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spk10: Good day, ladies and gentlemen, and welcome to the NAVASA fourth quarter and full year 2022 earnings conference call. I would now like to introduce your host for today's call, Ms. Juliette Cunningham, Vice President of Investor Relations at NAVASA. Please go ahead, Ms. Cunningham.
spk06: Thank you. Good afternoon, everyone. Joining me today are Chris Berry, Chief Executive Officer, and Matt Harbaugh, Chief Financial Officer. Chris will provide an overview of NuVasive's fourth quarter and full year 2022 business results and trends, as well as innovation highlights. Matt will review our detailed financial results and full year 2023 outlook. And then we'll host a question and answer session. The earnings release, which we issued earlier this afternoon, is posted on the IR section of our website and has been filed on form 8K with the SEC. We have also posted supplemental financial information. As a reminder, this call is being recorded and an archive will be available on the IR website later today. Before we get started, I'd like to remind you there are comments during this call will include forward-looking statements, which are based on current expectations and involve risks and uncertainties, assumptions and other factors, which could cause actual results to differ materially from those expressed or implied by such forward-looking statements. The factors that could cause actual results to differ materially are described in new basis news releases and periodic filings with the SEC. Except as required by law, we assume no obligation to update any forward-looking statements or information which speak as of their respective date. In addition, this call will include certain non-GAAP financial measures. Reconciliations of these measures to the most directly comparable GAAP financial measures are included in today's earnings release and the supplemental financial information. both of which are accessible on Nuvesa's website. And now I'd like to introduce Chris Berry.
spk18: Thank you, Juliette, and good afternoon, everyone. Earlier today, we reported fourth quarter and full year 2022 financial results. On today's call, I will provide highlights of 2022 and review our outlook for 2023, which is supported by our fundamentals of growth strategy and our definitive agreement to combine with Globus Medical. Matt will share additional financial details on the fourth quarter and four-year 2022 performance, as well as 2023 net sales guidance. I couldn't be more excited about our combination with Globus Medical, as it brings together two well-regarded technology companies in the musculoskeletal industry. The combined company will have an incredible commercial scale, an exceptional portfolio of clinically proven solutions supported by strong commercial and clinical professional development teams. and excellent capabilities to serve our customers effectively. Being able to change the future of spine and orthopedic care while unlocking our vision to change a patient's life every minute is now even more achievable, together with Globus. More on our announcement later in my remarks. Our progress over the full year 2022 reflects how our market-leading 360 portfolios and globalization efforts are advancing the company's core growth strategy. And I'm excited to see how our investments over the past three years have further positioned us to accelerate growth in 2023. Nuvasa delivered fourth quarter 2022 net sales of $305.4 million, an increase of approximately 1% on a reported basis and approximately 5% on a constant currency basis compared to the prior year period. Foreign currency negatively impacted our net sales performance by approximately 11 million, primarily driven by the Japanese yen and the euro. As expected, case mix favored lower acuity cases, both relative to the market and our procedural mix. However, we remain optimistic that higher acuity cases will ramp up throughout the year. In our international business, we achieved double-digit growth of approximately 11% on a constant currency basis compared to the prior year period. led by corresponding growth and the continued return of magic and precise titanium products. For the full year, our 2022 net sales came in at $1,202,000,000, an increase of 5.5% on a reported basis and 8.5% on a constant currency basis compared to the prior year. In a challenging environment, we grew our U.S. spinal hardware and U.S. surgical support business, as well as our international business. We achieved greater than 20% growth in cervical in the U.S. and delivered a strong global performance from NSO. Completing its first full year of commercial launch, Pulse platform net sales showed solid growth in the U.S. and international markets. Despite ongoing macro environmental headwinds, we continue to make progress on our growth strategy. During 2022, we delivered core growth to the proliferation of our 360 strategy, globalization, new product introductions, and introduced intelligent surgery built on the foundation of the Pulse platform with new partnerships, commercial distribution agreements, and asset acquisitions related to our innovation pipeline. Starting with our core business, we have significant runway in key procedural segments that our 360 portfolios, X360, C360, P360, and Complex continue to target. Our innovation gives us a strong competitive position to extend our leadership in the interior segment and take share where we've historically been underrepresented. This year marks 20 years of our flagship procedure, XLIFT. Today, with approximately 300,000 procedures performed, more than 450 peer-reviewed publications, and 50 XLIFT products launched, our success in introducing procedurally integrated solutions have made us a leader in the $900 million anterior segment. In addition, this year also marks five years of the X360 procedure, our lateral approach to single position surgery. Last month, another study published in the Spine Journal demonstrated the benefits of lateral single position surgery versus patients that needed to be flipped mid-procedure. Operative time significantly decreases from approximately five hours to one and a half hours. There's less fluoroscopic dosage, a shortened length of hospital stay, and a 36% reduction in post-op complications. We remain committed to delivering innovation that will improve clinical, operational, and financial outcomes for surgeons, hospitals, and patients. This year, our next-generation expandable technology, MODX XLIF, will begin clinical evaluations, and the introduction of modulus A-LIF blades will support the continued interest and Modulus ALIF as an interbody implant of choice. Within the $1.7 billion posterior segment, we plan to tackle the tremendous opportunity with our P360 portfolio, providing comprehensive pathology-driven solutions from the posterior position. ModXPL continues clinical evaluations in the U.S. market, and the recent commercial launch of the NuVasive tube system is providing our surgeon customers less invasive surgical access for both T-lift and decompression application. Turning to the $2.6 billion cervical segment, our C360 portfolio continues to deliver greater than 20% growth. We have a highly differentiated portfolio that continues to take share and maintain high surgeon interest. The Simplify Cervical Disc exceeded our expectations, furthering our ability to capture more of the $450 million CTDR market and creating pull-through for the rest of the C360 portfolio. The team is committed to additional enhancements for the Simplify Disc with plans to launch advanced instrumentation in the second half of this year. Our ACDF Interbody Implant Modulus Cervical received expanded indications for Atrax Putty, allowing surgeons to utilize the cost-effective biologic across our modulus thoracolumbar and cervical solutions. And our most recent addition, Realign Cervical, continues to receive positive feedback with plans to launch an additional occipital system enhancement in Q4 2023. Central to our core growth strategy is enabling technology. While other enabling technologies today deliver limited clinical utility, Pulse differentiates itself in that it can be used in 100% of spine procedures. Pulse is demonstrating definitive pull-through in hospitals that have adopted the technology. Our surging customers are experiencing the benefits of the platform. We have continued our global momentum by reaching 2,000-plus commercial cases. Our R&D and global operations teams are completing the next system-level software release for Pulse, launching this summer. The upcoming release will enhance the line of sight for navigation. at new instrument compatibility, improve remote support and services, and further streamline the overall surgeon and OR staff experience. As I conclude my remarks, our planned combination with Globus Medical to create an innovative global musculoskeletal company helps accelerate our near and long-term strategy. With presence in more than 50 countries and supported by over 5,000 employees, the new organization will be well positioned to deliver on our vision of intelligent surgery. Our combined spine and orthopedic portfolio is needed throughout the continuum of care to help deliver better clinical outcomes. As a reminder, the complementary combination expands our reach to surgeons and patients around the world with limited commercial overlap in key markets, creates a comprehensive portfolio of innovative spine and orthopedic technologies, continues our commitment to meaningful innovation, expands our operational capabilities, and creates compelling upside net sales potential, as well as a strong financial profile and value creation opportunity for shareholders. I remain confident in our standalone strategy, but together with Globus Medical, we can do so much more. We're combining two of the most well-regarded companies in the musculoskeletal industry to accelerate our vision to change a patient's life every minute. and further our purpose to transform surgery, advance care, and change lives. Now, I'll turn the call over to Matt.
