Globus Medical, Inc. Class A

Welcome to Globus Medical's second quarter 2020 earnings call. At this time, all lines will be on a mute, and a Q&A session will be held after the prepared remarks. To ask a question at that time, please press star and then the number one on your telephone keypad. I will now turn the call over to Brian Kearns, Senior Vice President of Business Development and Investor Relations. Mr. Kearns, please go ahead.

Thank you, Catherine, and thank you, everyone, for being with us today. Joining today's call from Globus Medical will be Dave Demski, President and CEO, Dan Scavilla, Executive Vice President, Chief Commercial Officer, and Keith Feil, 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 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 discussion today will also include certain financial measures that are not calculated in accordance with generally accepted accounting principles for 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 gap measures are available in the schedules accompanying the press release and on the investor relations section of the Globus Medical website. With that, I will now turn the call over to Dave Dembski, our president and CEO.

Thank you, Brian, and good afternoon, everyone. I'm very excited to report an outstanding performance by the Globus team in Q2. While it was the most challenging external environment in our 17-year history, I could not be more proud of the way our team responded to the challenge. Revenue for the quarter was $149 million, down 23% from Q2 2019. Musculoskeletal solutions was up by 21%, while enabling technologies was down by 55%. Non-GAAP EPS was $0.07 per share, and adjusted EBITDA was 15% for the quarter. While the growth and earnings metrics are low compared to our typical results, in light of the circumstances and relative to our peers, they are outstanding accomplishments. Our U.S. final implant business was down by 21% for the quarter, but the trends we saw within the quarter and continuing into July are encouraging. The business bottomed in mid-April and continued a steady climb upward through the quarter. April revenue was down by roughly two-thirds, May improved dramatically to finish off by 25%, and June rebounded into double-digit growth compared to June of 2019. Growth in July accelerated into the mid-teens, even as certain areas began restricting elective surgery again. Our growth is a function of a number of factors. New product launches, competitive recruiting, and robotic pull-through. Our spine product development team built on their strong performance in 2019 by launching six new products in 2020. We have seen tremendous uptake in the Hedron line of our 3D-printed interbody spacers, as well as Sable, our fourth-generation expandable MIS T-lift device. Adoption has been so successful that we are doubling our 3D manufacturing capacity, which should come online in Q4. Robotic usage continues to grow, mirroring the trends we experienced in the overall business during the quarter. Competitive recruiting and onboarding remained strong during the second quarter. Our pace for the first half of this year matched that of the first half of 2019, a record recruiting year for us. Now more than ever, Globus is the destination of choice for the best in the industry. I want to take a moment to recognize the dedication and commitment of our manufacturing and operations team members who have steadfastly supported our customers, patients, and sales reps during this difficult time. As essential workers, they have continued to deliver product in record amounts in anticipation of the bounce back in procedures we have expected and are now beginning to see. Our international spinal implant business was down by 30% for the quarter. Most markets are beginning to come back, but generally speaking, the bounce back in procedures began later and has not been as pronounced as the U.S. Similar to the U.S. trends, our international spying business had a strong June and improved further in July. Our trauma business was a bright spot in Q2, nearly tripling sales over the second quarter of 2019, posting 179% growth. We are continuing to invest in this business, expanding our geographic footprint by adding sales reps, launching new products and making improvements to systems already launched. During the second quarter, we completed the purchase of a developmental stage finished company called Synoste. Synoste engineers have developed a limb lengthening system that utilizes night and all technology to facilitate incremental nail expansion that can be accomplished outside of the clinical setting. They have studied patients implanted with the system in a limited clinical trial in Europe. We are excited about the potential to apply this technology to treat orthopedic trauma and deformity patients, as well as the potential to develop growing rods for pediatric spine deformity patients in the future. We are working to commercialize the limb lengthening system with a targeted market launch of 2022. Revenue from enabling technologies was $5.4 million in the quarter. While the economic impact of COVID-19 to hospitals has created some uncertainty around capital budgets, we are encouraged by the fact that we continued to close deals in June and July. During the quarter, we saw continued strong surge in interest in our robotic technology, hosting a number of webinars that focused on the advantages of Excelsis GPS and the capabilities of our interbody module. Now more than ever, the benefits that robotic surgery promises in terms of MIS procedures, shorter hospital stays, less time in the OR, and reduced cognitive load on busy surgeons are demonstrating value in the technology. We are seeing that hospitals can and will invest in capital that improves patient care and benefits surgeons. While this time has been challenging to navigate, we have used the opportunity to critically evaluate all aspects of the business and make adjustments to position ourselves well for the future. Our strong liquidity position and lean organization structure have enabled us to financially support all of our people during this crisis. We have not laid off or furloughed anyone. Since the start of the year, we have made several strategic moves to strengthen our company for the future. One, we purchased a building that will double our manufacturing footprint. Two, we continue to hire competitive recruits at a record pace. Three, we completed the acquisition of Synoste. And four, we bought back over $100 million of our stock at depressed prices. In addition, we have been able to donate millions of dollars to support communities and frontline workers who have been impacted by COVID-19. While no one knows what the second half of this year will bring regarding the coronavirus, I can say with certainty that Globus is stronger now than we have ever been and looking forward to the future, whatever that might be. I will now turn the call over to Keith.