Globus Medical Q1 2025 Earnings Report

Globus Medical EPS Results

• Actual EPS: $0.68
• Consensus EPS: $0.74
• Beat/Miss: Missed by -$0.06
• One Year Ago EPS: $0.72

Globus Medical Revenue Results

• Actual Revenue: $598.12 million
• Expected Revenue: $629.74 million
• Beat/Miss: Missed by -$31.62 million
• YoY Revenue Growth: -1.40%

Globus Medical Announcement Details

• Quarter: Q1 2025
• Date: 5/8/2025
• Time: After Market Closes
• Conference Call Date: Thursday, May 8, 2025
• Conference Call Time: 4:30PM ET

Globus Medical (NYSE:GMED), a medical device company, develops and commercializes healthcare solutions for patients with musculoskeletal disorders in the United States and internationally. The company offers spine products, such as traditional fusion implants comprising pedicle screw and rod systems, plating systems, intervertebral spacers, and corpectomy devices for treating degenerative and congenital conditions, deformity, tumors, and trauma injuries; treatment options for motion preservation technologies that consist of dynamic stabilization, total disc replacement, and interspinous distraction devices; interventional solutions to treat vertebral compression fractures; and regenerative biologic products comprising of allografts and synthetic alternatives. It also offers products for the treatment of orthopedic trauma, including fracture plates, compression screws, intramedullary nails, and external fixation systems; and hip and knee joint solutions, including modular hip stems and acetabular cups, as well as posterior stabilizing and cruciate retaining knee arthroplasty implants. In addition, the company distributes human cell, tissue, and cellular and tissue-based products. It sells its products through direct or distributor sales representatives, as well as hip and knee products through independent sales agents. Globus Medical, Inc. was incorporated in 2003 and is headquartered in Audubon, Pennsylvania.

Globus Medical Q1 2025 Earnings Call Transcript

Presentation

[Operator]

Welcome to the Globus Medical's First Quarter twenty twenty five Earnings Call. At this time, all lines will be on mute and a Q and A session will be held after the prepared remarks. To ask a question during the session, you will need to press 11 on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, please press 11 again.

[Operator]

I will now turn the call over to Brian Kearns, Senior Vice President of Business Development and Investor Relations. Mr. Kearns, please go ahead.

[Brian Kearns, SVP - Corporate Development & IR at Globus Medical]

Thank you, Brianna, and thank you everyone for being with us today. Joining today's call from Globus Medical will be Dan Scavilla, President and CEO, and Keith Feil, Chief Operating Officer and Chief Financial Officer. This review is being made available via webcast accessible through the Investor Relations section of the Globus Medical website at globusmedical.com. Before we begin, let me remind you that some of the statements made during this review are or may be considered forward looking statements. Our Form 10 ks for the 2024 fiscal year and our subsequent filings with the Securities and Exchange Commission identify certain factors that could cause our actual results to differ materially from those projected in any forward looking statements made today.

[Brian Kearns, SVP - Corporate Development & IR at Globus Medical]

Our SEC filings, including the 10 ks, are available on our website. We do not undertake to update any forward looking statements as a result of new information or future events or developments. Our discussion today will also include certain financial measures that are not calculated in accordance with generally accepted accounting principles or GAAP. We believe these non GAAP financial measures provide additional information pertinent to our business performance. These non GAAP financial measures should not be considered replacements for and should be read together with the most directly comparable GAAP financial measures.

[Brian Kearns, SVP - Corporate Development & IR at Globus Medical]

Reconciliations to the most directly comparable GAAP measures are available in the schedules accompanying the press release and on the Investor Relations section of the Globus Medical website. With that, I'll now turn the call over to Dan Scavilla, our President and CEO.

[Daniel Scavilla, President & CEO at Globus Medical]

Thanks, Brian, and good afternoon, everyone. Globus had a flat quarter in Q1, finishing slightly down in sales with negative 0.8% growth versus prior year on a constant currency basis. Drivers were softer enabling tech sales against difficult comp, temporary integration related supply chain disruption and timing of international distributor orders, partially offset by continued strengthening momentum of The U. Spine business. Revenue for the quarter was $598,000,000 Non GAAP EPS was $0.68 increasing 9% versus prior year against higher diluted shares and a $06 1 time 2024 EPS gain not repeated in 2025.

[Daniel Scavilla, President & CEO at Globus Medical]

Free cash flow was $141,000,000 increasing $117,000,000 or 493% versus prior year. We returned to debt free status in Q1, paying off the remainder of the nearly $900,000,000 debt inherited from the NuVasive merger and generating enough cash to pay for the Q2 Nevro acquisition while investing in the ongoing business without interruption. In addition, we launched two new products in Q1 that will aid in driving market penetration. Since the NuVasive deal closed in September of twenty twenty three, we've cumulatively added over $1,000,000,000 in incremental sales, generated $650,000,000 in free cash flow and executed over $500,000,000 of share repurchases, reducing deal dilution more than 20%. While Q1 sales were flat, we're already seeing stronger results in Q2 throughout the business as we remediate supply chain disruptions, fill open distributor orders and close robot deals.

[Daniel Scavilla, President & CEO at Globus Medical]

We will continue to focus on the long game, investing in sustained profitable growth and using our financial strength and discipline to accelerate the top line results, while continuing to deliver strong EPS and free cash flow. Moving into the performance of our business areas, U. S. Spine grew 2% in Q1 with gains across our product portfolio expandables, MIS screws, lateral and ACDF platforms. The core spine growth is driven by several factors, including a high retention rate at all levels of our field sales team, the strength of our combined product offering, increased product cross selling and implant pull through from robotic procedures.

[Daniel Scavilla, President & CEO at Globus Medical]

U. S. Q1 results were impacted by temporary integration related supply chain disruption and a planned reduction in third party biologic sales resulting from expected changes in the reimbursement landscape for wound care products, including some of our tissue products. The reduction in third party biologics was included in our annual guidance and the supply chain continues to strengthen in Q2. Exiting April, we delivered above market growth in our U.

