GMED - Earnings call transcript Q1 2022

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Operator

Welcome to the Globus Medical's First Quarter 2022 Earnings Call. At this time, all lines will be on mute and a Q&A session will be held after the prepared remarks. [Operator Instructions] I will now turn the call over to Brian Kearns, Senior Vice President of Business Development and Investor Relations. Mr. Kearns you may begin.

Brian Kearns

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

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

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

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

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

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

Dan Scavilla

comp EPS adjusted $X.XX X.X% slower with QX revenue COVID-related impacts a XX%. everyone. results EBITDA key a against reflect prior growth sales in revenue share good with and million Brian year and an difficult Thanks or a purchasing were growth countries These capital coupled modest of quarter. and afternoon of non-GAAP $XXX

in that out long-term education, it growth EBITDA Spine revenue of grew point important US year investing coupled quarter focusing COVID for average of where was our XX% in our on a QX recruiting R&D our challenging in the with competitive as While of daily call. sequential March strategy achieved sustained comp strong is and additional and noted goal to in growth slow we rep highest EPS sales. headwinds increasing remain of April impacts. improvement month QX growth. adjusted resources impacted above-market investments results, the unaltered these became against prior continued X% on by performance our earnings sales January February showed highest record. The and headwinds we in surgeon

a future experienced view is After focusing on were focused addition COVID launch. shortages more in procedures sales million to stronger our on from continue field this our QX, of the In growth imaging the state-of-the-art a and several ExcelsiusGPS and accelerate, is rest in quarter. to year. driving and driver cart Entering the offering XX% of is implant is is is three staffing Enabling high lower grow. room. with a Surgeons large the customer leading robotic we operating modalities robotic Globus high $XX our placements prior the with be ExcelsiusXD our in prior to integration to QX, X-in-X pipeline recruiting Robotic pull-through hospital to game May, we're as market. first system System. a positioned and versus the and sales seamless Navigation in competitive the indicator sites. performed we XX,XXX interest procedures year component shipment growing surpassing on a a as the to million, of orders in of slowdown penetrate down growth. which is due pipeline $X strengthening, year It realizing we purchasing Technology record XD surgeries ExcelsiusXD administration a and major began approximately since in technology QX. is Excelsius single key the Robotic maneuverability completed In continue throughout for platform Market us ecosystem changer. successfully and continued imaging image a said have

On positive Japan, international Brazil Japanese the growth, third market. the identified long-term the last business and declines mid-teens to QX. business expect we a our reset front, we the to Belgium year the remain of driven by potential trend spinal on implant quarter. through and in for our continue We as was in offset by Italy, growth, was Strong international flat continue UK,

launched strongest its annual products strong driven to System HEDRON spacer, with Mini the along P, expansion, rest interbody portfolio, lumbar double-digit while with throughout ANTHEM lines product growth every our printed In by delivered in XD spacer uptake expansion. Signature as We're our future meaningful XXXX, launch increasing of force investing our adding as sales offering in a XX% we well business Trauma and growth, product force family. articulating on HEDRON Plating date one product QX, and the of XX% Our track articulating Frag quarter Altera. fastest-growing sales sequential to to of lines, and and

three system competitive March, the launch Globus rest sales rep achieve to placements strengthening the now long-term I record, record the in becoming with positioned recruiting. Medical pipeline. the robot the will introductions, over and mission we of the imaging turn and for preeminent call Keith. musculoskeletal XXXX, company sales innovative competitive our ExcelsiusXD highest As to the rep we April's well world. remain product pleased is daily elements I'm growth, on average move core into new US imaging and of focused in

Keith Pfeil

good everyone. and Dan you, afternoon Thank

off strong year results much prior through growth facing almost the QX coming reflect impacts Our continued COVID comps, quarter. of

the which did improve and as February, part consistent currency not $XXX.X remained in was to on X.X% and volumes early however impacts remained until business the growing core COVID affected momentum we and procedural March. Our quarter, basis. see fundamentals X.X% building QX a intact. in resilient approach million, our reported of revenue constant Ongoing began

quarter, in Our focus early part in experienced uptick the the managing softness of of while also hospitals slow to their through robotics business COVID shortages. our staffing access development QX, also with shifting the pipeline cases, limiting capital many and reflective managing in of

