Globus Medical, Inc. Class A

Ladies and gentlemen, thank you for standing by, and welcome to Globus Medical's first quarter 2020 earnings conference call. At this time, all participants are in a listen-only mode, and later we will conduct a question and answer session. In order to ask a question at that time, simply press star, then the number one on your telephone keypad. If at any point you wish to withdraw your question, please press the pound key. Thank you. I'll now turn the call over to Mr. Brian Kearns, Senior VP of Investor Relations. Please go ahead, sir.

Thank you, Maria, and thank you, everyone, for being with us today. Joining us for today's call from Globus Medical will be Dave Demski, President and CEO, Dan Scavilla, Executive Vice President, Chief Commercial Officer, and Keith Fowle, Senior Vice President and Chief Financial Officer. This review is being made available via webcast accessible through the investor relations section of the Globus Medical website at www.globusmedical.com. Before we begin, let me remind you that some of the statements made during this review are or may be considered forward-looking statements. Our Form 10-K for the 2019 fiscal year and our subsequent filings with the Securities and Exchange Commission identify certain factors that could cause our actual results to differ materially from those projected in in any forward-looking statements made today. Our SEC filings, including the 10-K, are available on our website. We do not undertake to update any forward-looking statements as a result of new information or future events or developments. Our discussions today will also include certain financial measures that are not calculated in accordance with generally accepted accounting principles or GAAP. We believe these non-GAAP financial measures provide additional information pertinent to our business performance. These non-GAAP financial measures should not be considered replacements for and should be read together with the most directly comparable GAAP financial measures. Reconciliations to the most directly comparable GAAP measures are available on the schedules accompanying the press release and on the investor relations section of the Globus Medical website. With that, I'll now turn the call over to Dave Denske, our President and CEO.

Thank you, Brian, and good afternoon, everyone. I want to start off by thanking everyone on the call for your continued interest and support of Globus Medical in these challenging and uncertain times. I'm thankful that our company has remained relatively safe during this crisis, as only a handful of our team members have contracted the virus and none have required hospital care. I'm proud of the way our team has responded to this opportunity. We have made patient care and safety our top priority with a focus on how we can help. We have continued to drive technology innovation, remarkably launching three new products in the last five weeks. While our current revenue has been substantially disrupted, our manufacturing and supply chain teams have built inventory at record levels in anticipation of a bounce back in elective procedures in the near future. Our conservative financial philosophy has positioned us well to ride out this difficult time without having to reduce our commitment to any important long-term growth initiatives. In fact, given our strong liquidity position, We have taken the opportunity to repurchase over $100 million of our own stock, and we are seriously evaluating several tuck-in acquisition opportunities. We will also use the downtime to strengthen our clinical and technical acumen of our salespeople, digitally introduce record numbers of surgeons to new products and techniques, carefully analyze all aspects of our business to increase efficiencies, and aggressively look for opportunities to serve and support the communities that we are a part of. In short, I believe Globus will emerge from this time as a stronger and more cohesive company than we have ever been. Our business was strong in the first quarter as we built on the momentum we had created in 2019. Revenue for the quarter was $190.6 million and increased by 4% over the first quarter of last year. Musculoskeletal solutions increased 3.9% while enabling technologies grew by 11.8%. The COVID-19 crisis significantly impacted revenue in March. With just over two weeks in March remaining, our internal projections indicated that we would finish with 15% growth for the quarter, including double-digit growth in our U.S. spinal implant business. Strong recruiting, pull through from robotics, and traction from new products all contributed to the U.S. spine performance. While enabling technologies did grow over last year, the impact of COVID is particularly significant in this segment, as a disproportionate number of deals typically close in the last two to three weeks of every quarter. We launched three new spine products in Q1 and two more in April. We are seeing strong interest in several products from our Hebron family, the most comprehensive portfolio of 3D-printed interbody spacers in the industry. During the quarter, we also launched Table, our fourth-generation expandable MIS-TDIF interbody spacer that was met with strong demand and great feedback. The international spine business declined by 6.5% in Q1. Not only was the business significantly impacted by COVID-19, We were also up against very challenging counts from Q1 of 2019, as alluded to on our call last quarter. The trauma business continues to make steady progress, up by over 150% from Q1 2019 and up sequentially over Q4. We are on track to launch several new products this year and expect to double the size of our sales footprint in the second half of the year. While COVID caused some delays in INR development efforts, we've made significant progress in the commercialization of several systems. We expect to roll out the interbody module in the second quarter. In the third quarter, we plan to submit the imaging system to FDA and we anticipate FDA clearance of the cranial module for Excelsis GPS. As we look forward to the remainder of the year, it's too early to assess when we might be back to normal, but we are encouraged by the upward trend in procedural volumes over the last month. Our U.S. fine business bottomed in the first full week of April, off by about 70% from our pre-COVID pace. Since that point, weekly volumes have steadily risen as several states have begun to allow elective surgeries to commence again. Volumes for the current week are on pace to reach roughly two-thirds of our pre-COVID levels. At some point over the next two to three quarters, we expect a prolonged spike in procedures as surgeons work to treat the growing backlog of patients in need of surgical intervention. Interest in robotics remains extremely strong, even during the pandemic, and we have had record attendance at virtual market development events in recent weeks. We have not lost any deals, but do expect some delays in the purchasing process as hospitals work through the financial implications of this crisis. Our strong balance sheet enables us to be flexible in response to hospitals' capital constraints, and from a clinical standpoint, now more than ever, the promise of robotics is compelling. Whether that's the potential to shorten hospital stays for patients concerned about being in a hospital, or the reduction of cognitive load on busy surgeons trying to treat their backlog of patients, Robotics offers a tremendous value and clear payback. While this time has been challenging to navigate, we are thankful that the only impact to the Globus family has been economic and not health-related. We are also grateful that we have the financial strength and liquidity to maintain a healthy business infrastructure which will provide the platform for strong growth in the latter half of this year. We are well positioned to capitalize on our technology lead in key sectors, and I have the utmost confidence in our team to execute well in this unique time. I will now turn the call over to Keith.