[Daniel Scavilla, President & CEO at Globus Medical]

S. Spine business and feel positive about the quarters ahead. Competitive rep recruiting was strong in Q1 and the overall recruiting pipeline remains active as we enter Q2, positioning us for another meaningful recruiting year. As mentioned earlier, we launched two new products in Q1. The Cohere ALIF spacer with integrated screw fixation builds on the clinical success of our Cohere line, now offering surgeons a porous PEEK solution for anterior lumbar interbody fusion procedures.

[Daniel Scavilla, President & CEO at Globus Medical]

Our Cohere proprietary porous architecture supports bone in growth and reduces fibrous encapsulation while maintaining the radio lucency needed for precise interoperative placement and postoperative fusion visualization. The Cohere A List spacer meets surgeon demands for improved OCL integration without sacrificing imaging clarity or mechanical performance. This expansion further establishes our leadership in advanced material science. The ReLine eGPS fixation system delivers solutions for open, minimally invasive and hybrid procedures with preassembled and modular implants paired with versatile instruments to address both degenerative conditions and complex deformities effortlessly and efficiently. The integration of the ReLine fixation system with the Excelsius enabling technology suite creates a powerful synergy of trusted reliability and innovation, delivering a comprehensive solution for surgeons while advancing our mission to help improve patient lives.

[Daniel Scavilla, President & CEO at Globus Medical]

The following Reline systems are now compatible with Excelsius technologies: Reline Open, Modular, Mass, Mass Reduction, Small Stature, Mass Midline, and Reline Cervical. The R and D pipeline remains rich and I look forward to another year of meaningful launches improving outcomes as we strive to develop solutions to address unmet clinical needs. Moving to enabling technology, sales for the quarter were $22,000,000 a decrease of 31% against a record prior year comp. Capital sales tend to fluctuate among quarters with Q1 historically being slower, but we didn't close the deals we planned on in Q1 in the face of market uncertainty. To our knowledge, we did not lose any pipeline deals to competition and expect to close active deals in the upcoming quarters.

[Daniel Scavilla, President & CEO at Globus Medical]

The deal pipeline is robust and Q2 is off to a good start with several robot and imaging system deals closed in April and May. Robotic procedures performed since launch surpassed 100,000 procedures globally in Q1 and continue to accelerate, growing 6% versus prior year, continuing to create increased implant pull through. Our international spine implant business grew 1% in Q1 on a constant currency basis, impacted by the timing of distributor orders and temporary supply chain disruptions. We are accelerating growth in Q2 as we reduce the back orders in several key markets. The combined trauma and NSO business declined 8% in Q1, driven by integration related supply chain disruption related to facility validations.

[Daniel Scavilla, President & CEO at Globus Medical]

This was partially offset by continued strength in the core trauma, which did deliver 34% growth for the quarter. The supply chain disruptions have been remedied and product is being released for sale to the markets. We're seeing the overall trauma in NSO growth return to high levels in Q2. In April, we completed the purchase of all shares of the Nevro Corporation for an all cash transaction of $250,000,000 The acquisition of Nevro further expands our reach into the musculoskeletal market, adding an additional $3,000,000,000 market space for us to compete in and grow. We believe that paresthesia free pain relief enabled by high frequency technology offers a clinically superior solution that is altering the standard of care for patients suffering from chronic pain.

[Daniel Scavilla, President & CEO at Globus Medical]

Nevro technology has potential beyond its current application to benefit our cranial enabling technology, next generation spinal implants, adaptive AI, painful diabetic neuropathy, and other areas of our business. The Nevro patent portfolio strengthens our already best in class musculoskeletal innovation suite, while Globus' scale and customer base will accelerate market penetration of the differentiated high frequency technology. We see this move as an expansion of our continuum of care and complementary to our current spinal portfolio offering. The strong and dedicated neuromodulation sales force will be able to leverage our existing spine team to drive uptake and penetration, while our spine team can offer more solutions to their surgeons. Globus' financial strength will accelerate investments in neuromodulation to expand existing product reach and future product development.

[Daniel Scavilla, President & CEO at Globus Medical]

Combining Nevro into Glovis' existing infrastructure will improve the profitability and cash flow of the Nevro business, generating more cash for future investments and growth. I believe the potential for Glovis has never been greater. It's up to us to harness our resources and shape the future of our markets. We have at our fingertips everything we need to realize this. I want to thank the Globus team worldwide for your dedication and support, building the pathway to becoming the preeminent musculoskeletal technology company in the world.

[Daniel Scavilla, President & CEO at Globus Medical]

I will now turn the call over to Keith.

[Keith Pfeil, CFO & COO at Globus Medical]

Thanks, Dan, and good afternoon, everyone. Reflecting on Q1, our quarter delivered a mixed set of results. While revenue was down slightly to the prior year quarter, we saw a meaningful expansion in profitability and cash flow. We continue to make disciplined progress across our strategic and operational pillars, which will fuel our long term growth. This afternoon, my comments will focus on Q1 performance, operational updates and impacts, discuss the Nevro acquisition, highlight tariffs and potential impacts, and comment on insights as to our performance for the remainder of 2025.

[Keith Pfeil, CFO & COO at Globus Medical]

We view many of the Q1 impacts as short term and are encouraged by the good start we've seen across our business in Q2. Now, let's turn our discussion to the first quarter. First quarter revenue was $598,100,000 declining 1.4% as reported and down 08% on a constant currency basis over the prior year quarter. As Dan mentioned earlier, the main driver was softer enabling technology sales as well as temporary integration related supply chain disruption and the timing of international distributor orders, which were partially offset by growth in U. S.

[Keith Pfeil, CFO & COO at Globus Medical]

Spine. Our Q1 GAAP net income was $75,500,000 translating into fully diluted GAAP earnings of $0.54 per share growing $0.59 versus the prior year quarter due mainly to lower merger related costs. Q1 non GAAP net income was $94,800,000 resulting in $0.68 of fully diluted earnings per share or an 8.5% as reported improvement versus the prior year quarter. In the prior year quarter, I highlighted a onetime $06 favorable noncash adjustment related to the useful lives of assets acquired from the NuVasive merger. Excluding this one time favorable adjustment in the prior year quarter, operationally, our Q1 twenty twenty five non GAAP EPS improved $0.11 or 19.5 percent versus Q1 twenty twenty four.