March driving through into the As of quarter, the up. middle and our forward second We improvement, business and we XXXX. ramped entered activity in discussions approach pipeline we deal as remain showed confident as progress this

Moving further into sales.

continued X.X% are the our primarily declines The lower US QX offset as partially $XXX.X revenue my sales million, compared QX Japan musculoskeletal XX.X% which force. growth related business, sales. revenue driven year to pipeline. growing by in Technology to to comments was by our robotics was direct and transition year $XX.X million prior to a prior Enabling is Our Japan or around quarter, of earlier the compared commercial was quarter reflective primarily our lower in Japan as Spine

compared and revenue with by around robotic was growing XXXX, sales essentially by X.X% the as our flat for lower $XX.X line expectations. million, of was comments the of related driven partially INR $XXX.X revenue revenue within quarter the US transition quarter quarter Japan sale. to million, which earlier driven first International XXXX, in to my First our growth to was by Spine, first offset US quarter

mainly as the focus Latin continue business within international America. to Europe penetration grew Spine, and within deeper drive we Western of mid-teens in Excluding our countries Japan, our

primarily compared The was The to gross manufacturing new of related increased XX.X% profit related quarter expense as the was was and freight result inflation to profit and inventory are XX lower basis to plant business is surcharges material and mix. XX.X% inefficiencies freight increased which result estimate inventory of freight freight implant primarily costs. write-offs First as our in biologics XX a higher driven our costs higher profit costs XXXX. gross within QX primarily increased of scrap roughly gross write-offs point to by the the change. a raw higher increased manufacturing, some well slightly We mix as impact costs while fuel to product

we ahead progress the in XXXX. profit remain gross through Looking expect as mid-XXs to we

gross impacts. with level $XX.X rate costs was ended equivalents tax stock lower and sales the our expenses first within quarter partially and with reflective of in This which primarily travel sales of Technologies, regarding and as entertainment Enabling billion of non-GAAP share. in year. Spine my income our the across option We spending net first first Adjusted earnings quarter XX.X% expenses million fully of diluted as sales drive bad SG&A a X.X% $XX.X the expenses. or well lower to driven with as $XX.X were the in as The in and income increase our and quarter to this $XX.X our pre-COVID plans benefit due increase was the exercises. levels quarter and EBITDA quarter a comments for on $X.XX XXXX meeting spending and by lower $X.XX is prior further spending quarter increase Our and with cash of dollars quarter was earlier of securities. $XXX.X around is will million, first which for training or million, capabilities. XX.X% sales non-GAAP to class-leading The increased is million tax for income was made return QX of first position of is for in percentage XX.X% consistent to to increased net million debt the of was effective R&D us business to $XX.X SG&A were both expectations. expenses development cash, spending line XX.X%, the marketable of XX.X% XXXX. events. X.X% The of offset compared and investment in rate million or benefits in primarily research consistent and GAAP per comp spending in sales our or of Overall, by XXXX. associated delivered The comments profit compared of of increased compared sales

flow Our operating and QX $XX.X was free net $XX.X cash activities million million. cash provided was by

investments equipment. cash primarily QX The company inventory business free capital as and focused within is and remains CapEx higher machinery flow INR as of debt our mainly working on well Our reflective free.

and guidance $X.XXX EPS. full net Our XXXX diluted at in sales, remains fully year in non-GAAP unchanged $X.XX billion

remain ahead, objectives. and our execute positive growth around remainder drive our Looking of against we the remain year the for extremely and will positioned well expectations to we

to is and term, over committed for our employees. the team Our our patients, customers value our long driving

for open now call questions. will We the

Operator

you. Thank

on session. from Instructions] question-and-answer the first [Operator Singh from begin now RBC Capital question And comes Markets. will our line We Shagun

Shagun Singh

due finer QX going start with you on heard It Thank question. was dollars? a so much versus the seasonality the How any it? other about it trends How for much to, and due typical to of that pulled we've from net expect Can more provide And are mention QX You for to where Great. outlook to shortages? capital. it appear staffing remaining several it that does talked taking QX just does you I'm QX guess, you did to I your will strengthening. much COVID to to And pipeline out facing point companies. that and that comments seem was was on put in can through related soft one are kind it you QX? COVID delays the of of you XXXX. hospitals you pressure. is It margin seeing what But be?