spk15: Thank you, Chris, and good afternoon. I'm going to provide our fourth quarter and full year 2022 financial results and drivers, as well as our full year 2023 net sales guidance. Our detailed financial results have been provided in today's press release and supplemental information. During my remarks, I will be discussing both GAAP and non-GAAP measures. please see our press release for GAAP to non-GAAP reconciliations. I'll reference our fourth quarter results first, and then provide our full year 2022 results. Unless otherwise noted, all comparisons are to the prior year period. We delivered above market net sales growth in 2022, driven by core spine growth, new product introductions, globalization, and further adoption of Pulse. Worldwide net sales for the fourth quarter were $305.4 million, a 1.1% increase as reported, and a 4.8% increase on a constant currency basis. Foreign currency exchange fluctuations had an unfavorable impact of approximately $11 million during the fourth quarter. Worldwide net sales for the full year 2022 were $1,202,000, a 5.5% increase as reported, and an 8.5% increase on a constant currency basis. For the full year 2022, foreign currency exchange fluctuations had an unfavorable impact of approximately $34 million. International net sales for the fourth quarter were $68.4 million, which was a decrease of 4.9% as reported and an increase of 10.7% on a constant currency basis. For the full year 2022, International net sales were $282.3 million, a 4.9% increase as reported, and a 17.7% increase on a constant currency basis. Constant currency growth showed positive momentum in key international markets during 2022, driven by core spine growth and NSO products. Now turning to our U.S. net sales, here are some key highlights by product line. U.S. spinal hardware net sales for the fourth quarter of 2022 were $167.8 million, representing a 4.6% increase. Our cervical portfolio achieved greater than 20% net sales growth, once again led by the C360 portfolio and the simplified cervical disc. For the full year 2022, U.S. spinal hardware net sales were $652.1 million, a 6.8% increase. US surgical support net sales for the fourth quarter of 2022 were $69.2 million, roughly flat compared to the prior year period. Growth in the services business and pulse was offset by declines in biologics net sales. For the full year 2022, US surgical support net sales were $267.5 million, a 3.3% increase. Moving to operating results, Fourth quarter non-GAAP gross profit was $214.7 million compared to $219.1 million in the prior year period. For the full year 2022, non-GAAP gross profit was $866 million compared to $832.8 million in the prior year. Non-GAAP gross margin as a percentage of net sales for the fourth quarter of 2022 was 70.3%. a decrease of 220 basis points compared to 72.5% in the prior year period. The year-over-year decline was primarily driven by unfavorable foreign currency impacts and a $6 million increase in inventory-related costs. Non-GAAP gross margin as a percentage of net sales for the full year 2022 was 72%, a decrease of 110 basis points compared to 73.1% in the prior year period. The year-over-year decline was primarily driven by unfavorable foreign currency impacts and procedural mix. Fourth quarter 2022 non-GAAP operating expenses were flat year-over-year at $180.2 million. For the full year 2022, non-GAAP operating expenses were $716.9 million, an increase of 4.3% compared to $687.3 million. The increase was mainly driven by variable expenses associated with net sales growth, higher depreciation costs from investments in surgical instrument sets, and inflationary impacts, particularly in travel and freight. Fourth quarter 2022 non-GAAP operating margin was 11.3%, a decrease of 160 basis points compared to 12.9% in the prior year period. The year-over-year change was primarily driven by the decrease in gross margin as discussed earlier. For the full year 2022, non-GAAP operating margin was 12.4%, a decrease of 40 basis points compared to 12.8% in the prior year, primarily due to lower gross margins. Non-GAAP other income and expense for the fourth quarter was $3.1 million of expense compared to $8.8 million of expense in the prior year period. The decrease was primarily driven by lower unrealized foreign currency losses. For the full year 2022, non-GAAP other income and expense was $14.1 million of expense compared to $28.2 million of expense in the prior year. The decrease was primarily driven by higher levels of interest income in 2022, lower unrealized foreign currency losses, and lower interest expense as a result of retiring the 2021 convertible notes in March 2021. Non-GAAP tax expense for the fourth quarter of 2022 was $8.8 million compared to $9.3 million in the prior year period. Our fourth quarter 2022 effective tax rate was 28% compared to 31% in the prior year period. For the full year 2022, non-GAAP effective tax rate was 23%. compared to 25% in the prior year. For the fourth quarter of 2022, we reported GAAP net income of $24.1 million or diluted earnings per share of 42 cents compared to a net loss of $36.7 million or diluted loss per share of 71 cents in the prior year period. Included in our GAAP results for the fourth quarter were favorable impacts of foreign currency exchange fluctuations of approximately $15 million. This increase was primarily associated with the strength of the Australian dollar compared to the US dollar related to our 2021 acquisition of Simplify Medical. On a non-GAAP basis, we reported fourth quarter net income of $22.6 million or diluted earnings per share of 43 cents compared to net income of $20.7 million or diluted earnings per share of 40 cents in the prior year period. For the full year 2022, Gap net income was $40.4 million or diluted earnings per share of 76 cents compared to gap net loss of $64.1 million or diluted loss per share of $1.24 in the prior year. Included in our gap results for the full year were unfavorable impacts of foreign currency exchange fluctuations of approximately $19.2 million related to our simplified medical acquisition. On a non-gap basis, we reported full year 2022 net income of $103.9 million or diluted earnings per share of $1.98 compared to non-GAAP net income of $87.8 million or diluted earnings per share of $1.68 in the prior year. Turning to the balance sheet, we had cash and cash equivalents of $248.7 million as of December 31, 2022. In addition, we continue to have an undrawn $550 million revolving credit facility and our total net debt leverage is 3.3. We generated $14.3 million in free cash flow during the fourth quarter compared to $11.9 million in the prior year period. For the full year 2022, we generated $29.9 million in free cash flow compared to $71.1 million in the prior year. In 2022, we increased our investment in surgical instrument sets to support net sales growth and new product launches. And now, turning to NuVase's full year 2023 net sales guidance. As we assess the operating environment, we believe there will continue to be macroeconomic volatility and impact in 2023, including quarterly foreign currency fluctuations, inflationary risks, and supply constraints. While we can't predict the timing and extent of those impacts, we believe we will continue to benefit from the investments we've made and the positive momentum we're seeing in our business. We expect continued procedural recovery, further adoption and growth from new product introductions, continued globalization, and a strong net sales pipeline. Given those factors, we expect worldwide net sales growth of between 6% to 8% for the full year 2023 on a constant currency basis compared to the prior year. If rates hold near their levels as of February 15, 2023, we expect reported net sales growth to also be 6% to 8%. We expect some quarterly growth rate implications from exchange rate fluctuations, but minimal impact to net sales growth on a full year basis. Due to our pending merger with Globus Medical, which we expect to close mid-year, we are not providing operating margin or EPS guidance at this time. We continue to focus on driving our business in 2023 while improving operating margin and achieving profitable growth. Now I'd like to ask the operator to please open the call for questions.
spk10: Thank you. We will now be conducting a question and answer session. If you would like to ask a question, Please press star one on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star two if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. One moment please while we poll for questions. Our first question comes from Matt Mikezek with Barclays. Please go ahead.
spk20: Matt, you there? Hi. Can you hear me okay?
spk02: I can now. Great. Thanks. Sorry for that. And thanks so much for taking the question. So, putting a little color on the pipeline, I wanted to just ask one question, if I could, about the announced transaction with Globus and sort of some of the internal reaction of the company, and then add one follow-up on the pipeline. So maybe Chris and Matt, just to get a sense of one of the views out there has been that the cultures of these companies are is different, might not mesh so well. I think we've seen something different. I'd love to get a sense of how the teams are reacting to the news and your view on the culture match between the organizations. I have one quick follow-up.
spk18: Thanks for the question, Matt. Listen, I'll say this, that I've had a chance to spend time with both teams over the last couple of weeks and I found a lot more similarities than I found differences. I think, in general, both sides are excited. I think the strategic rationale is clear. If you really step back, both organizations are very patient-focused. We like to say we change a patient's life every minute. They say improve the quality of a life for patients with musculoskeletal disorders. We both have a strong history of innovation. It's in our DNA. They have a clear and decisive approach to operational rigor and financial discipline. I think we have a marketing proudness and a best-in-class surgeon engagement and training capability. You mesh those things together, I think you create a world-class organization across multiple dimensions, and I think everybody sees that. Now, clearly change is challenging, but I've been uniquely impressed at the I don't know, I don't want to say the ease, but how the differences have melted away and people have really gotten behind it. Now, clearly we've got a ways to go, but I like to say that we don't have contradictory cultures. We have complementary cultures with complementary capabilities that we can drive together. So that's kind of where we are today. Again, we're two weeks in, but I've been very impressed with the Globus team. I've been impressed how the NuVasive team has come together and gotten behind this. It's early days, but I'm encouraged.
spk02: Second question, Matt. All right. Yeah, yeah, that's super helpful. So the one question I had on the pipeline is just, you know, the posterior segment that you've now talked about a few times and then it's going to be ramping up this portfolio around getting after, like, you know, used to be maybe like an MIS TLIF opportunity. You know, when can we see that sort of start to, maybe move the needle or be reflected in some of the results.
spk18: Thanks. Yeah, thanks for the question. We're excited about P360. We talked this before. Where you've seen us focus our efforts, like X360, we've had phenomenal results. You've seen that more recently with C360, where we doubled down in the cervical portfolio, added an acquisition with Simplify, and now posted five plus quarters of greater than 20% growth within that portfolio. We're just now getting off the starting line. It's a $1.7 billion segment. We have low single-digit share. We've recently launched our newvasive tubular system, a retractor system to, I think, give us an advantage in areas like T-lift and decompression. We'll do clinical trials starting this year with Mott XPL. So you'll see meaningful contribution this year from our focus in P360. Now, clearly, we're still counting on X360 and C360 to be the growth drivers, but we're now off the starting line, I would say, with P360, what I consider to be a substantial runway in this segment that we've done. Oh, that's exciting. Thanks so much.
spk02: Thanks, Matt.
spk10: Our next question says,
spk08: comes from shagun singh with rbc capital markets please go ahead oh great thank you so much um i have two questions you know one on the deal and one on uh just before exit rates and guidance uh you know on the deal i was just wondering if you could talk a little bit about the current stock price reaction in the context of the deal uh you know why do you think this is the right deal that investors should vote on uh, you know, maybe just what you're hearing from investors and what, what is your key messaging to them? Um, and then for my second question, I was just wondering if you can talk about, uh, you know, the, the confidence in the six to 8% growth, you know, why is that the right number given the Q4 exit rates? I think you called out, you know, high versus lower acuity cases in spine and that recovery seems to be different. Um, can you just talk about that? Thank you for taking the questions.