[Keith Pfeil, CFO & COO at Globus Medical]

The earnings improvement is driven by synergy capture, partially offset by lower revenue. Q1 free cash flow was a record $141,200,000 Musculoskeletal sales in the first quarter of twenty twenty five were $575,900,000 essentially flat to the prior year quarter. Though U. S. Spine grew 2.2%, it was offset by declines in other areas of musculoskeletal, including neuromonitoring, wound care and the timing of international distributor orders.

[Keith Pfeil, CFO & COO at Globus Medical]

In addition, temporary supply chain issues related to manufacturing integration impacted core spine and trauma. The neuromonitoring impact was driven by a change in reimbursement approach by a large insurance provider. Though case volumes are growing, the decline in reimbursements is negatively impacting revenue. Our Biologics business was impacted by expected changes in the reimbursement landscape for wound care products, specifically the placental tissue used in diabetic foot ulcers. In response to this shift in market dynamics, we are proactively realigning our Biologics strategy.

[Keith Pfeil, CFO & COO at Globus Medical]

We are positioning our tissue manufacturing capabilities to support direct business opportunities that provide more stable reimbursement and greater long term business opportunities. Moving into supply chain impacts, we experienced temporary issues driven by the timing of in house manufacturing scale up. This disruption mainly impacted legacy NuVasive products and was driven by finalizing validation activities associated with production. These issues resolved themselves late in our first quarter and production has since come online for the impacted products. Our Q1 international distributor revenue was impacted by the timing of stocking orders as well as integration impacts driven by supply chain disruption mentioned above or earlier as well as some limited distributor consolidation.

[Keith Pfeil, CFO & COO at Globus Medical]

As we move through 2025, this disruption will subside as integration supply chain challenges ease and restocking orders are placed to replenish orders filled at the end of twenty twenty four. Overall, we estimate the impact of these business issues to total approximately $20,000,000 to our musculoskeletal revenue in the quarter. Q1 Enabling Technologies revenue was $22,200,000 declining 30.6% as compared to the prior year quarter. We do note a tough Q1 comp as we did not see the usual sequential drop off between Q4 twenty twenty three and Q1 twenty twenty four where revenue only declined 2.3 sequentially. Despite the tough comp, Q1 Enabling Tech revenue was clearly soft, mainly in robotics driven by extended timelines to close deals.

[Keith Pfeil, CFO & COO at Globus Medical]

This further underscores the lumpy patterns we see in revenue from time to time. We do not see softness as a sign of demand destruction. We remain bullish on this business and are encouraged by our good start to the second quarter. First quarter U. S.

[Keith Pfeil, CFO & COO at Globus Medical]

Revenue was $483,900,000 essentially flat to the prior year quarter, driven by my earlier comments as cross musculoskeletal and enabling technologies. Q1 international revenue was $114,300,000 lower by 7.7% as reported and lower by 4.6% on a constant currency basis. The driver of lower international revenue ties back to my earlier comments, mainly distributor orders, supply chain disruptions and lower robotic sales. GAAP gross profit in the quarter was 63.6% compared to 55.3% in the prior year quarter with the resulting improvement driven primarily by lower inventory step up amortization and synergy capture, partially offset by sales mix. Adjusted gross profit was 67.3% compared to 69% in the prior year quarter.

[Keith Pfeil, CFO & COO at Globus Medical]

The prior year quarter gross profit includes the one time favorable non cash adjustment that I mentioned in my earlier comments. This non operational adjustment was worth $9,500,000 and 1 point 5 percent, thus normalized Q1 twenty twenty four gross profit was 67.5%. Adjusting for this, this quarter over quarter twenty basis point decline was driven by the mix impact of lower Enabling Technology sales and lower neuromonitoring reimbursements, primarily offset by synergy actions. Research and development expenses in Q1 twenty twenty five were $33,100,000 or 5.5% of sales compared to $57,300,000 or 9.4% of sales in the prior year quarter. Included in the prior year quarter was a 12,600,000 charge related to the acquisition of in process research and development, which did not occur in the current quarter.

[Keith Pfeil, CFO & COO at Globus Medical]

Adjusting for that, Q1 twenty twenty four R and D would have been $44,700,000 or 7.4% of sales. The resulting decline, both in dollars and as a percentage of sales, is attributable to synergy capture, resulting in lower headcount and third party spending. SG and A expenses in the first quarter of twenty twenty five were $242,800,000 or 40.6 percent of sales compared to $248,700,000 or 41% of sales in the prior year quarter. The decline in spend is attributable to synergy capture, mainly from lower back office spending, partially offset by higher sales and marketing costs driven by the mix impact of lower international revenue, which carries a higher fixed component to compensation costs. Q1 net interest income was $1,700,000 compared to $1,900,000 of interest expense in the prior year quarter.

[Keith Pfeil, CFO & COO at Globus Medical]

The $3,600,000 favorable change is being driven by lower interest expense on convertible debt. The GAAP tax rate for Q1 twenty twenty five was 27.2% compared to 16.8% in the prior year quarter. The Q1 twenty twenty four rate was abnormally low driven by the discrete nature of the IP R and D acquisition in the prior year quarter, higher GAAP pre tax profits in the current year quarter and lower valuation allowances on foreign derived income. Our non GAAP tax rate for the quarter was 24.1% in line with the prior year non GAAP rate of 24.5%. Cash, cash equivalents and marketable securities were $461,300,000 at 03/31/2025 compared to $956,200,000 at 12/31/2024.

[Keith Pfeil, CFO & COO at Globus Medical]

The decline in cash is driven by two main factors. One, in March, we fully repaid in cash the remaining $450,000,000 outstanding convertible debt assumed from the NuVasive merger. With the repayment of this debt instrument, Globus has now returned to being debt free. In addition, during the quarter, we spent $190,300,000 to repurchase approximately 2,400,000.0 shares. With this action, we've completed our current share repurchase program.