So to do I spending in then impact any expect follow-up. way? medical on a have it devices And you

Keith Pfeil

Okay. a -- weeks Capital as -- again. the I part take that. didn't I'll the business This Thanks pipeline mentioned ago, capital the as really of is in first Keith. of develop QX. couple we

capital other competitors maturation environment. was of made pipeline. comments some that Really the what the see the we regarding commented of didn't You

progress our we feedback the the staffing and And and really through through. we're see as but that that want dealing didn't work through we QX deals to the focusing we're to start happening a seeing getting see to of of improve as I also to it, quarter. to needed is see pipeline we the with with in quarter, dealing sit here got end we potential returning shortages they COVID the the the that attention critical the being thing during progress is we that get what for that And We of fear maturation we back So on as the quarter. in hospitals quarter, saw quarter. as second didn't uptick,

one and didn't starting systems our robotics I bolo ecosystem ship. to So discussion Plus, and we other the other with are there a points around There we or about is my might thing entering feel at but that's have QX. enabling been better about general where That's to overview. technologies. imaging two we're Shagun, catch creating global think have capital that

Dan Scavilla

I'll add to that Shagun.

today would us is. for our very would But of We'll on as these could to believe back there, have I results actually with do. want latter the signaling any what As we're throw environment but why enough reason or our may albeit we by back we're to hospitals to-date difficult think We guidance don't half to what muscle that. get that seeing eyes keep we your away. not predict differently we'd we keeping to consistent, question, levers deliver capital know to

Shagun Singh

really can balance about it. just cadence the Got EPS. That's of and the as the year And follow-up, helpful. through you growth talk just for a of sales

taking color I think $XXX sales questions. pre-pandemic. Obviously, QX XX% of soft any it pretty and cadence on consensus EPS and for would is my million helpful? looking a has $X.XX higher in it Thank was XX% be would QX for than as and been increase in you but rapid implies sequential well, in

Keith Pfeil

This Thanks again. is Shagun. Keith

and plan we really quarterly We don't haven't guidance start. given to really

at we're to for the and really today reaffirming guidance is remain where full positive year. I further into where the look forward think is about We business we're the year. getting

Shagun Singh

you. Thank

Operator

you. Thank

next Matthew O'Brien Piper comes on line Our question from Sandler. from

Matthew O'Brien

Hi. think, is But here. tailwind. million. in perfect million what a year-over-year. that year, Thanks for of guidance you're than saw for In implied have less got XXXX. guys the you've Either this I projecting that's you taking you spine numbers in or up it's Dan headwind year, think, were $XX I -- And my again, by Keith. I XD kind I you XXXX, OUS the number The questions. is spine know $XX like don't but more total did about

XXXX? the it the is that on than that would bucks pressure? for Spine is saw business specifically kind million anything couple be hundred you is think which you're in of of what slower seeing we side, guys And why there So expandable incremental where I a

Keith Pfeil

great out that this haven't -- projecting say US Keith. what the mean there and is really I for look, -- year. when we've between gotten then Spine Thanks step business we we XXXX a going would I trending XXXX Yeah. and our back obviously But, question. year. to and to significantly we into is be pretty XXXX the to for XXXX had grown

to our down were really at added our from are, We see look the to don't to that precutting we've that dollars and again, new of the business. primary the We're that competitive work continue launches, we robotics. drivers to the As pull-through up product double and business our going changing. increase

Dan Scavilla

up have Yeah. very Matt, going I that, would probably I'm are new sales your because a we our this just product including are say of maybe with conversation calculations year. on strong to which later. we lining not Spine, strong launches, could be see growth, continued growth fairly

don't up come conclusion. I would to think that I So, same

Matthew O'Brien

And doing in you're Okay. expandables? still Dan, well

Dan Scavilla

date. one we've That's Absolutely. many so for Keep got mind of that main the of in that. us to generations drivers

Matthew O'Brien

Thanks. this on be And that you unbelievably product XD, Okay. to a is follow-up expect we then, is one feedback year? for million, that quick guys million on $XX Should a that we get $XX strong.