spk18: Thanks Shagan. Um, Listen, you know, I've obviously, as everybody else has watched some of the stock price reaction, you know, listen, I know that the market has sort of been fixated on stock price and predicate deals in the space. I focus our efforts and our look as we looked at this deal at a clear strategic rationale that complementary global commercial organizations with minimum overlap, you know, truly innovative and broad portfolio in spine and orthopedics, R&D, world-class R&D organizations on both sides of the fence, if you will, within this with tremendous urgent education capabilities. Manufacturing distribution synergies that we look to leverage. Compelling upside revenue potential. And shareholder value creation. And I would say I was very confident in our standalone plan. but nothing accelerates our strategy more than this deal. So we just got to come to terms with we went down this road because we thought it was the best way to create value and create value for our shareholders in the long term. I think there's a lot of people reacting in the short term, but to be clear, we looked at this. We looked at several other opportunities over the last several years, as we always do. We always came back to this is the most compelling combination and unlocks the most shareholder value over time. I think over time people will come to terms with that. I'm excited about this. I'm confident in this deal. And like I said, we're early days. We've got a lot of work to do. I've got to get out and talk to a lot of our investors, which I'll be doing over the next several weeks, telling them how excited I am about getting behind this deal.
spk15: Yeah, Shagan, with regard to your question, we feel good about the 6% to 8%. I would say we're continuing to feel good about our prospects internationally in low- to mid-double-digit growth You know, we're going to still see great success in Simplify. You know, we're going to continue to grow Pulse. You know, as you're thinking about calendarization, we're thinking upper 200s for the first quarter. And if you look at that compared to last year, that'll be a really strong start to the year. Thanks for the question.
spk22: Thank you.
spk10: Our next question says, comes from Jose Jennings with Cohen. Please go ahead.
spk00: Hi, this is Eric on for Josh. Thanks for taking the question. I was hoping to just ask about the NuVasive pipeline and Pulse specifically. I was just curious to hear your thoughts on pursuing a replacement application for Pulse. And then also, if you're able to provide any placement metrics on Pulse at the moment, that would be helpful. Thank you.
spk18: Thanks for the question, Eric. Listen, we've been excited about what we've done with Pulse so far. We've done over 2,000 commercial cases. We've got a broad pipeline of technology coming with Pulse. In the short term, we've got software upgrades in the summer that will create, we believe, greater global expansion this year. We've always talked about pursuing robotics in the future for Pulse. It's always been a part of the roadmap, and it still is. So, you know, obviously the opportunity we see ahead with Globus accelerates our opportunity with robotics, enabling tech in general. If you back up, if you recall, our four major growth drivers, our four major strategies should say core growth, which was really the 360 strategies that we've talked about. Second was intelligent surgery. And this is all about the software capability to truly innovate and change patients' lives in spine surgery. And if you think about the combination of the two companies coming together, it more than accelerates anything that we could have done as a standalone. So they're world-class. They have a world-class technology with a robotic system. We think that that potentially creates an accelerator for our ability to drive intelligent surgery. So we're excited. For just Pulse in general, units placed... For over a year, we've seen double-digit pull-through. So a lot of the things that we've done over the last year really set us up and create a lot of optimism for how we move ahead with Pulse. As far as placement metrics, we've sold the majority of these units. We still have the capability to place, but we've sold the majority of the units. I've always said before, My goal is to create flexibility, and when we prove out the business model that we're getting the kind of pull-through that we're seeing with some of the units that, like I said, are replaced for more than a year, that might open up the opportunity to do a little more placements. But so far, generally speaking, we've sold most of our units. We're still remaining flexible and have several different programs for people to acquire the technology. But, again, I'd say it's still early days, a year in, with a lot of opportunity to go.
spk00: Understood.
spk20: Thank you. Next question.
spk10: Our next question comes from Matt Thaler with Jefferies. Please go ahead.
spk03: Hey, everyone. This is for Matt. Thanks for taking our questions. I guess was wondering maybe if you can, you know, highlight some of the Major invasive businesses are more complementary in nature with scoliosis, less overlap. You know, I'm thinking cervical, OUS, NSO, neuromonitor, and, you know, anything else you would highlight? And then, you know, for the rest of the business, she can maybe talk a little bit more about, you know, which ones might have slightly more overlap.
spk18: You know, we've looked at this a lot of different ways. I'll just say that the portfolio is highly complementary. Clearly, there's some level of overlap, but, again, Spine is a fragmented market. There's a lot of competitors out there. So even where we have overlap, we still have a lot of competition. So, you know, they have a strength-enabling technology. Obviously, we've done well in areas like Lateral. They've done a fantastic job with areas like enabling tech. We've more recently done a really nice job, I think, with our cervical portfolio. We doubled down in globalization a few years back, and I think we've got an opportunity there to create synergy between the two organizations. We're likely a little farther ahead with our global footprint. So generally speaking, there's a lot of complementary nature to the way the two companies come together. That was one of the compelling areas when we sat down and looked at this. Although competitors, just the way the two companies have evolved and innovated over the course of our history, we've sort of been on a parallel path but actively engaged in a lot of different areas. So generally speaking, we feel very good about the complementary nature of the portfolio. We've talked a lot about the commercial overlap. A lot of people will ask me, you know, how overlapped are you commercially? And I want to be really clear on this one. In the majority of accounts, and this is a U.S. statement, in the majority of accounts, we don't have any overlap, meaning one company has revenue, but the other does not. Of the accounts where both companies have business, in almost all instances, one company has significantly more business than the other. An incredible international runway. So if you think about the opportunity for us with the backdrop of what I just said, Selling the 360 portfolio, including X360 and Simplify in the Globus medical accounts. Selling Excelsius and Expandables in the Nuvasiv accounts. The ability to sell NSO and Precise in GMEDS and Globus' existing orthopedic and trauma portfolio. All of that should bring, hopefully, some context and some backdrop that we are confident. and our ability to successfully integrate our commercial teams, and as you ask, very confident in the complementary nature of the portfolio and how that creates value to our patients, to our surgeons, and to our shareholders.
spk03: All right, great. I appreciate the detailed follow-up there. Maybe one on the U.S. market, wanted to hear a little bit more. Sounds like there's some macro headlines still, but getting more stable. You know, where do you think we are on the recovery curve? You know, if you can maybe talk a little bit about the potential impacts from maybe backlogs or staffing easing for 2023.
spk18: Yeah, I mean, I think it's, you know, 22 is a very, very volatile year from a lot of different perspectives. You sort of started with a COVID challenge in January and February of 2022, and then you ran smack dab into, you know, stability and the war in Ukraine, and then you ran into staffing shortages and currency fluctuations. You know, I think over the course of the year, we found, I guess, more stability, although I would just say we probably got comfortable reacting to the challenges. As I look at 23, I still think there's volatility, and I still think there's challenges. I still think there's staffing shortages in some way, shape, or form. There's clearly still some currency volatility. But the good news is I think as an industry, we've had a chance to sort of react, so now we can be a little more proactive and at least predict. Now, you know, currency gets worse or there's further unrest or, you know, who knows? After the last few years, who knows what happens? But I think we're set up to have a more stable year in 23, and with that stability, I think we continue to move back to a normal, and hopefully that normal is sort of a liken to the pre-COVID normal. Hard to predict where we are along that continuum today, but I would expect that 23 will be more stable than 22. I can't imagine it wouldn't be, and I think we have now the better prediction capabilities looking forward than we've had over the last several years. So all that The underlying statement is I'm optimistic that 23 will be a much more stable and predictable year than what we've seen in the last couple.
spk19: All right, great. Thanks for taking our questions. Thanks.
spk10: Our next question comes from Matt Blackman with Stifel. Please go ahead.
spk01: Hi, this is Emily on for Matt. Thanks for taking the question. Just a couple on Simplify. I was hoping for a bit more color on the rollout progress, product pull-through, especially for Simplify users who are new to NuVasive, maybe where it has exceeded your expectations, and if we're still kind of in the early innings for that. And then maybe if you could touch on the competitive dynamics, if you get the sense your growth is coming more from share-taking as opposed to market expansion, and if there's been any changes there with the recent disk launches from Sentinel. Thanks.
spk18: Thank you, Emily, for the question. We're very excited about the progress we've made with Simplify, and I would say it's really exceeding our expectations across the board. We're beating our deal model. We're on or ahead of pace on some of the integration that we have. We've completed most of the activities, waiting for agencies' response to fully integrate into West Carrollton. The other thing that's exciting about this is we had the opportunity to re-look at the market when we did our investor day back in October. And what was exciting about that is as we were watching the growth of our product, which we think is the leading technology in the CTDR space, we also recognize the market has grown greater than 50% since we measured the market last time. So we have a leading technology in probably the fasting expanding space in the spine market today. So of all those things, we're excited. We've trained upwards of 800-plus surgeons. We've got roughly about, you know, let's say greater than 500 active today. So we've got a lot of runway. There's still opportunities for, we think, Simplify and the CTDR market to grow. We think patient awareness. You know, patients want motion preservation. We think surgeon awareness continues to increase. We think the data that's associated with this procedure continues to show positive results versus things like ACDF. And the reimbursement gap is closing. It's not closed yet, but it's closing. And so those things all give us a lot of confidence that we've got opportunity. As far as competitive dynamics of market share versus market expansion, we know we're taking share. You know, obviously the incumbents, M6, MOBC, we think we're doing well. We're also taking advantage of the market expansion. So... I don't have a number, per se, to say how much is market expansion and how much is share, but just suffice to say I'm confident in our runway. I'm confident in the fact that it's pulling through the broader C360 portfolio. We've grown that 20-plus percent for the last five quarters, and I feel confident the runway going forward, we can continue that trend.
spk07: Great. Thank you.
spk18: Thanks for the question.
spk10: Our next question comes from Vik Chopra with Wells Fargo. Please go ahead.
spk23: Hey, good afternoon and thanks for taking the questions, too, for me. First one for Chris. Chris, you talked about the complex with the higher acuity cases getting better. Could you perhaps put a finer point on that and what gives you confidence that they will ramp throughout the year? And my follow-up is for Matt. Matt, can you just maybe talk about seasonality in 2023 as you see it both on revenues and on OPEX? Thank you.