[Keith Pfeil, CFO & COO at Globus Medical]

Since closing the merger in September 2023, we have paid off the remainder of the $871,000,000 of debt inherited from the merger and invested $500,800,000 to repurchase 8,400,000.0 shares at an average price of $59.62 per share. These actions over the past sixteen months call attention to our focus on operational cash flow discipline to maintain a strong balance sheet, while exhibiting conviction in the merger as our share repurchase activities resulted in us buying back over 20% of the dilution created in the stock for stock merger with NuVasive. Q1 net cash provided by operating activities was $177,300,000 and free cash flow was $141,200,000 both of which are records for our first quarter. The increase is attributable to higher cash profits from the business driven by synergy capture and working capital improvements within accounts receivable, partially offset by higher capital spending, predominantly machinery and set investments to in source production and drive sales growth. Operationally, we remain focused on in sourcing key products across our manufacturing facilities.

[Keith Pfeil, CFO & COO at Globus Medical]

Machinery ordered in 2024 has been landing in our facilities and is coming online throughout the year, while we continue to assess and reduce third party spending. Despite the softness in our top line, our Q1 results showed a meaningful expansion in profitability with Q1 adjusted EBITDA finishing at 29.7% versus 25.4% in the prior year quarter as a result of synergy actions achieved. The expansion of profitability occurred despite the neuromonitoring reimbursement challenges mentioned earlier, which is negatively impacting consolidated adjusted EBITDA by a full two percentage points in the first quarter. Thus, neuromonitoring, adjusted EBITDA would have been 31.7% in Q1 twenty twenty five. Looking ahead, we remain confident in our approach to grow profitably while addressing specific areas of investment and business improvement.

[Keith Pfeil, CFO & COO at Globus Medical]

We remain on track to delivering synergy savings, will be reflected in the P and L as we move ahead. Subsequent to the quarter, on 04/03/2025, we closed our acquisition of Nevro Incorporated after Nevro shareholder and regulatory approval. We paid $250,000,000 using existing cash reserves to fund the acquisition. We are actively rolling out action plans to get this business right sized to drive profitable sales growth while reducing excess spending to quickly adopt a Globus mindset as we seek to improve cash generated from this business. We've been actively reviewing and assessing tariff impacts for the legacy Globus business as well as the newly acquired Nevro business.

[Keith Pfeil, CFO & COO at Globus Medical]

Overall, we do not see tariffs as materially impacting our business through supply chain disruptions or from a cost increase perspective. Much of the Globus business is vertically integrated and predominantly U. S.-based, thus minimizing tariff exposure. Where we do see tariff impacts, we have launched a series of cost action offsets, including, but not limited to, targeted price increases, vendor resourcing and vendor cost renegotiations. We have actively and aggressively engaged on this initiative to ensure minimal impact to our business.

[Keith Pfeil, CFO & COO at Globus Medical]

Now, I'd like to turn our attention to the financial guidance. Upon announcing the Nevro acquisition on February 6, we communicated twenty twenty five net sales guidance in the range of $2,800,000,000 to $2,900,000,000 and fully diluted non GAAP earnings per share between $3.1 to $3.4 At the present time, we are reaffirming the guidance for net sales in the range of 2,800,000,000 to $2,900,000,000 but we're decreasing our guidance for fully diluted non GAAP earnings per share to a range between $3 to $3.3

[Keith Pfeil, CFO & COO at Globus Medical]

This $00 decrease on the

[Keith Pfeil, CFO & COO at Globus Medical]

top and low ends in EPS guidance is to account for the additional carrying costs of expenses related to closing the Nevro deal earlier than planned. To summarize, although Q1 top line results were softer than anticipated, we delivered meaningful gains in profitability, deleveraging and free cash flow, key priorities in our value creation strategy. Q2 is off to a good start highlighted by U. S. Spine and Enabling Technologies.

[Keith Pfeil, CFO & COO at Globus Medical]

We are well positioned to build on this momentum and remain focused on executing a seamless integration of the Nevro acquisition to drive future growth. In closing, I'd like to thank the entire Globus team, including our newly integrated Nevro colleagues for their focus and execution. As we continue to strengthen our core portfolio and unlock new market opportunities, our priorities remain clear disciplined profitable growth, operational excellence and sustained shareholder value as we build a leading musculoskeletal company of the future. We'll now open the call for questions.

[Operator]

Thank you. At this time, we will conduct a question and answer session. Our first question comes from Matt Miksic of Barclays. Your line is now open.

[Matthew Miksic, Analyst at Barclays Capital]

Hey, good evening. So, it goes without saying, think this isn't the quarter anyone was expecting. Maybe if you could talk a little bit about your confidence here coming into April. I think you mentioned operating on or above your metrics, but how much of what happened in Q1 maybe spilled into Q2? What amount of what happened in Q1 do you think could recover somewhat in Q2 in rapid fashion?

[Matthew Miksic, Analyst at Barclays Capital]

What's going take a little more heavy lifting? And then I have one follow-up, if I could.

[Daniel Scavilla, President & CEO at Globus Medical]

Yeah. So Matt, I'll go first. At the end of the day, there's a couple of things. As we transition facilities into new ones and validate them, whereas we continue to scale up our in house manufacturing, right? There are some things that took longer than planned that created some back orders.

[Daniel Scavilla, President & CEO at Globus Medical]

Think that coupled with timing of distributor orders, again, heavy in Q4, light in Q1, probably coming back. And then ultimately, the real thing here is the elongated selling process that we experienced in Q1 with all of the market uncertainty that really is the impact there. What I think is without getting deep into Q2, we've seen positive effects in our U. S. Spine business that really is solid.

[Daniel Scavilla, President & CEO at Globus Medical]

We are remedying and supplying the products from the back orders. I see that as a temporary issue that will recover in second quarter. And that will have an impact throughout international and trauma as well as U. S. And we are seeing deals occur at a decent pace within the robot.

[Daniel Scavilla, President & CEO at Globus Medical]

So it's going well in all of those aspects. So if you ask me, I have confidence that this feels like a blip and we're moving back to who we need to be. And look, we own a bad quarter. We're going to go fix it and drive it forward and come out with the right results here.

[Matthew Miksic, Analyst at Barclays Capital]

Okay. That's helpful color. And then maybe on the synergies side for Nevro, maybe talk a little bit about now that the deal is closed, any additional color or confidence you can express about the pace and the areas of opportunity for driving efficiencies or aligning the organization in a way that gets to you at or above your dilution expectations for this year? Thanks.