Keith Pfeil

out that great. be year guidance. someone specific I orders. on given will our this the than -- year. this to more we we look want year have we we achieve guidance will felt Every we the double-digit what one to they to sees say excited sales product, buy remain As our and in enthusiasm The haven't is still time we

Matthew O'Brien

Got you. it. Thank

Operator

you. Thank

online question from Our and next Needham Company. from David Saxon comes

David Saxon

Maybe questions. thanks I'll for Spine start Good business taking the afternoon, the in Japan. and with

or last half. third quarter were in fourth sounds you to maybe might that to think growth pushed if to I like serves, memory be quarter. business the that It expecting return second quarter

if on that what's anything business back of changed kind track? plan guess, has there, wondering just the So, get I or to

Dan Scavilla

the Thanks question. for David

year. half of the fourth quarter obviously is second So, the

place, we for recent as the so really When sales see That area team had, very have going continue leadership the I've do team Nothing And time this us from large bullish on shifted the events we're that last over path. precise in tell I I'm I that coming a that gotten a with little next will has look I at on spoke. more putting the and in since to years. place, we've surgeon quarter interest as other the the we're said, you, we Japan. to

with right point. then going going to once what's so, that direct. to to And I continue growth stabilize, by And And we're forward. do that, and up contract going we'll expect cleaning we significant

David Saxon

about helpful. hiring Thanks for launch? then, That's there And the maybe And have that the like of support today launch? you much. you to update follow-up terms then, that Any expected should Okay. then, StelKast feel ask Do on portfolio launch? of And I'll time how think any just we my Recon ahead so plans in the robot. enough in line? robot

Dan Scavilla

Okay.

would we're progressing that I robot. you tell the well So with

doubtfully to call we At with the this acceptance cast this reinvigorating feedback paired yet features the rate. be always would and And be out point I to you And, robot is to Globus year will we very tell will a get correct. that that it's it where portfolio file are as same But tell now surgeons, the major unison the of have and We at promising portfolio, be and though difficult way. yes, or I with you in it the Ortho is develop we that in to with match been the part that approval. as with with launched our give us to that. go filed have time that. and

of we decide expand we'll product most that in pull plans team get trigger. We and and latter more have that with the status our active something to this as part get when commercial likely to more that's year

David Saxon

Great. you. Thank

Operator

you. Thank

next comes on line from question Canaccord. Rose Our Kyle from

Kyle Rose

allocation. just valuations about in markets. seen I to mean questions. the public we've capital some ask the big Thank of Great. for wanted you I dislocations taking one

leverage. balance the cash You've got $X in billion no sheet on

just you acquisitive expect I to weakness markets we on period creating about You've should see increased part that's forward? the that strategically. the Globus a we're the an in moving seeing in the public opportunity if of past talked buying if wanted think if and M&A of being

Keith Pfeil

your Thanks looking would opportunities would thought of been the that is the standpoint say M&A. for have that great there I This Keith. always M&A. accurate COVID took but happened when would off. thinking that's from there the at One question. buying really -- have We're market about out

slowdown rates seeing we're speaking general inflation about seeing As a talk a climb, generally we're -- recession. in there's

I go might think As for up, be to would and there rates smaller debt acquire. -- look will opportunities become us laden that with out be that companies potentially at

it's that of terms think portfolio. at us business. enabling at looking not of acquisitions. perspective Ortho at I would R&D spine that's our places fully companies obviously, where? overall that I think help But about In with your do And, think accurate a those again speaking. is to looking you really From technology would looking directionally technologies yet, think I developed complementary pieces looking the our are some spine small that assertion

