think the we of I driver key sales of we the as missed COVID. that a $XX result a is million

Richard Newitter

inclusive? similarly, the the in XX% two-thirds that business, of hardware revenue that or And the the XX% was gave when in current recurring you was the and all April, spinal at more week, bottom

David Demski

business. being specific specific, just to spinal I'm Rich, want No, that's there, be U.S. implant I

Richard Newitter

how initiatives plan margin -- that up how into And that of was above the and was on much your your that side, beyond maybe previous how and know, below out the margin some on for levels, much the stepped you break EBITDA your spending core internal us normalized of brought just COVID of pressure much impact? can you buckets,

Keith Pfeil

at most the the the XX%. that where range I COVID-XX. back us say have around impact of not would to the if was I to year of of I look our $XX landed over somewhere in go sales land EBITDA, all, business, expected million If we related would to prior really and

Richard Newitter

or quarter, of you part back to early to to back follow-up to get why normalized the you able shouldn't in first that, the expect to the level? margin get just where on we were when EBITDA something pre-COVID you And reason do any close mid-XX% levels

Keith Pfeil

hesitate at we into the further year along would how to answer point to I get this see do we until that respond.

David Demski

understand me question. just we Rich, make sure your let

You you -- caveated then saying volumes back by get pre-COVID what's be? once would to -- levels, what the EBITDA our

Richard Newitter

it we out any reason your of the quarter I year, recovery, in model just fourth to whether is happens is want as --, of or first there trajectory to think… the there any quarter -- next the

David Demski

project we're mid-XX's. -- the when but We're happen when hit will that's we not -- to when volumes yeah, the to that be not able level that when saying going in

Operator

question the of next Our Piper Sandler. line O'Brien from comes Matt of

Matt O'Brien

remarks expand of your the prepared love trauma little a I'd on business. your bit side to on

as work hear the business and you've good You building know, during done a period of XXXX of really more been everything's disruption business but to from trauma force love making for there itself and what's what progress you. I'd color seems a for to it lot sales like would and helpful, really instruments out that thank expecting sets that the be within you're going this on level. high for That

Dan Scavilla

called really sequentially growth with We're significant three year-on-year even going the driven we've out, by going. as versus pleased progress, and with That's made to where QX factors. Dave be we're

by continued that launches next is anticipate. would with access accounts new rep into and outs I wave build recruiting progressing at and launches. product of been market our product where followed probably into first The We've are

had I other right now. plays or strong to we but more pleased great Still some with a on working ASC's a the some GPO's the quarter. have community-type certainly with be And although go. we way of want recruiting had into to hospitals where We long quarter access

we as we we the a number I see all realized QX trajectory activity want with certainly XXXX the going and refrain of say that. to from for you to. and, track on and place exit with the we're right to that the to in haven't But know, place this especially growth action in On really I'm get plans

Matt O'Brien

don't had I And you one mind. follow-up, if

You be good players of are spine a at you're position being here. capitalized there company there's well in so less other market consolidation a may know, play form smaller but really some capitalized and that

an get color that Any would gain? So, to opportunity how this really you or with are helpful you is there market know, taking additions new recovery. dynamic? share some during for about thinking You be rep the aggressive

Dave Demski

time. on Yes, opportunities I'm the pair about how they're to those the react. as for their back thinking vendors some have and looking considering actually larger are already some look then capital the smaller hearing be the both and where hospitals ones future cutting working do want don't some the we through as of that of to And companies this reps of that fronts players. navigate about There's, are structure to that they're they to

created So, yeah, there are a good opportunities already there. out It's question. being

Operator

from next line Krum the of SunTrust. of comes Kaila Our question

Kaila Krum

question spending. So last just clarify to on that on

with hiring a mentioned freeze for except of the you roles all So, hand, cash your on function. sales

would you are kind thoughts or in spending actively sort hiring maybe than with get track So, of be your you would pre-COVID? plans you you are out to just prior like potentially of to hire reps think backfilling that are do you sort I have guys guys, sort more of there. or of you'll

Dave Demski

us. reps no many There's back. on to think fully as expect business drive limit are we that. as to hiring are come We for We qualified

we do We we're to portfolio quality with if team add and have our people it. going a to great can

Kaila Krum

the how environment? of M&A curious I'm M&A, in guys were about on thinking you just then this context you. Thank And