[Keith Pfeil, CFO & COO at Globus Medical]

Hey, Matt, this is Keith. Thanks for the question. It's a great question as you think about bringing Nevro online. The place we're really going to focus on coming out of the gate is really operational expenses. If you walk down the P and L Nevro's gross margins in the high 60s, We think that over time we can work to expand that.

[Keith Pfeil, CFO & COO at Globus Medical]

But I would say in the near term, near and medium term, the key focus is going to be figuring out their operational expenses and working to reduce those. Because as we look at the P and L, the SG and A expenses candidly are too high for that business to operate profitably long term. So those are the things that we're going to focus on right out of the gate.

[Matthew Miksic, Analyst at Barclays Capital]

All right. Appreciate the color.

[Keith Pfeil, CFO & COO at Globus Medical]

Thank you.

[Operator]

Thank you. And one moment for our next question. Our next question comes from Vik Chopra of WF. Your line is now open.

[Vikramjeet Chopra, Analyst at Wells Fargo]

Hey. Good afternoon, and thanks for taking the questions. Two for me. You know, appreciate your comments on the elongated selling cycle for robots, but I'm just curious if you've seen any impact from recently launched spine robots via larger competitors. And whether, you know, people are asking for more alternative forms of financing or an increase in your rental program?

[Vikramjeet Chopra, Analyst at Wells Fargo]

And then a quick follow-up, please.

[Keith Pfeil, CFO & COO at Globus Medical]

This is Keith. Thanks, Rick, for the question. In terms of the elongated selling cycle, I haven't seen situations where other competitors are slowing down the process. In terms of looking at the mix of how we're selling robots, rentals, leases, I would say still our mix this quarter is still heavily focused on outright sales. But options of what we're quoting, I would say are increasing, whether it be third party financing or rentals.

[Keith Pfeil, CFO & COO at Globus Medical]

But I would say that, that may have slowed some things down. It really contributes to some of the elongated selling cycles. But I don't see competitor robots thus far as driving a delay in us closing deals.

[Vikramjeet Chopra, Analyst at Wells Fargo]

Okay. Thank you. That's super helpful. And my follow-up question is, I know you don't guide to EBITDA margins, but just maybe directionally help us think about EBITDA margins in 2025 as you fold in the Nevro deal? Thank you.

[Keith Pfeil, CFO & COO at Globus Medical]

Yes, we don't guide the EBITDA margins, but as I think about kind of where we're going, I would say that our goal is to achieve the 30s, but adding on Nevro and the timing of bringing it on earlier will have a slight impact. So I would say that we should be in the high 20s this year.

[Operator]

Thank you. One moment for our next question. Our next question comes from Matthew O'Brien of Piper Sandler. Your line is now open.

[Phillip Dantoin, Assistant Vice President at Piper Sandler Companies]

Hey, this is Phil on for Matt. Thanks for taking our questions. Understood that there are a lot of moving parts between some of these headwinds, enabling tech purchases, supply chain, but wanted to hear maybe more specifically how your rep count has been holding up. Maybe just confirm that you aren't seeing any uptick Nuva sales rep leaving at this point? And thanks for the color on the pipeline looking good, but just any further color on that.

[Phillip Dantoin, Assistant Vice President at Piper Sandler Companies]

Thank you.

[Daniel Scavilla, President & CEO at Globus Medical]

Yes, Philip, I'll answer that. We're not seeing any unusual or high volume departures occur from any of our sales reps regardless of where they used to work. We're actually seeing them dig in and do well. The U. S.

[Daniel Scavilla, President & CEO at Globus Medical]

Is really a strength outside of the back orders and they're doing well. The momentum is increasing there. And so not only are the teams staying together, but they have sequentially over four to five months significantly move the average daily sales up. And so they're digging in doing well. They're staying together as a team.

[Daniel Scavilla, President & CEO at Globus Medical]

We've not seen any interruption that would cause concern. And certainly there are no rep departures that would have impacted our results in the first quarter.

[Phillip Dantoin, Assistant Vice President at Piper Sandler Companies]

That's helpful. And then shifting gears on the positive, one to focus on the cash flow that you consistently deliver. Thinking past the Nevro deal, what are your expectations for cash use? Might we see more M and A or maybe some more share repurchases, that sort of thing? Thank you.

[Keith Pfeil, CFO & COO at Globus Medical]

That's a great question. So as I think about cap structure moving forward, obviously, we want to continue to generate strong cash flow. We still view ourselves as a growth company. So the first priority is going to be internal investment. We've done several deals here over the last couple of years.

[Keith Pfeil, CFO & COO at Globus Medical]

M and A is still part of our cap structure. As I think about that moving forward, I would say that anything we do in the near term would be more of a tuck in nature. And then thirdly, share repurchases, they have been part of cap structure. We see them continuing as part of our cap structure, but it's not the primary driver.

[Daniel Scavilla, President & CEO at Globus Medical]

And I would just add, if we were to experience any overreactions in a market, we would take advantage of that and probably go back and buy stock opportunistically, apply towards future acquisitions. We know the strength of this business long term and so we're going stay focused on delivering that.

[Phillip Dantoin, Assistant Vice President at Piper Sandler Companies]

Thanks so much.

[Operator]

Thank you. Our next question comes from Richard Newitter of Truist Securities. Your line is now open.

[Richard Newitter, Managing Director at Truist Securities]

Hi, thanks for taking the questions. I think I know the answer and I think it's yes. But can you just confirm that all of Nevro is in the guidance dilution and revenue? And if it is, what's the what's your organic growth guidance?

[Keith Pfeil, CFO & COO at Globus Medical]

So Rich, this is Keith. I will tell you that yes, it is included in business. We haven't broken out the parts and pieces of it, though as we move forward when we report, we are going to show base business Globus versus prior year versus acquisitions.

[Richard Newitter, Managing Director at Truist Securities]

Okay. So I'm just okay, got it. So can you maybe just tell us then because we had all been thinking of you standalone and we built for those that covered that covered never we had never a forecast or you could use the consensus, but are the components of your organic guide dramatically different on a standalone No,

[Keith Pfeil, CFO & COO at Globus Medical]

no. The components of our organic guide are not materially different on a standalone basis.