Kyle Rose

users? you. the maybe the looks product, And when like? then XD that have and Thank it the you. Is you where to we can just it trying current Is for past? Thank understand pipeline it to that what about us leads about talk is think you Just Globus robotic the coming robots robotic from? current haven't the competitive demand in used users? Is people really

Dan Scavilla

know our the We've a mix above And our not out. really all interest people as It's tied It's just around just particular Kyle. of applicable seen it's throughout. It's with to that robots. just all robot. have not you of Thanks who Excelsius you to the called this.

is coming news multiple good really the from directions. So it's

Kyle Rose

taking the for question. you Thank

Keith Pfeil

you. Thank

Operator

you. Thank

from Loop from next Our Jason Capital. Wittes line in comes question

Jason Wittes

and with in could On build Hi, technologies of is that in to or as like a done knee company, look thanks. follow-up. internally that be just type far start If that terms implant potentially type that you've technologies orthopedic a acquisitions adjacent something could hip like you Trauma? I so

Dan Scavilla

It would line Jason it something time needs would on I we at opportunity be. that depends and take our innovative, be guess really meaningfully what actually that. something a look would the shift to

again opportunity pursue and as difference But internally is is today, using of just it. we we're it meaningful on So makes most we're built. what one a depends it's on the it But we the planning consider really right if and would what possible.

Jason Wittes

kind Fair equipment have? enough. Appreciate six-month visibility mentioned you the you have it Is that. to visibility? them? the the capital booking Just a orders, speaking of, that full or order terms Has double-digit of from And of quarter then trying install. what, visibility? install Is generally all, visibility changed terms a at good you sense visibility on get is when of do to it you how in actually a in can

Keith Pfeil

a Sorry. Keith. your to trying for is second. there follow We're question This

terms visibility there's plan. of rollout In really a

know done cadence key We double-digit we've to is We installed launch really are. our they're there'll So we a start orders new out from product soft is a cases said know going and it's and out those to getting it this what we're a I've the that be doing sites, since thing getting there our they're important how roll us. The there ship. for before launch robots.

So, to we miss anything. make want that we don't sure

the that for sure make to want we hospital the staff. training is So there

will there But launch we get So our them be have on a timeline. board. basically staff to

the continue sell But into As quarter we bit new work time orders, backlog, through those well. to once and we probably me to backlog third those through the the as ship into quarter. we'll the fourth we by the little work or a to begin get

Dan Scavilla

build received installed too, Jason equipment but just with pieces they They've I'll they've are so shipped is minimal been that well have And to-date sensitive and because on been far. efforts of these well.

capital functioning. the pleased running. we're getting with is, about So opposed and what think more said used it to them of to getting I Keith up the to second as training get and the piece actually would ability it's I

Jason Wittes

will I queue. Thank jump in you. back

Operator

Thank you.

question comes next from Newitter Truist. from Richard line Our

Richard Newitter

trend or as to periods, XX% figure always periods periods taking that -- Maybe one to Dan your in the should go range. the I'm investment suggested payoff start margin during Hi, more you've key low to in EBITDA on even margins. this or one XX% XXs first the of XX% it -- thanks now could margin. the could payoff question. for consider off as low flex just would XX discretionary the and quarters that more upper see XX% mid of ahead? we of EBITDA we kind Would out that into in launching should move kind the investment period? products kind XXs you And have the or towards trying of your

Dan Scavilla

Again, Rich the tougher our I signaling investment I step up I even we against think what et are not that do. I and script cetera. was when opened my of we spending with recruiting lighter headwinds did back sales is with had of R&D people

And out to so to is lower that continue the to we your right point the what through this and long the take example for EBITDA. where of years we've called -- these term invest willing

up naturally it think pick I the as volumes lift. will

And so, the feel has mid-XXs. focused Keith what in we comfortable saying that, been will remain with I