spk18: Thanks, Vic. You know, I said this last quarter, I believe, I haven't seen any discernible difference in the velocity of cases. What I said was we're going to annualize our mix. We've seen, obviously, a more should say, muted number of complex cases in relation to the growth we saw in areas like cervical. So our overall revenue per case was down because we had a mixed disruption in 2022. Although, having said that, we still grew the business 8.5%. So I was proud of how Specifically, when I look, and I've talked to this before, when I look at the volume growth, the volume growth is much greater than the revenue growth because of this dynamic that we've seen with our mix. Good news is, I don't know that I see a change in velocity of high QA cases yet, but what I do see is we've annualized our mix. So, we should get a much, you know, a generally equal benefit from volume to revenue where, you know, in the 2022 timeframe, we were at a deficit. So, Hey, if it picks back up, that's great. I haven't seen anything that would indicate that it's picking up and increasing in velocity, but generally if the market stabilizes and staffing concerns go down and the floors on the hospital are not constrained, then hopefully the throughput will increase, and that should benefit some of the higher QD cases, if that makes sense.
spk15: Yeah, Vic, this is Matt. Thanks for the question. We feel really good about the 6% to 8%, as I said earlier. We're thinking upper 200s for... the first quarter. From a currency perspective, we're expecting a negative impact in the first and second quarter, and then it'll be muted in the back half of the year. And on balance, you know, it pretty much nets to plus or minus a million.
spk18: Hey, Vic, I'll just add one more thing, though, that's interesting that I will say. You know, coming out of Q4 of 2022, We did see some softness in the very end of the quarter, in the latter December, where we usually see some of our strongest weeks of the year, fairly muted. Now, correspondingly, I've seen less of a drop-off in January. Now, January doesn't represent the quarter, but it would indicate there may be a little more of a smoothness in the seasonality coming into this year. Now, whether that progresses throughout the year and you have a smoother season, Seasonality to 23 is something we'll have to watch, but December to January usually have a peak and a valley. We saw less of a peak, but we're also seeing less of a valley, if that makes sense.
spk20: Thank you. Very helpful. Thank you. Thanks, babe.
spk10: Our next question comes from David Saxon with Nidham and Company. Please go ahead.
spk05: Hi guys, this is Joseph on for David. Maybe just wanted to do two questions around the overlap with Globus. I guess just looking at the accounts where you don't have any overlap with Globus, could you maybe talk about your main competitors in those accounts if they aren't Globus?
spk18: I mean, there's eight to ten companies that make up 80% of the market. So if it's not us or Globus, it's one of them. And depending on where you are, it could be any one of those. So Medtronic's the market leader. So if you want to throw a dart at it, you probably hit them first, but there's many others out there.
spk05: Okay, yeah, that makes sense. And then I guess... Internationally, if you could touch on that, what the overlap looks like. Is it similar to the U.S.?
spk18: We've got work to do there, but generally speaking, I can't speak for Globus here, but off the top of my head, I want to say they had low double-digit type of revenue representation of U.S. versus OUS, maybe 10% to 11%. But we've amassed roughly about 25% of our revenue comes from markets outside the US and that's growing substantially for us. 70.7% constant currency in 2022. We'll get to the bottom of where we have overlapped, but safe to say, I think both of us in early innings and in low single-digit share positions in most markets. Japan's a market that we have a significant amount of strength, as an example. We're the number two share player, and they're probably a lower share player in that market, so that's clearly a synergy opportunity. We'll be working through that as we go through the pre-integration planning. Got a lot of work to do there. But at first glance, we're optimistic that there is significant opportunity and minimal overlap. Now, we haven't gone to the granularity we've gone to in the U.S. yet, but we will. And like I said, we're confident we've got an opportunity there as well.
spk05: Okay, great. Thank you for taking our questions.
spk20: Thank you.
spk10: Our next question comes from Alan Gong with J.P. Morgan. Please go ahead.
spk11: Hi, this is actually Lily on for Alan. Thanks for taking the question. EPS in the quarter was a bit softer than what we in the street were thinking. So if you could just dig a little deeper into the P&L dynamics you saw in the quarter and what the main driver of the March to April fall was, that would be helpful.
spk15: Yeah, I think the tax rate was a little bit higher than what people were modeling. And I would say in general, interest expense is an area that has more volatility around it than is being modeled. And I would like to say for 2023, for interest expense, we think $25 million is a good number to use.
spk11: Got it. That's really helpful. And then maybe just digging into the guidance a bit more, could you talk a bit about your confidence in getting to the top half of the 6% to 8% range and What are the drivers that are needed to get you there? Thanks so much.
spk18: Yeah, so I'll hit that one. You know, we're confident in the guidance range. You know, clearly, I've talked about this, we haven't seen a normal year since 2019. So, you know, to the earlier question, I think, I forget who asked it, but how do we look at 23 from a stability perspective? I think to get to the guidance, we need the macroeconomics to subside. I should say the macroeconomic headwinds to subside. We need to beat currency. We need to see staffing shortages go away. But the fact is, we feel pretty good. We've got the X360 portfolio and the new product contracts we talked about. The C360 portfolio continues to grow. We continue to drive pulse. Simplify continues to be a growth driver. Our international business continues to grow in the double-digit range. So to get above that 8% range or get to the higher end, I just need the market to come in line for once in the last few years and give us a little bit of stability and minimize some of the headwinds we face. So providing those things happen, I feel pretty confident that we're in the range of the year and optimistic that there's some upside if the market continues to get better.
spk21: Great, thank you.
spk22: Thanks for the question.
spk10: Again, if you have a question, please press star one on your telephone keypad. Our next question comes from Drew Ranieri with Morgan Stanley. Please go ahead.
spk17: Thank you. Hey, Chris and Matt. Thanks for taking the questions. Just to start, Really going back to the deal announcement, both the companies have kind of talked about free cash flow generation being a key value driver of the deal. And Matt, I think I heard in your remarks that you talked about 2022 as a key investment year for SETS. As you're thinking about 23, can you maybe talk about any specific areas where you're continuing to push your foot down on the gas from an investment perspective in SETS or anything that you're pulling back on? Just how should we kind of think about SET deployment, SET investment, contributing to that 6% to 8% top line growth for 23?
spk18: Yeah, thanks for the question, Drew. Clearly, you know, we talked to Investor Day. We talked a lot about the programs that we believe would drive up margin. We continue to say we're going to invest in the company. And we've done that. We've done that through the course of 22. And we'll continue to provide sets. We'll continue to execute our 2023 plan. We'll continue to execute our R&D programs. we'll continue to operate the business. I mean, all those things will continue. Business as usual, business continuity will be the key for us over the next several weeks and months as we move from this sign to close period. The things that I will likely pause on are sort of these multi-year initiatives. You know, examples are, you know, ERP consolidations, things that just don't make a lot of sense to do until, you know, we move into the context of the new entity. Ski rationalization is one I talked about, I believe, in... in October and under the context of global inventory, but you know, within the combined entity, we just need to take a pause and see what that looks like. So listen, all the things that we think drive our business forward today and continue to maintain top line growth will continue things that we need to rethink in the context of a combined entity. We'll pause and rethink. Uh, so that, that, you know, I don't know if I'm answering your question specifically, but that's kind of what we're looking at it.
spk17: And then just, uh, maybe a growth driver type question. On international, you were just talking about Japan has been a strong market for you. You're kind of leading the charge there versus Globus. But as you look at the combined portfolio, putting everything together, is there any geography that you think you have a better opportunity to kind of win as a combined company that you previously didn't have before with the scale? And just a second question, if I may, on there. With Pulse, you said definitive pull-through, pretty strong language. So can you kind of give us a sense of, in the cases that you're seeing, how much that means in terms of wallet share per procedure? Just any more context there would be great. Thank you for taking the questions.
spk18: As far as that where I think we're better positioned to win in which geographies, I mean, I don't want to be contrite here, but I would say all of them. I mean, if you look at, like I said before, our ability to access, the enabling tech capability that Globus has possessed and continues to innovate around what we've done, like I said, with our 360 portfolios, things like Simplify, our global footprint, the NSO and Precise Opportunity coupled with their orthopedic and trauma portfolio. I think we're stronger in every market we play in, just as a rule. It's one of the key drivers of why we're doing this deal. As far as Pulse, I would just say there's been double-digit net sales growth in the account. So you compare that to our total global growth of 8.5%, and you even take that into consideration, it's probably more of a U.S. phenomenon for the most part. Double digits, you know, where those customers that have had the system in for, let's say, you know, a year or so, we've seen double-digit growth. So substantially better than what you would say the average is if you look at our U.S. growth number or if you translate that even to our global growth number.
spk20: Substantially higher. Thanks for the question.
spk10: There are no further questions at this time. I would like to turn the floor back over to Craig Berry, new VASA CEO, for closing comments. Please go ahead.
spk18: Thanks, Maria. Thanks, everybody, for participating today in the earnings call. Hopefully it came through how excited I am about creating an innovative global musculoskeletal company together with Globus. I'm also very excited about where we've come with Nuvasiv and our confidence in our standalone strategy. But I am confident that this is the best path forward for us to create shareholder value and further enhance how we partner with surgeons and ultimately better treat patients. Thank you all for attending today and hope to talk to you next time.
spk10: Now disconnect your lines at this time. Thank you for your participation and have a great day. Thank you.