[Richard Newitter, Managing Director at Truist Securities]

Okay. And then maybe just for my follow-up, on the capital outlook, it sounds like you've seen something get better in April, maybe even into early May. Just trying to get an understanding of what the elongating selling cycle looks like. And if that's occurring, what gives you the confidence that that narrows again in short order? I guess, it sounds like you expect somewhat of a snapback or through some sort of uncertainty period on some level.

[Richard Newitter, Managing Director at Truist Securities]

What could you give us a sense as to kind of reconcile that dynamic with your comments that things are getting better?

[Daniel Scavilla, President & CEO at Globus Medical]

Yes, Rich, and I want to make sure we clarify. We're happy with the progress in Q2 and we're seeing deals close. I don't know if an elongation will snap back. You have market uncertainty, whether it be with tariffs or other things along the line with capital market disruption and different things that are going around. So at the end of the day, our job is to make sure we've got a potential portfolio and we actively work with them when we close that.

[Daniel Scavilla, President & CEO at Globus Medical]

And if that winds up shifting a month or two over the long term, that's fine. We'll neutralize and go. The market is really not penetrated and the potential is great. And as I rattled off, more and more of our former Nuva products are now available on a robot. So we're positioned to really go back to the initial reason of that acquisition, which is double our TAM, and place our robots with our customers and provide them those products.

[Daniel Scavilla, President & CEO at Globus Medical]

All of that remains on course and that's okay if it takes a month or two. We're playing this game for the next five to ten years with each one of them, not for the quarter.

[Operator]

Thank you. Our next question comes from Matthew Blackman of Stifel. Your line is now open.

[Mathew Blackman, Managing Director at Stifel Financial]

Good afternoon, everybody. Thanks for taking my question. I have a couple. And my first one is, I think, along the similar lines as Rich's and maybe come out of it in a different way. But wanted to just push a little bit on that reaffirmed top line guide and the assumptions backing it.

[Mathew Blackman, Managing Director at Stifel Financial]

This was a pretty substantial miss in the first quarter. And with the reaffirm guide, again, much of what Rich was asking, does that mean you expect to claw back this lost 1Q business throughout the year? Or again, I just want make sure, did you change something in how you were layering in contribution or even dissynergies from Nevro or NuVasive? And then one follow-up.

[Keith Pfeil, CFO & COO at Globus Medical]

So I would say that there's not a material change in the guide. Dan made a comment that when we talked about the biologics impact that that was contemplated in our guide going into the year. I would also call out that the neuromonitoring impact was also contemplated in our guide coming into the year. I talked about a $20,000,000 impact on musculoskeletal. It's fair to say that roughly 7,000,000 to $10,000,000 of that is the two things that I mentioned earlier the wound care as well as the neuromonitoring.

[Keith Pfeil, CFO & COO at Globus Medical]

When you look at Q1 and the thing that we remain positive and optimistic about is calling back the enabling tech sales and seeing an uptick in our spine business as we move forward. We commented on the impacts of supply chain issues. We see those as behind us. And as we move forward, we see people ordering again. We don't view that as a loss sale.

[Keith Pfeil, CFO & COO at Globus Medical]

We see us getting that back as we move forward.

[Mathew Blackman, Managing Director at Stifel Financial]

Okay. Appreciate that. And obviously, there are a lot of moving parts, I don't know that you do this traditionally. But could you maybe give us a little bit of help, at least on the second quarter in terms of the cadence here with the downstep or the step down here in the first quarter, but then layering in Nevro, just any sort of sense of where we should be landing on the top or the bottom line relative to where consensus may be today or just some sort of help might be would be appreciated. Thank you.

[Daniel Scavilla, President & CEO at Globus Medical]

No, I appreciate the question. So we don't get down to that kind of granularity or even on the quarters. If there's an after hour call and you have a few questions, we'll be glad to entertain that. But we're not in a position to break out the quarters or get into granularity within the sub businesses.

[Mathew Blackman, Managing Director at Stifel Financial]

All right. Fair enough. Thank you.

[Operator]

Thank you. Our next question comes from Shogan Singh of RBC. Your line is now open.

[Shagun Singh Chadha, Analyst at RBC Capital Markets]

Thank you so much for taking the question. I guess, I just wanted to take a step back and just hoping you can address one of the questions I've been receiving from investors that is Nevro the right acquisition just given that the NuVasive acquisition integration is still ongoing and it could open you up to potential execution misses and we've seen a little bit of a choppy quarter in Q1. So can you maybe talk to us about Nevro, why it makes sense? And then NuVasive, where exactly are you in that integration? And how confident are you that all this is behind us and we won't hit a snag down the road in 2025?

[Shagun Singh Chadha, Analyst at RBC Capital Markets]

Thank you.

[Daniel Scavilla, President & CEO at Globus Medical]

Thanks, Shagun. I'll try and address some of that. You can help me if I missed a few of the points you put out. But let's start with your investors and let's keep it fact based. Nevro wasn't part of anything that we did in the first quarter.

[Daniel Scavilla, President & CEO at Globus Medical]

And so that question is more of a head scratcher there. Well, timing is never great with some of the acquisitions. It was an opportunistic buy that I did go through in my prepared script. So for $250,000,000 we enter into the neuromod business and we're able to get a clinically superior solution out there that we feel we can scale up to expand our continuum of care and really help treat patients. In addition, the patent portfolio strength is where we want to get to with future things we're working on and their technology is applicable through multiple areas of our business that I laid out.

[Daniel Scavilla, President & CEO at Globus Medical]

So this is a buy that has great long term potential. We focus on the long term. And while we have people working on it there, they are separate from anyone else doing robotics and anyone else doing U. S. Spine.

[Daniel Scavilla, President & CEO at Globus Medical]

They're not interfering with it. And there's nothing related to supply chain manufacturing from Nevro that would come into our robots or our spine. So they're very different that way. If you want, you can pick some of your other parts of the question, but I think that's the major message out to the investors.

[Keith Pfeil, CFO & COO at Globus Medical]

Think Shagun, this is Keith. Just to add on, you had a follow-up in there that talked about how do you know that these things are behind you for what you experienced in the first quarter. When I think about Q1, '2 big things that jump out to me are the soft enabling tech sales and really some of the insourcing supply chain disruptions that we saw. I commented that coming out of the quarter, production is coming online and we're back to shipping. We've insourced a good bit of product, primarily on the NuVasive side.