Keith Pfeil

comments prepared M&A, we again, of some standpoint in I'll back the refer the remarks. to had our From of

of believe act times balance strong where opportunities and at, opportunistic. to think that we we we're position where we unprecedented a ability a in we're When know, remain have us. have we about You put are but these are we in very sheet front the upon

long-term opportunities there, that perspective. us out a believe if So the interest strategic are and look are them we ahead, from best M&A that in as we'll we they act review of

Operator

and Company. comes question of Mike next line from the of Our Matson Needham

Mike Matson

to want follow-up M&A. there question on on Just Kaila's

at there be deals. in looking that think you're a of you those this could you're and, at know, you the and environment price mentioned you several in to additional you in? current better So looking tuck-in doing potential may us you a given get near-term, something couple kind Is that anything here you're do we're of tell able about

Keith Pfeil

I is This Keith. to Dave said in what just would his back refer remarks. really prepared

reviewing into should opportunities further that them move and to our at to we're will really ahead. fit I point. they We we But want this review criteria, don't go continue are, we'll and

Mike Matson

with and and just going both then you're the then, in impact margins, is that third regard potentially in QX slow slower lingering affect and would And those to second gross from into how the any be know, as gross volumes XX, there the quarter, quarters you manufacturing to margins production?

Keith Pfeil

coming view say would production. We demand our to because that we into producing I What down come it kept is this actually back. slow will that is did not this

ahead, we I from the in we look as impacts us So look as don't year. later hitting the slowdown see there being any really ahead,

Operator

of Our comes the from of next Steven Oppenheimer. Lichtman question line

Steven Lichtman

driver last Your the obviously an number been over guys plan for quarters. has of you important

pertaining we if you're reach in to Just description maybe procedure more give particular ground little seeing a on on as the could wondering what with, bit you volumes?

Dave Demski

could Tough Steven, you it. repeat connection maybe

breaking up. You're

Steven Lichtman

me bit Hi can David, little hear a you better?

Dave Demski

better. much Yes,

Steven Lichtman

country an driver been you're number with that obviously Japan, us, you to volumes? you in if ground seeing of give on quarters. what for over particular, last in the Wondering the guys just procedure important respect could

Dave Demski

have see a of rest the I they the But, to to relative a been of May relative the of in they're terms mean, severe impact goes. world the so getting had healthier restrictions how much they, there. business, right they of are rest and now Yes, behind us. good the little some to they we'll more have COVID April bit

Steven Lichtman

margins, on And secondly just then again.

sense think Maybe here very force margin sales You another variable the how terms sort about can would what you a can know, us way you, the hopeful. know, on that drop-through any the you it, impact, just give of sort you your the color your percentage lower in you of OpEx given sales, to would what near-term. comment hiring OpEx on know, the ask or we of front, of should about of of be is continuing give be sort in

Keith Pfeil

are to to that are I continue to as a we for out sales company, still feel break but too look us going add we the said, unknowns. ahead. we reps think percentages fit can many We our hesitate help there's Dave Like OpEx drive

Operator

Our next question comes from the line of Matt Taylor of UBS.

Xuyang Li

Xuyang little just I'm are Li and a taking question. with some that about of comments up operating the staggered capacity, ramp ramp? in little as for centers much a is for Matt. about possible curious, the bit Thanks more made just slower our have initial Maybe their talk earlier of you to about ask of states. you or in as a kind it bit they can opened

Dave Demski

I on from they've think that the COVID. depends experienced impact that

areas more it challenging they've but they're into in such back where stepping those full impact they're haven't they situation, back. had a relatively slowly where an on So, seen

Xuyang Li

then in And to to I perform you longer the in any that of facilities guess or do any facilities, you their anything up procedural terms in of the know, Are the cases? changes the it? terms in of, times staffers additional have picked order burdens because have OR in

David Demski

really one At if difference. potential still a know, new it's see point, logistical relatively around we're to this the early PPE too given is there's comeback to outfitting tell going some to the challenges volume. Look, of to you staff changes. our really small other any be to with It's

Operator

Globus day. at be There to Earnings appears And like a Medical further Please joining today's have for wonderful this I'd time. to Quarterly no your thank call. lines questions. everyone disconnect

Globus Medical (GMED) 9 May 202020 Q1 Earnings call transcript