spk13: Thank you.
spk14: © transcript Emily Beynon Thank you. Thank you. Thank you. Thank you. so you music Thank you. Bye. Thank you. music music
spk10: Good day, ladies and gentlemen, and welcome to the NAVASA fourth quarter and full year 2022 earnings conference call. I will now like to introduce your host for today's call, Ms. Juliette Cunningham, Vice President of Investor Relations at NAVASA. Please go ahead, Ms. Cunningham.
spk06: Thank you. Good afternoon, everyone. Joining me today are Chris Berry, Chief Executive Officer, and Matt Harbo, Chief Financial Officer. Chris will provide an overview of NuVasive's fourth quarter and full year 2022 business results and trends, as well as innovation highlights. Matt will review our detailed financial results and full year 2023 outlook. And then we'll host a question and answer session. The earnings release which we issued earlier this afternoon is posted on the IR section of our website and has been filed on form 8K with the SEC. We have also posted supplemental financial information. As a reminder, this call is being recorded and an archive will be available on the IR website later today. Before we get started, I'd like to remind you there are comments during this call will include forward-looking statements, which are based on current expectations and involve risks and uncertainties, assumptions and other factors, which could cause actual results to differ materially from those expressed or implied by such forward-looking statements. The factors that could cause actual results to differ materially are described in evasive news releases and periodic filings with the SEC. Except as required by law, we assume no obligation to update any forward-looking statements or information which speak as of their respective date. In addition, this call will include certain non-GAAP financial measures. Reconciliations of these measures to the most directly comparable GAAP financial measures are included in today's earnings release and the supplemental financial information, both of which are accessible on Nuvasiv's website. And now I'd like to introduce Chris Berry.
spk18: Thank you, Juliette, and good afternoon, everyone. Earlier today, we reported fourth quarter and full year 2022 financial results. On today's call, I will provide highlights of 2022 and review our outlook for 2023, which is supported by our fundamentals of growth strategy, and our definitive agreement to combine with Globus Medical. Matt will share additional financial details on the fourth quarter and four-year 2022 performance, as well as 2023 net sales guidance. I couldn't be more excited about our combination with Globus Medical, as it brings together two well-regarded technology companies in the musculoskeletal industry. The combined company will have an incredible commercial scale an exceptional portfolio of clinically proven solutions supported by strong commercial and clinical professional development teams, and excellent capabilities to serve our customers effectively. Being able to change the future of spine and orthopedic care while unlocking our vision to change a patient's life every minute is now even more achievable, together with Globus. More on our announcement later in my remarks. Our progress over the four-year 2022 reflects how our market-leading 360 portfolios and globalization efforts are advancing the company's core growth strategy. And I'm excited to see how our investments over the past three years have further positioned us to accelerate growth in 2023. Nuvasa delivered fourth quarter 2022 net sales of $305.4 million, an increase of approximately 1% on a reported basis and approximately 5% on a constant currency basis compared to the prior year period. Foreign currency negatively impacted our net sales performance by approximately 11 million, primarily driven by the Japanese yen and the euro. As expected, case mix favored lower acuity cases, both relative to the market and our procedural mix. However, we remain optimistic that higher acuity cases will ramp up throughout the year. In our international business, we achieved double-digit growth of approximately 11% on a constant currency basis compared to the prior year period, led by corresponding growth and the continued return of magic and precise titanium products. For the full year, our 2022 net sales came in at $1,202,000,000, an increase of 5.5% on a reported basis and 8.5% on a constant currency basis compared to the prior year. In a challenging environment, we grew our U.S. spinal hardware and U.S. surgical support business as well as our international business. We achieved greater than 20% growth in cervical in the U.S. and delivered a strong global performance from NSO. Completing its first full year of commercial launch, Pulse platform net sales showed solid growth in the U.S. and international markets. Despite ongoing macro environmental headwinds, we continue to make progress on our growth strategy During 2022, we delivered core growth to the proliferation of our 360 strategy, globalization, new product introductions, and introduced intelligent surgery built on the foundation of the Pulse platform with new partnerships, commercial distribution agreements, and asset acquisitions related to our innovation pipeline. Starting with our core business, we have significant runway in key procedural segments that are 360 portfolios, X360, C360, P360 and Complex continue to target. Our innovation gives us a strong competitive position to extend our leadership in the interior segment and take share where we've historically been underrepresented. This year marks 20 years of our flagship procedure, XLIF. Today, with approximately 300,000 procedures performed, more than 450 peer-reviewed publications, and 50 XLIF products launched, Our success in introducing procedurally integrated solutions have made us a leader in the $900 million anterior segment. In addition, this year also marks five years of the X360 procedure, our lateral approach to single position surgery. Last month, another study published in the Spine Journal demonstrated the benefits of lateral single position surgery versus patients that needed to be flipped mid-procedure. Operative time significantly decreases from approximately five hours to one and a half hours. There is less fluoroscopic dosage, a shortened length of hospital stay, and a 36% reduction in post-op complications. We remain committed to delivering innovation that will improve clinical, operational, and financial outcomes for surgeons, hospitals, and patients. This year, our next-generation expandable technology, MODX XLIF, will begin clinical evaluations, and the introduction of modulus ALIF blades will support the continued interest and Modulus ALIF as an interbody implant of choice. Within the $1.7 billion posterior segment, we plan to tackle the tremendous opportunity with our P360 portfolio, providing comprehensive pathology-driven solutions from the posterior position. ModXPL continues clinical evaluations in the U.S. market, and the recent commercial launch of the NuVasive tube system is providing our surgeon customers less invasive surgical access for both T-lift and decompression application. Turning to the $2.6 billion cervical segment, our C360 portfolio continues to deliver greater than 20% growth. We have a highly differentiated portfolio that continues to take share and maintain high surgeon interest. The Simplify Cervical Disc exceeded our expectations, furthering our ability to capture more of the $450 million CTDR market and creating pull-through for the rest of the C360 portfolio. The team is committed to additional enhancements for the Simplify Disc with plans to launch advanced instrumentation in the second half of this year. Our ACDF Interbody Implant Modulus Cervical received expanded indications for Atrax Putty, allowing surgeons to utilize the cost-effective biologic across our modulus thoracolumbar and cervical solutions. And our most recent addition, Realign Cervical, continues to receive positive feedback with plans to launch an additional occipital system enhancement in Q4 2023. Central to our core growth strategy is enabling technology. While other enabling technologies today deliver limited clinical utility, Pulse differentiates itself in that it can be used in 100% of spine procedures. Pulse is demonstrating definitive pull-through in hospitals that have adopted the technology. Our surging customers are experiencing the benefits of the platform. We have continued our global momentum by reaching 2,000-plus commercial cases. Our R&D and global operations teams are completing the next system-level software release for Pulse, launching this summer. The upcoming release will enhance the line of sight for navigation. at new instrument compatibility, improve remote support and services, and further streamline the overall surgeon and OR staff experience. As I conclude my remarks, our planned combination with Globus Medical to create an innovative global musculoskeletal company helps accelerate our near and long-term strategy. With presence in more than 50 countries and supported by over 5,000 employees, the new organization will be well positioned to deliver on our vision of intelligent surgery. Our combined spine and orthopedic portfolio is needed throughout the continuum of care to help deliver better clinical outcomes. As a reminder, the complementary combination expands our reach to surgeons and patients around the world with limited commercial overlap in key markets, creates a comprehensive portfolio of innovative spine and orthopedic technologies, continues our commitment to meaningful innovation, expands our operational capabilities, and creates compelling upside net sales potential, as well as a strong financial profile and value creation opportunity for shareholders. I remain confident in our standalone strategy, but together with Globus Medical, we can do so much more. We're combining two of the most well-regarded companies in the musculoskeletal industry to accelerate our vision to change a patient's life every minute. and further our purpose to transform surgery, advance care, and change lives. Now, I'll turn the call over to Matt.