[Keith Pfeil, CFO & COO at Globus Medical]

I view that as really as a one time change bringing it in. I feel confident as we move forward that we have the worst of those issues behind us. Machinery is coming online. We have product flowing both from our manufacturing facilities as well as our third party facilities and we're getting product in the hands of our sales reps. The enabling tech, I really fall back on the earlier comments.

[Keith Pfeil, CFO & COO at Globus Medical]

We see the lumpiness. We had lumpiness like this, I think, three years ago coming into Q1. In that time, we said that the pipeline wasn't developing. The situation here is a little bit different. We have a robust pipeline.

[Keith Pfeil, CFO & COO at Globus Medical]

We're just seeing a bit of an elongated selling cycle.

[Shagun Singh Chadha, Analyst at RBC Capital Markets]

Got it. And just, I guess, a quick follow-up and sorry, I was I got disconnected earlier. But any update on the FDA warning letter? And then should we expect you to continue to focus on M and A like you had Thank you for taking the question.

[Daniel Scavilla, President & CEO at Globus Medical]

We don't really have anything as far as the FDA warning letter. We made a lot of progress with that. We're really waiting for them to come back and inspect the facility and move this. We're actually excited for them to come back and inspect this facility and remove this. We're more than ready.

[Daniel Scavilla, President & CEO at Globus Medical]

We're more than ready thirty days after that. So it's not a concern of ours. It's not an impact of ours. We just want to go get this cleaned up and put

[Daniel Scavilla, President & CEO at Globus Medical]

it behind us.

[Keith Pfeil, CFO & COO at Globus Medical]

And as it relates to your question on M and A, I would say that given we're finalizing NuVasive and working to bring that in along with Nevro, I would say that we probably slowed down a little bit in the near term on M and A and focus on finalizing the integration activities before stepping forward.

[Operator]

Thank you. Our next question comes from Caitlin Cronin of Canaccord Genuity. Your line is now open.

[Caitlin Cronin, Director at Canaccord Genuity Inc]

Hi, thanks for taking the questions. So, with The US performance of 2%, what did you see in terms of the market growth and just anything from an overall procedural health and market perspective to point out?

[Daniel Scavilla, President & CEO at Globus Medical]

Yes, Caitlin, I don't really have a lot of good data for the market growth answer for you. So don't be a guess on my side. Having talked to surgeons, one of the things that they had told us is they saw some slowdown occurring. They also felt like some of the approvals were taking longer from insurance companies as they're going through it. But that was more conversational.

[Daniel Scavilla, President & CEO at Globus Medical]

I don't really have a lot of data to say, I think it's X. I think there were some things going on that may have impacted it. I think ours is more about just creating the cadence and feeding the product and clearing out back orders and launching new products and going. So to me, I think it's just something we push through and get back on track to who we need to be.

[Caitlin Cronin, Director at Canaccord Genuity Inc]

Got it. And then just on the enabling tech funding, Reline now approved was has Modulus been approved for Excelsius and how much of an uptick are you already starting to see with kind of the cross selling with Nuva surgeons?

[Daniel Scavilla, President & CEO at Globus Medical]

Yes, it's a great question. So Modulus is not yet approved, but it's in the works. We'll get it there. You're right with Reline, we're seeing it. And we are placing robots into Nuva accounts.

[Daniel Scavilla, President & CEO at Globus Medical]

We're seeing that continue. So as thought with our plan, we're doing that. Of course, we'd like it faster in going through. But all of instrumentation is done on Reliance. You said, all of the products are there, Modulus next, and then we'll look to really make sure that we have everyone trained.

[Daniel Scavilla, President & CEO at Globus Medical]

We've been working on that and we'll continue down the path, which is already to me a decent impact into Nuva accounts.

[Caitlin Cronin, Director at Canaccord Genuity Inc]

Great. Thanks so much.

[Operator]

Thank you. Our next question comes from David Saxon of Needham and Company. Your line is now open.

[David Saxon, Senior Analyst at Needham & Company]

Great. Good afternoon. Thanks for taking my questions. So I had a couple here this afternoon, one on Nevro and then one on Excelsius Flex. So on Nevro, just can you talk about kind of the pace of the integration you're trying to kind of meet there and key milestones we should be aware of?

[David Saxon, Senior Analyst at Needham & Company]

And when in a previous answer, you talked about their SG and A being too high. So I guess the real question is like how quickly can you get that down to where you want it to be and where do you want it to be?

[Keith Pfeil, CFO & COO at Globus Medical]

This is Keith. I'll take that. So in terms of Nevro, I mean, OpEx, like I said, is going to be a key area of focus. We are in the early stages of integration focused and working on that. I'm not going to give a point number as to kind of what I say the future state is.

[Keith Pfeil, CFO & COO at Globus Medical]

The key takeaway is when you look at OpEx, it's not sustainable for that level of sales. So it's really unpacking where is the spending at. And we've identified those areas of third party spending we've got to control, those areas of internal spending we have to control. We're going to aggressively go after that as we move through 2025. The key is to make sure that the business is driving profitable sales.

[David Saxon, Senior Analyst at Needham & Company]

Okay, great. And then on eFlex, I guess, level of interest in the system, number of placements, how's that order book building today? And what are you seeing in terms of StelCast implant pull through? Thanks so much.

[Daniel Scavilla, President & CEO at Globus Medical]

Yes. So we're still building out the book of capital placement and it's actually going well. It's getting heavier, meaning it's getting fuller with where we're going. We have not placed any yet out into the market. And what I would tell you is no pull through as of yet.

[Daniel Scavilla, President & CEO at Globus Medical]

But if you ask me, my thought would be, we're probably going to enter the market within the second quarter based on what we're looking at now and push through. And then to your point, we'll start seeing that ramp up as we get into the future quarters from there.

[David Saxon, Senior Analyst at Needham & Company]

Great. Thank you.

[Operator]

Thank you. Our next question comes from Steve Lichtman of OpCo. Your line is now open.

[Analyst]

Hi, guys. This is Amir on for Steve. Thanks for taking the question. I just had a question regarding tariffs. Can you guys talk about what impact that denounced tariffs may have on your margins?

[Analyst]

Thank you.