Keith Pfeil

inflation be to and to what range we're Quarter to that bit Yes. saw. thing there talked R&D, in inflation we And some will in comment picture. immaterial But confident that, about EBITDA make did here an sit in end the out is increasing bigger been perspective. raw just a gross the out material wanted still little we again, with about lower that said, business. I'm to on the of year, on the was at XX% But is that. our XX.X% talked EBITDA investment we that. a rest that's obviously here on today is and things But XX% the raise I from to the add that profit really I Dan called look in mid-XXs as coming did this light of past. the in I Sitting I at

and very important mid-XXs to look that's is the drive message I an there business. us as the to that's So out get that to rest is me of profit -- that profitability our to down going P&L because up gross important because for help

Richard Newitter

And one the for Thanks the the in US. market spine just on environment there. color the

of spine comps outsized share guys last gainers in the were along the some to So, most It the you with you market. than impacted got appears But had you spine rest that even tough that guys other year. of granted. throughout players market pretty also smaller relative

a maybe some grew even slower little You bit of than them.

a delayed just had some drove of something that's some I into or business, is specific just up procedures back it March. gain Do the in record to the seeing performance feel combination? get recapture previously, you you're your that want guess like share to to been you back for that's what I commentary that So, I'd to some for, hear Thanks. underlying is and feel trends? market love March that your maybe on or mode just you're where April a

Dan Scavilla

Thanks, that's into Yeah. slower a recapture of think I April. some for sure there's and would Rich. February come January March

rep I think logical I assumption competitive to do those of the well in which up of that you would of was to in tell as April a an we'll quantify, so. opened in recruiting the or but both concerns we've I first think surgeries. seen think us also it's well would be which as through some fruit that And very COVID, and for I I with. news continue months and cases drop-down March decent the difficult go those would the quarter bared

it's frame. think mainly things of I in the March So those April time combination a

Richard Newitter

Okay. you. Thank

Operator

Thank you.

Wells on Vik question Please next Our Fargo. Chopra line from comes go ahead. from

Vik Chopra

And the Good year. is I growth. And will growth products Hey. system kind thanks one have that. questions. wondering you. be I'm total touched this growth just which product afternoon, and imaging follow-up us to you one just Thank new for the taking on what the of new impactful most beside ones contribution guess after I remind Dan, to of launches. had

Dan Scavilla

Okay.

portfolio I quite XD XX-plus a main Vik, through Trauma we be for plan major this the don't great one I plan a do to of And for out drivers. has upward I would half that have and So that launches that they the just we roll actually growth. get planned out year. you year. frankly break there said, imaging Certainly, of Spine as of out retailer to product is we contributions that their got kind the second will obviously had of tell think

factored of the in really, us but to through as we this been be have All of only year. drivers as it get possibly not meet, rest those for main

Vik Chopra

my business, Okay. should see follow-up to the your recovery year then And Great. international you a the Thank and business? to Japan year? in And international on how mid-teens gauge that international your just do growth confidence you. your we business. your return this in We is about on half still pathway the of love back to contribution from think

Dan Scavilla

Thanks.

feel place would So with had are have plan replenishment that we I deep those and all strong. very you force and gone of who Japan sales in tell interest Again, we're very surgeon with things recruiting the I this. confident the I to the actually as

think through go that out still much anticipate I into I'm into rest to That's Japan saying fourth a comes next and quarter. stronger get that's we why year year account neutralizing as a being when access the and reset contributor, I don't possibly in have it begin of as growth, we and forward. work so the it. really would this

that and There's be we without that and been in the the will have tell headwinds. do once the I impacts of bullish fairly really contributor COVID at the world significant results half estimates it what resurgence. significant very those paid rest our internal hospitals us People without surgeries. decent different areas the any Australia rest the On that of feel world, year like you second of could again that government a some had look to COVID some will of good I in not for

Operator

today's further thank we And time. and gentlemen. have conference. questions with ladies Thank you at this that participating. no for you This concludes And

may now You disconnect.

Globus Medical (GMED) 10 May 222022 Q1 Earnings call transcript