spk15: Thank you, Chris, and good afternoon. I'm going to provide our fourth quarter and full year 2022 financial results and drivers, as well as our full year 2023 net sales guidance. Our detailed financial results have been provided in today's press release and supplemental information. During my remarks, I will be discussing both GAAP and non-GAAP measures. Please see our press release for GAAP to non-GAAP reconciliations. I'll reference our fourth quarter results first, and then provide our full year 2022 results. Unless otherwise noted, all comparisons are to the prior year period. We delivered above market net sales growth in 2022, driven by core spine growth, new product introductions, globalization, and further adoption of Pulse. Worldwide net sales for the fourth quarter were $305.4 million, a 1.1% increase as reported, and a 4.8% increase on a constant currency basis. Foreign currency exchange fluctuations had an unfavorable impact of approximately $11 million during the fourth quarter. Worldwide net sales for the full year 2022 were $1,202,000, a 5.5% increase as reported, and an 8.5% increase on a constant currency basis. For the full year 2022, foreign currency exchange fluctuations had an unfavorable impact of approximately $34 million. International net sales for the fourth quarter were $68.4 million, which was a decrease of 4.9% as reported and an increase of 10.7% on a constant currency basis. For the full year 2022, International net sales were $282.3 million, a 4.9% increase as reported, and a 17.7% increase on a constant currency basis. Constant currency growth showed positive momentum in key international markets during 2022, driven by course buying growth and NSO products. Now turning to our U.S. net sales, here are some key highlights by product line. U.S. spinal hardware net sales for the fourth quarter of 2022 were $167.8 million, representing a 4.6% increase. Our cervical portfolio achieved greater than 20% net sales growth, once again led by the C360 portfolio and the simplified cervical disc. For the full year 2022, U.S. spinal hardware net sales were $652.1 million, a 6.8% increase. US surgical support net sales for the fourth quarter of 2022 were $69.2 million, roughly flat compared to the prior year period. Growth in the services business and pulse was offset by declines in biologics net sales. For the full year 2022, US surgical support net sales were $267.5 million, a 3.3% increase. Moving to operating results, Fourth quarter non-GAAP gross profit was $214.7 million compared to $219.1 million in the prior year period. For the full year 2022, non-GAAP gross profit was $866 million compared to $832.8 million in the prior year. Non-GAAP gross margin as a percentage of net sales for the fourth quarter of 2022 was 70.3%. a decrease of 220 basis points compared to 72.5% in the prior year period. The year-over-year decline was primarily driven by unfavorable foreign currency impacts and a $6 million increase in inventory-related costs. Non-GAAP gross margin as a percentage of net sales for the full year 2022 was 72%, a decrease of 110 basis points compared to 73.1% in the prior year period. The year-over-year decline was primarily driven by unfavorable foreign currency impacts and procedural mix. Fourth quarter 2022 non-GAAP operating expenses were flat year-over-year at $180.2 million. For the full year 2022, non-GAAP operating expenses were $716.9 million, an increase of 4.3% compared to $687.3 million. The increase was mainly driven by variable expenses associated with net sales growth, higher depreciation costs from investments in surgical instrument sets, and inflationary impacts, particularly in travel and freight. Fourth quarter 2022 non-GAAP operating margin was 11.3%, a decrease of 160 basis points compared to 12.9% in the prior year period. The year-over-year change was primarily driven by the decrease in gross margin as discussed earlier. For the full year 2022, non-GAAP operating margin was 12.4%, a decrease of 40 basis points compared to 12.8% in the prior year, primarily due to lower gross margins. Non-GAAP other income and expense for the fourth quarter was $3.1 million of expense compared to $8.8 million of expense in the prior year period. The decrease was primarily driven by lower unrealized foreign currency losses. For the full year 2022, non-GAAP other income and expense was $14.1 million of expense compared to $28.2 million of expense in the prior year. The decrease was primarily driven by higher levels of interest income in 2022, lower unrealized foreign currency losses, and lower interest expense as a result of retiring the 2021 convertible notes in March 2021. Non-GAAP tax expense for the fourth quarter of 2022 was $8.8 million compared to $9.3 million in the prior year period. Our fourth quarter 2022 effective tax rate was 28% compared to 31% in the prior year period. For the full year 2022, non-GAAP effective tax rate was 23%. compared to 25% in the prior year. For the fourth quarter of 2022, we reported GAAP net income of $24.1 million or diluted earnings per share of 42 cents compared to a net loss of $36.7 million or diluted loss per share of 71 cents in the prior year period. Included in our GAAP results for the fourth quarter were favorable impacts of foreign currency exchange fluctuations of approximately $15 million. This increase was primarily associated with the strength of the Australian dollar compared to the U.S. dollar related to our 2021 acquisition of Simplify Medical. On a non-GAAP basis, we reported fourth quarter net income of $22.6 million or diluted earnings per share of 43 cents compared to net income of $20.7 million or diluted earnings per share of 40 cents in the prior year period. For the full year 2022, Gap net income was $40.4 million or diluted earnings per share of 76 cents compared to gap net loss of $64.1 million or diluted loss per share of $1.24 in the prior year. Included in our gap results for the full year were unfavorable impacts of foreign currency exchange fluctuations of approximately $19.2 million related to our simplified medical acquisition. On a non-gap basis, we reported full year 2022 net income of $103.9 million or diluted earnings per share of $1.98 compared to non-GAAP net income of $87.8 million or diluted earnings per share of $1.68 in the prior year. Turning to the balance sheet, we had cash and cash equivalents of $248.7 million as of December 31, 2022. In addition, we continue to have an undrawn $550 million revolving credit facility and our total net debt leverage is 3.3. We generated $14.3 million in free cash flow during the fourth quarter compared to $11.9 million in the prior year period. For the full year 2022, we generated $29.9 million in free cash flow compared to $71.1 million in the prior year. In 2022, we increased our investment in surgical instrument sets to support net sales growth and new product launches. And now, turning to NuVase's full year 2023 net sales guidance. As we assess the operating environment, we believe there will continue to be macroeconomic volatility and impact in 2023, including quarterly foreign currency fluctuations, inflationary risks, and supply constraints. While we can't predict the timing and extent of those impacts, we believe we will continue to benefit from the investments we've made and the positive momentum we're seeing in our business. We expect continued procedural recovery, further adoption and growth from new product introductions, continued globalization, and a strong net sales pipeline. Given those factors, we expect worldwide net sales growth of between 6% to 8% for the full year 2023 on a constant currency basis compared to the prior year. If rates hold near their levels as of February 15, 2023, we expect reported net sales growth to also be 6% to 8%. We expect some quarterly growth rate implications from exchange rate fluctuations, but minimal impact to net sales growth on a full year basis. Due to our pending merger with Globus Medical, which we expect to close mid-year, we are not providing operating margin or EPS guidance at this time. We continue to focus on driving our business in 2023 while improving operating margin and achieving profitable growth. Now I'd like to ask the operator to please open the call for questions.
spk10: Thank you. We will now be conducting a question and answer session. If you would like to ask a question, Please press star one on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star two if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. One moment, please, while we poll for questions. Our first question comes from Matt Mikezek with Barclays. Please go ahead.
spk20: Matt, you there? Hi. Can you hear me okay?
spk02: I can now. Great. Thanks. Sorry for that. And thanks so much for taking the question. So, pretty general color on the pipeline. I wanted to just ask one question, if I could, about the announced transaction with Globus and sort of some of the internal reaction of the company, and then add one follow-up on the pipeline. So maybe, Chris and Matt, just to get a sense of one of the views out there has been that the cultures of these companies – is different, might not mesh so well. I think we've seen something different. I'd love to get a sense of how the teams are reacting to the news and your view on the culture match between the organizations. I have one quick follow-up.
spk18: Thanks for the question, Matt. Listen, I'll say this, that I've had a chance to spend time with both teams over the last couple of weeks and I found a lot more similarities than I found differences. I think, in general, both sides are excited. I think the strategic rationale is clear. If you really step back, both organizations are very patient-focused. We like to say we change a patient's life every minute. They say improve the quality of a life for patients with musculoskeletal disorders. We both have a strong history of innovation. It's in our DNA. They have a clear and decisive approach to operational rigor and financial discipline. I think we have a marketing proudness and a best-in-class surgeon engagement and training capability. If you mesh those things together, I think you create a world-class organization across multiple dimensions, and I think everybody sees that. Now, clearly change is challenging, but I've been uniquely impressed at the I don't want to say the ease, but how the differences have melted away and people have really gotten behind it. Now, clearly, we've got a ways to go, but I like to say that we don't have contradictory cultures. We have complementary cultures with complementary capabilities that we can drive together. So that's kind of where we are today. Again, we're two weeks in, but I've been very impressed with the Globus team. I've been impressed how the Newvasive team has come together and gotten behind this. It's early days, but I'm encouraged.
spk02: Second question, Matt. All right. Yeah, yeah, that's super helpful. So the one question I had on the pipeline is just, you know, the posterior segment that you've now talked about a few times and then it's going to be ramping up this portfolio around getting after, like, you know, used to be maybe like an MIS TLIF opportunity. You know, when can we see that sort of start to, maybe move the needle or be reflected in some of the results.
spk18: Thanks. Yeah, thanks for the question. We're excited about P360. We've talked this before. Where you've seen us focus our efforts, like X360, we've had phenomenal results. You've seen that more recently with C360, where we doubled down in the cervical portfolio, added an acquisition with Simplify, and now posted five plus quarters of greater than 20% growth within that portfolio. We're just now getting off the starting line. It's a $1.7 billion segment. We have low single-digit share. We've recently launched our newvasive tubular system, a retractor system to, I think, give us an advantage in areas like T-lift and decompression. We'll do clinical trials starting this year with Mott XPL. So you'll see meaningful contribution this year from our focus in P360. Now, clearly, we're still counting on X360 and C360 to be the growth drivers, but we are now off the starting line, I would say, with P360, what I consider to be a substantial runway in this segment that we've done. Oh, that's exciting. Thanks so much.
spk02: Thanks, Matt.
spk10: Our next question says,
spk08: comes from shagun singh with rbc capital markets please go ahead oh great thank you so much um i have two questions you know one on the deal and one on uh just before exit rates and guidance uh you know on the deal i was just wondering if you could talk a little bit about the current stock price reaction in the context of the deal uh you know why do you think this is the right deal that investors should vote on you know, maybe just what you're hearing from investors and what is your key messaging to them. And then for my second question, I was just wondering if you can talk about, you know, the confidence in the 6% to 8% growth. You know, why is that the right number given the Q4 exit rates? I think you called out, you know, high versus lower acuity cases in spine, and that recovery seems to be different. Can you just talk about that? Thank you for taking the questions.