[Keith Pfeil, CFO & COO at Globus Medical]

Yes, great question. We don't see any real material impact here on margins. Like I said, we predominantly vertically integrated. When I think about the countries where we do source from, the impacts to us are minimal because there's lots of other actions we've taken, whether it's vendor cost renegotiation or offsets such as targeted price increases. I do not to be clear, I do not see that having an impact on our earnings or margins this year or going into next year.

[Daniel Scavilla, President & CEO at Globus Medical]

Yes. And I would say, Keith says vertically integrated, 95% of our production is U. S. Based and our sourcing of materials to produce is actually U. S.

[Daniel Scavilla, President & CEO at Globus Medical]

Based. We've been on that. That actually plays to our favor in this case. And so with what we've calculated, we don't see any need to pivot or change our strategy as we work through these tariff challenges.

[Analyst]

Great. Thank you, guys.

[Operator]

Thank you. Our next question comes from Craig Bajal of BofA Securities. Your line is now open.

[Craig Bijou, Equity Research Analyst at Bank of America Securities]

Good afternoon, guys. Thanks for taking the questions. Dan, I wanted to ask on U. S. Spine growth, the 2%.

[Craig Bijou, Equity Research Analyst at Bank of America Securities]

You guys have been talking about how The U. S. Core spine has kind of held in there and that was a strength. But was there an impact from any of these supply disruptions on that number? And if so, what was the growth ex the one time?

[Daniel Scavilla, President & CEO at Globus Medical]

Yes, it's a good question, Craig. And the answer is yes. We're not going to split it out. Some of that is kind of estimates. Did you get the surgery?

[Daniel Scavilla, President & CEO at Globus Medical]

Did you not? Would it go? And so I'm not really feeling comfortable enough to put something out there. But the answer is yes with that. There was an impact that occurred within the back orders that we know are behind us and we're improving on a daily basis here with that type of move.

[Daniel Scavilla, President & CEO at Globus Medical]

Also, listen, robotic sales and prolonged sales, they also tend to have an impact in your pull through and different things that will play into those numbers as well. So both of those are a factor that would impact U. S. Spine.

[Craig Bijou, Equity Research Analyst at Bank of America Securities]

Got it. And I'm going to try another quantification question. I'm not sure if you're going to give me an answer or not. So on the enabling tech, maybe, I guess, would you be willing to quantify what the impact was in Q1? And then maybe just what those deals were that closed in early Q2?

[Daniel Scavilla, President & CEO at Globus Medical]

Well, and I apologize, I'm not sure I'm fully following, right? Because I said it was down 31%. It was a $22,000,000 sale. So are you asking what carried forward in

[Daniel Scavilla, President & CEO at Globus Medical]

Q2 as deals? Is that what

[Daniel Scavilla, President & CEO at Globus Medical]

I'm

[Craig Bijou, Equity Research Analyst at Bank of America Securities]

I guess if you would quantify what the impact was from the delayed sales that may have been pushed

[Daniel Scavilla, President & CEO at Globus Medical]

again, I'm not being funny with this, but why don't we talk that in August when we get into Q2 just because it's in play now and you're the May. And so while we're seeing some lifts occurring, you're right, the things that we're talking about, some of those rollover, but some of them are new. I'd have to sort through it. But one out of the three months is tough for me to make a call right now and just tell you that the sales are really related to both carryovers and new ones that we had in our portfolio.

[Craig Bijou, Equity Research Analyst at Bank of America Securities]

Got it. Okay. Thanks, Dan.

[Operator]

Thank you. Our final question comes from the line of Matt Taylor of Jefferies. Your line is now open.

[Matt Taylor, Managing Director at Jefferies & Company Inc]

Hi. Thank you for taking the question, guys. Apologies. This is really just a clarification. I am a little confused on the top line guide still because previously it was with the close of Nevro at the end of Q2.

[Matt Taylor, Managing Director at Jefferies & Company Inc]

Now you got the same number, but you closed it kind of a quarter early. So it implies something changed. And I was just wondering, you know, if you could, at a high level, talk about whether it's a different Nevro expectation or a different base expectation or FX, like what's different about those two scenarios?

[Keith Pfeil, CFO & COO at Globus Medical]

Hey, Matt, that's a great question. This is Keith. I really would fall back on what I said earlier is that we're focused on driving profitable growth as it relates to Nevro. Even though the deal closed earlier, we're being conservative on the revenue view as we move the business forward because we want to get the spending right.

[Matt Taylor, Managing Director at Jefferies & Company Inc]

Okay. And then maybe just one follow-up. In terms of your, enabling tech, the delays that you saw in Q1 of the closing, is there some factor in terms of the type of customer or the type of deal or the environment that you would attribute that to? I just wanted to get more texture as to why you thought that that was happening.

[Daniel Scavilla, President & CEO at Globus Medical]

I'll take that. No, it wasn't a particular thing or a particular customer or anything like that. I think it was really just a lot of interest and most of it was red lines back and forth to seeming to take longer than normal as I think hospitals or other caregivers work through some of the more macro challenges. But again, it was really kind of across the board, not specific to one group or one customer.

[Matt Taylor, Managing Director at Jefferies & Company Inc]

Okay, great. Thank you so much.

[Daniel Scavilla, President & CEO at Globus Medical]

Thank you.

[Operator]

Thank you. With no further questions, that concludes the Globus Medical's earning call. Thank you for participating. You may now disconnect.

Participants

Executives

• Brian Kearns, SVP - Corporate Development & IR
• Daniel Scavilla, President & CEO
• Keith Pfeil, CFO & COO

Analysts

• Matthew Miksic, Analyst at Barclays Capital
• Vikramjeet Chopra, Analyst at Wells Fargo
• Phillip Dantoin, Assistant Vice President at Piper Sandler Companies
• Richard Newitter, Managing Director at Truist Securities
• Mathew Blackman, Managing Director at Stifel Financial
• Shagun Singh Chadha, Analyst at RBC Capital Markets
• Caitlin Cronin, Director at Canaccord Genuity Inc
• David Saxon, Senior Analyst at Needham & Company
• Analyst
• Craig Bijou, Equity Research Analyst at Bank of America Securities
• Matt Taylor, Managing Director at Jefferies & Company Inc