spk18: Thanks, Shagan. Listen, you know, I've obviously, as everybody else has watched some of the stock price reaction, you know, listen, I know that the market has sort of been fixated on stock price and predicate deals in the space. I focus our efforts and our look as we looked at this deal at a clear strategic rationale that complementary global commercial organizations with minimal overlap, you know, truly innovative and broad portfolio in spine and orthopedics. R&D, world-class R&D organizations on both sides of the fence, if you will, within this with tremendous urgent education capabilities, manufacturing distribution synergies that we look to leverage, compelling upside revenue potential, and shareholder value creation. And I would say I was very confident in our standalone plan, but nothing accelerates our strategy more than this deal. So We just got to come to terms with we went down this road because we thought it was the best way to create value and create value for our shareholders in the long term. I think there's a lot of people reacting in the short term. But to be clear, we looked at this. We looked at several other opportunities over the last several years, as we always do. We always came back to this is the most compelling combination and unlocks the most shareholder value over time. I think over time people will come to terms with that. I'm excited about this. I'm confident in this deal. And like I said, we're early days. We've got a lot of work to do. I've got to get out and talk to a lot of our investors, which I'll be doing over the next several weeks, telling them how excited I am about getting behind this deal.
spk15: Yeah, Shagan, with regard to your question, we feel good about the 6% to 8%. I would say we're continuing to feel good about our prospects internationally in low- to mid-double-digit growth. You know, we're going to still see great success in Simplify. You know, we're going to continue to grow Pulse. You know, as you're thinking about calendarization, we're thinking upper 200s for the first quarter. And if you look at that compared to last year, that'll be a really strong start to the year. Thanks for the question.
spk22: Thank you.
spk10: Our next question says, comes from Jose Jennings with Cohen. Please go ahead.
spk00: Hi, this is Eric on for Josh. Thanks for taking the question. I was hoping to just ask about the NuVasive pipeline and Pulse specifically. I was just curious to hear your thoughts on pursuing a robotic application for Pulse, and then also if you're able to provide any placement metrics on Pulse at the moment, that would be helpful. Thank you.
spk18: Thanks for the question, Eric. Listen, we've been excited about what we've done with Pulse so far. We've done over 2,000 commercial cases. We've got a broad pipeline of technology coming with Pulse. In the short term, we've got software upgrades in the summer that will create, we believe, greater global expansion this year. We've always talked about pursuing robotics in the future for Pulse. It's always been a part of the roadmap, and it still is. So, you know, obviously the opportunity we see ahead with Globus accelerates our opportunity with robotics, enabling tech in general. If you back up, if you recall, our four major growth drivers, our four major strategies, I should say core growth, which was really the 360 strategies that we've talked about. Second was intelligent surgery. And this is all about the software capability to truly innovate and change patients' lives in spine surgery. And if you think about the combination of the two companies coming together, it more than accelerates anything that we could have done as a standalone. So they have a world-class technology with a robotic system. We think that that potentially creates an accelerator for our ability to drive intelligent surgery. So we're excited. For just Pulse in general, units placed For over a year, we've seen double-digit pull-through. So a lot of the things that we've done over the last year really set us up and create a lot of optimism for how we move ahead with Pulse. As far as placement metrics, we've sold the majority of these units. We still have the capability to place, but we've sold the majority of these units. I've always said before, You know, my goal is to create flexibility, and when we prove out the business model that we're getting kind of pulled through that we're seeing with some of the units that, like I said, are replaced for more than a year, that might open up the opportunity to do a little more placements. But so far, generally speaking, we've sold most of our units. We're still remaining flexible and have several different programs for people to acquire the technology. But, again, I'd say it's still early days, a year in, with a lot of opportunity to go.
spk00: Understood. Thank you.
spk20: Next question.
spk10: Our next question comes from Matt Thaler with Jefferies. Please go ahead.
spk03: Hey, everyone. This is for Matt. Thanks for taking our questions. I guess was wondering maybe if you can highlight some of the Major and evasive businesses are more complementary in nature with scoliosis, less overlap. You know, I'm thinking cervical, OUS, NSO, neuromonitoring, you know, anything else you would highlight? And then, you know, for the rest of the business, if you can maybe talk a little bit more about, you know, which ones might have slightly more overlap.
spk18: You know, we've looked at this a lot of different ways. I'll just say that the portfolio is highly complementary. Clearly, there's some level of overlap, but again, Spine is a fragmented market. There's a lot of competitors out there. So even where we have overlap, we still have a lot of competition. So, you know, they have a strength-enabling technology. Obviously, we've done well in areas like Lateral. They've done a fantastic job with areas like enabling tech. We've more recently done a really nice job, I think, with our cervical portfolio. We doubled down in globalization a few years back, and I think we've got an opportunity there to create synergy between the two organizations. We're likely a little farther ahead with our global footprint. So generally speaking, there's a lot of complementary nature to the way the two companies can deal. That was one of the compelling areas when we sat down and looked at this. Although competitors, just the way the two companies have evolved and innovated over the course of our history, we've sort of been on a parallel path but actively engaged in a lot of different areas. So generally speaking, we feel very good about the complementary nature of the portfolio. We've talked a lot about the commercial overlap. A lot of people will ask me, you know, how overlapped are you commercially? And I want to be really clear on this one. In the majority of accounts, and this is a U.S. statement, in the majority of accounts, we don't have any overlap, meaning one company has revenue, but the other does not. Of the accounts where both companies have business, in almost all instances, one company has significantly more business than the other. An incredible international runway. So if you think about the opportunity for us with the backdrop of what I just said, Selling the 360 portfolio, including X360 and Simplify in the Globus medical accounts. Selling Excelsius and Expandables in the Nuvasiv accounts. The ability to sell NSO and Precise in GMEDS and Globus' existing orthopedic and trauma portfolio. All of that should bring, hopefully, some context and some backdrop that we are confident in our ability to successfully integrate our commercial teams, and as you asked, Very confident in the complementary nature of the portfolio and how that creates value to our patients, to our surgeons, and to our shareholders.
spk03: All right, great. I appreciate the detailed follow there. Maybe one on the U.S. market wanted to hear a little bit more. Sounds like there's some macro headlines still, but getting more stable. You know, where do you think we are on the recovery curve? You know, if you can maybe talk a little bit about the potential impacts from maybe backlogs or staffing easing for 2023.
spk18: Yeah, I mean, I think it's, you know, 22 is a very, very volatile year from a lot of different perspectives. You sort of started with a COVID challenge in January and February of 2022, and then you ran smack dab into, you know, instability in the war in Ukraine, and then you ran into staffing shortages and currency fluctuations. You know, I think over the course of the year, we found, I guess, more stability, although I would just say we probably got comfortable reacting to the challenges. As I look at 23, I still think there's volatility, and I still think there's challenges. I still think there's staffing shortages in some way, shape, or form. There's clearly still some currency volatility. But the good news is I think as an industry, we've had a chance to sort of react, so now we can be a little more proactive and at least predict. Now, you know, currency gets worse or there's further unrest or, you know, who knows? After the last few years, who knows what happens? But I think we're set up to have a more stable year in 23, and with that stability, I think we continue to move back to a normal, and hopefully that normal is sort of a liken to the pre-COVID normal. Hard to predict where we are along that continuum today, but I would expect that 23 will be more stable than 22. I can't imagine it wouldn't be, and I think we have now the better prediction capabilities looking forward than we've had over the last several years. So all that Underlying statement is I'm optimistic that 23 will be a much more stable and predictable year than what we've seen in the last couple.
spk19: All right, great. Thanks for taking our question. Thanks.
spk10: Our next question comes from Matt Blackman with Stifel. Please go ahead.
spk01: Hi, this is Emily on for Matt. Thanks for taking the question. Just a couple on Simplify. I was hoping for a bit more color on the rollout progress, product pull-through, especially for Simplify users who are new to NuVasive, maybe where it has exceeded your expectations, and if we're still kind of in the early innings for that. And then maybe if you could touch on the competitive dynamics, if you get the sense your growth is coming more from share-taking as opposed to market expansion, and if there's been any changes there with the recent disk launches from Sentinel. Thanks.
spk18: Thank you, Emily, for the question. We're very excited about the progress we've made with Simplify, and I would say it's really exceeding our expectations across the board. We're beating our deal model. We're on or ahead of pace on some of the integration that we have. We've completed most of the activities, waiting for agencies' response to fully integrate into West Carrollton. The other thing that's exciting about this is we had the opportunity to re-look at the market when we did our investor day back in October. And what was exciting about that is as we were watching the growth of our product, which we think is the leading technology in the CTDR space, we also recognize the market has grown greater than 50% since we measured the market last time. So we have a leading technology in probably the fasting expanding space in the spine market today. So of all those things, we're excited. We've trained upwards of 800-plus surgeons. We've got roughly about, you know, let's say greater than 500 active today. So we've got a lot of runway. There's still opportunities for, we think, Simplify and the CTDR market to grow. We think patient awareness. You know, patients want motion preservation. We think surgeon awareness continues to increase. We think the data that's associated with this procedure continues to show positive results versus things like ACDF. And the reimbursement gap is closing. It's not closed yet, but it's closing. And so those things all give us a lot of confidence that we've got opportunity. As far as competitive dynamics of market share versus market expansion, we know we're taking share. You know, obviously the incumbents, M6, MOBC, we think we're doing well. We're also taking advantage of the market expansion. So... I don't have a number, per se, to say how much is market expansion and how much is share, but just suffice to say I'm confident in our runway. I'm confident in the fact that it's pulling through the broader C360 portfolio. We've grown that 20-plus percent for the last five quarters, and I feel confident the runway going forward, we can continue that trend.
spk07: Great. Thank you.
spk20: Thanks for the question.
spk10: Our next question comes from Vik Chopra with Wells Fargo. Please go ahead.
spk23: Hey, good afternoon and thanks for taking the questions too for me. First one for Chris. Chris, you talked about the complex or the higher acuity cases getting better. Could you perhaps put a finer point on that and what gives you confidence that they will ramp throughout the year? And my follow-up is for Matt. Matt, can you just maybe talk about seasonality in 2023 as you see it both on revenues and on OPEX? Thank you.
spk18: Thanks, Vic. You know, I said this last quarter, I believe, I haven't seen any discernible difference in the velocity of cases. What I said was we're going to annualize our mix. We've seen, obviously, a more should say, muted number of complex cases in relation to the growth we saw in areas like cervical. So our overall revenue per case was down because we had a mixed disruption in 2022. Although, having said that, we still grew the business 8.5%. So I was proud of how Specifically, when I look, and I talked to this before, when I look at the volume growth, the volume growth is much greater than the revenue growth because of this dynamic that we've seen with our mix. Good news is, I don't know that I see a change in velocity of high QED cases yet, but what I do see is we've annualized our mix. So, we should get a much, you know, a generally equal benefit from volume to revenue where, you know, in the 2022 timeframe, we were at a deficit. So, Hey, if it picks back up, that's great. I haven't seen anything that would indicate that it's picking up and increasing in velocity, but generally if the market stabilizes and staffing concerns go down and the floors on the hospital are not constrained, then hopefully the throughput will increase and that should benefit some of the higher acuity cases, if that makes sense.
spk15: Yeah, Vic, this is Matt. Thanks for the question. We feel really good about the 6% to 8%, as I said earlier. We're thinking upper 200s for the first quarter. From a currency perspective, we're expecting a negative impact in the first and second quarter, and then it'll be muted in the back half of the year. And on balance, you know, it pretty much nets to plus or minus a million.
spk18: Hey, Vic, I'll just add one more thing, though, that's interesting that I will say. You know, coming out of Q4 of 2022, We did see some softness in the very end of the quarter, in the latter December, where we usually see some of our strongest weeks of the year fairly muted. Now, correspondingly, I've seen less of a drop-off in January. Now, January doesn't represent the quarter, but it would indicate there may be a little more of a smoothness in the seasonality coming into this year. Now, whether that progresses throughout the year and you have a smoother season Seasonality to 23 is something we'll have to watch. But December to January usually have a peak and a valley. We saw less of a peak, but we're also seeing less of a valley, if that makes sense. Thank you.
spk20: Very helpful. Thank you. Thanks, babe.
spk10: Our next question comes from David Saxon with Nidham and Company. Please go ahead.
spk05: Hi, guys. This is Joseph on for David. Maybe just wanted to do two questions around the overlap with Globus. I guess just looking at the accounts where you don't have any overlap with Globus, could you maybe talk about your main competitors in those accounts if they aren't Globus?
spk18: I mean, there's eight to 10 companies that make up 80% of the market. So if it's not us or Globus, it's one of them. And depending on where you are, it could be any one of those. So Medtronic's the market leader. So if you want to throw a dart at it, you probably hit them first, but there's many others out there.
spk05: Okay. Yeah, that makes sense. And then I guess, Internationally, if you could touch on that, what the overlap looks like. Is it similar to the U.S.?
spk18: We've got work to do there, but generally speaking, I can't speak for Globus here, but off the top of my head, I want to say they had low double-digit type of revenue representation of U.S. versus OUS, maybe 10% to 11%. But we've amassed roughly about 25% of our revenue comes from markets outside the US and that's growing substantially for us. 70.7% constant currency in 2022. We'll get to the bottom of where we have overlapped, but safe to say, I think both of us in early innings and in low single-digit share positions in most markets. Japan's a market that we have a significant amount of strength, as an example. We're the number two share player, and they're probably a lower share player in that market, so that's clearly a synergy opportunity. We'll be working through that as we go through the pre-integration planning. Got a lot of work to do there. But at first glance, we're optimistic that there is significant opportunity and minimal overlap. Now, we haven't gone to the granularity we've gone to in the U.S. yet, but we will. And like I said, we're confident we've got an opportunity there as well.
spk05: Okay, great. Thank you for taking our questions.
spk20: Thank you.
spk10: Our next question comes from Alan Gong with J.P. Morgan. Please go ahead.
spk11: Hi, this is actually Lily on for Alan. Thanks for taking the question. EPS in the quarter was a bit softer than what we in the street were thinking. So if you could just dig a little deeper into the P&L dynamics you saw in the quarter and what the main driver of the March to April fall was, that would be helpful.
spk15: Yeah, I think the tax rate was a little bit higher than what people were modeling. And I would say in general, interest expense is an area that has more volatility around it than is being modeled. And I would like to say for 2023, for interest expense, we think $25 million is a good number to use.
spk11: Got it. That's really helpful. And then maybe just digging into the guidance a bit more, could you talk a bit about your confidence in getting to the top half of the 6% to 8% range and What are the drivers that are needed to get you there? Thanks so much.
spk18: Yeah, so I'll hit that one. You know, we're competent in the guidance range. You know, clearly, I've talked about this. We haven't seen a normal year since 2019. So, you know, to the earlier question, I think, I forget who asked it, but how do we look at 23 from a stability perspective? I think to get to the guidance, we need the macroeconomics to subside. I should say the macroeconomic headwinds to subside. We need to beat currency. We need to see staffing shortages go away. But the fact is, we feel pretty good. We've got the X360 portfolio and the new product introduction we talked about. The C360 portfolio continues to grow. We continue to drive pulse. Simplify continues to be a growth driver. Our international business continues to grow. and the double-digit range. So to get above that 8% range or get to the higher end, I just need the market to come in line for once in the last few years and give us a little bit of stability and minimize some of the headwinds we face. So providing those things happen, I feel pretty confident that we're in the range of the year and optimistic that there's some upside if the market continues to get better.
spk21: Great, thank you.
spk22: Thanks for the question.
spk10: Again, if you have a question, please press star one on your telephone keypad. Our next question comes from Drew Ranieri with Morgan Stanley. Please go ahead.
spk17: Thank you. Hey, Chris and Matt. Thanks for taking the questions. Just to start, Really going back to the deal announcement, both the companies have kind of talked about free cash flow generation being a key value driver of the deal. And Matt, I think I heard in your remarks that you talked about 2022 as a key investment year for SETS. As you're thinking about 23, can you maybe talk about any specific areas where you're continuing to push your foot down on the gas from an investment perspective in SETS or anything that you're pulling back on? Just how should we kind of think about SET deployment, SET investment, contributing to that 6% to 8% top line growth for 23?
spk18: Yeah, thanks for the question, Drew. Clearly, you know, we talked to an investor today. We talked a lot about the programs that we believe would drive up margin. We continue to say we're going to invest in the company. And we've done that. We've done that through the course of 22. And we'll continue to provide sets. We'll continue to execute our 2023 plan. We'll continue to execute our R&D programs. we'll continue to operate the business. I mean, all those things will continue. Business as usual, business continuity will be the key for us over the next several weeks and months as we move from this sign to close period. The things that I will likely pause on are sort of these multi-year initiatives. You know, examples are, you know, ERP consolidations, things that just don't make a lot of sense to do until, you know, we move into the context of the new entity. Ski rationalization is one I talked about, I believe, in... in October and under the context of global inventory, but you know, within the combined entity, we just need to take a pause and see what that looks like. So listen, all the things that we think drive our business forward today and continue to maintain top line growth will continue things that we need to rethink in the context of a combined entity. We'll pause and rethink. Uh, so that, that, you know, I don't know if I'm answering your question specifically, but that's kind of what we're looking at it.
spk17: And then just, uh, maybe a growth driver type question. On international, you were just talking about Japan has been a strong market for you. You're kind of leading the charge there versus Globus. But as you look at the combined portfolio, putting everything together, is there any geography that you think you have a better opportunity to kind of win as a combined company that you previously didn't have before with the scale? And just a second question, if I may, on there. With Pulse, you said definitive pull-through, pretty strong language. So can you kind of give us a sense of, in the cases that you're seeing, how much that means in terms of wallet share per procedure? Just any more context there would be great. Thank you for taking the questions.
spk18: As far as that where I think we're better positioned to win in which geographies, I mean, I don't want to be contrite here, but I would say all of them. I mean, if you look at, like I said before, our ability to access, the enabling tech capability that Globus has possessed and continues to innovate around what we've done, like I said, with our 360 portfolios, things like Simplify, our global footprint, the NSO and Precise Opportunity coupled with their orthopedic and trauma portfolio. I think we're stronger in every market we play in, just as a rule. It's one of the key drivers of why we're doing this deal. As far as Pulse, I would just say there's been double-digit net sales growth in the account. So you compare that to our total global growth of 8.5%, and you even take that into consideration, it's probably more of a U.S. phenomenon for the most part. Double digits, you know, where those customers that have had the system in for, let's say, you know, a year or so, we've seen double-digit growth. So substantially better than what you would say the average is if you look at our U.S. growth number or if you translate that even to our global growth number. Substantially higher.
spk20: Thanks for the question.
spk10: There are no further questions at this time. I would like to turn the floor back over to Craig Berry, new VASEF CEO, for closing comments. Please go ahead.
spk18: Thanks, Maria. Thanks, everybody, for participating today in the earnings call. Hopefully it came through that how excited I am about creating an innovative global musculoskeletal company together with Globus. I'm also very excited about where we've come with Nuvasiv and our confidence in our standalone strategy. But I am confident that this is the best pass forward for us to create shareholder value and further enhance how we partner with surgeons and ultimately better treat patients. Thank you all for attending today and hope to talk to you next time.
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