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spk09: Welcome to Globus Medical's first quarter 2021 earnings call. At this time, all lines will be on mute and a Q&A session will be held after the prepared remarks. At that time, if you would like to ask a question, please press star and the number one on your telephone keypad to enter the queue. I will now turn the call over to Brian Kearns, Senior Vice President of Business Development and Investor Relations. Mr. Kearns, please go ahead.
spk07: 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, President of Trauma, 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 2020 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 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 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.
spk11: Thank you, Brian, and good afternoon, everyone. We got off to a great start in Q1, continuing the momentum we established in 2020. All facets of the business performed well in the quarter as we continued to take meaningful market share. Revenue for the quarter was $227 million, up 21% on a day-adjusted basis over the first quarter of last year. Non-GAAP EPS was 49 cents per share, an increase of 67%, and adjusted EBITDA was 35%. Once again, INR and U.S. Spine led the way. INR revenue for Q1 was $15 million, up 86% over the first quarter of last year. Q1 is typically a slow quarter for capital sales. but our revenue in Q1 actually surpassed our revenue for the entire first half of 2020. The clinical superiority of our robotic technology continues to be recognized by surgeons, as shown by back-to-back quarters of strong growth. U.S. Fine continues to take significant market share, growing by almost 22% on a day-adjusted basis. Pull-through from robotics, contributions from new product introductions, a resurgence in our biologics business, and competitive recruiting were all factors driving growth. Our international spinal implant business was essentially flat for the quarter. Strong growth in most markets was offset by declines in Japan, as expected, primarily due to the transition of our sales force composition there. We expect both of these trends, strong growth in the rest of the world and headwinds in Japan, to continue throughout 2021 and remain very positive about the health of our international business. We had a number of exciting product introductions in the quarter, but I would like to highlight two because they demonstrate the synergies inherent between our capital and implant product development engines. The first is the Corbel Lateral ALIF system, comprised of a novel retractor and an innovative interbody spacer designed for the L5 S1 disk space through a lateral patient position. Corbel is the latest addition to the most comprehensive suite of lateral interbody solutions on the market today. Our lateral technology includes multiple expandable options, static spacers, and integrated plate spacer solutions that can address all levels of the lumbar spine to either a prone or lateral patient position. Furthermore, the Excelsius Lateral 360 Procedural Solution allows surgeons to safely and efficiently treat multiple inner body levels and place MIS pedicle screws while the patient remains in a single position. The second is Creo 1, the market's first pedicle screw designed specifically for robotic spine surgery with Excelsis GPS. Creo 1 simplifies pedicle preparation while maintaining navigational accuracy and increasing pull-out strength by 86% compared to traditional pedicle screws tapped to size. The rigid robotic arm and navigational accuracy of Excelsis GPS combined with 301's unique screw tip are designed to save time and improve efficiency in the OR by eliminating procedural steps. Early feedback on both systems has been very positive. Shifting to trauma, Revit is up over 100% in Q1 compared to the first quarter of 2020. We are focused on Salesforce expansion and have several exciting product launches planned for the second half of this year. While we expect continued sequential growth, Year-over-year growth may slow a bit in the coming quarters as we face challenging comps. We have filed with the FDA for 510 clearance on our imaging system and are ramping up manufacturing and operations for an anticipated Q3 launch. We also plan to launch the cranial module for eGPS later this quarter. Glibus has emerged from the pandemic as a stronger company, growing much faster than our larger peers with a strong balance sheet and healthy cash flows. As we look forward to the future, we see tremendous opportunities to accelerate our growth in INR, spine, trauma, and total joints. We have an exciting lineup of product introductions planned for 2021, but to take full advantage of our potential beyond this year, we are going to ramp up investments in R&D resources moving forward. We will also be aggressive in pursuing acquisition targets that enable us to further differentiate our portfolio. Globus had an outstanding first quarter, producing excellent financial results and delivering on several key strategic objectives. We're set up for an amazing year if we continue to execute. All parts of the company are performing well, and we're working together as a team. I'm grateful for the dedication, ability, and effort of our worldwide Globus team members as they serve our customers and patients. I will now turn the call over to Keith.
spk05: Thanks, Dave, and good afternoon, everyone. As Dave commented, our strong first quarter results demonstrate our continued momentum and point to continued market share gains. Our focus on driving execution, along with our long-standing commitment to innovation and technology, have positioned us well as we work to fully emerge from the impacts of COVID-19. This is evidence in our first quarter sales, profitability, and cash flow growth. Q1 revenue was $227.3 million, growing 19.3% as reported, and 20.7% on a day-adjusted basis compared to the first quarter of 2020. Revenue grew 18.7% on a constant currency basis as compared to the first quarter of 2020. Though we experienced COVID impacts in January and early February, revenue grew sequentially each month and accelerated as we moved further into February and March. Net income was $45.3 million and non-GAAP net income was $49.7 million driving 49 cents of fully diluted non-GAAP earnings per share. Adjusted EBITDA was 35.2%, and our free cash flow was $49.9 million. Moving further into sales, U.S. revenue was $193.3 million, or 22% higher than the first quarter of 2020, driven by the continued strength of our U.S. spine business, as well as higher INR revenue stemming from additional capital sales. International revenue for the quarter was $34 million, representing a 5.9% increase versus the first quarter of 2020. As Dave noted earlier, international implant sales were essentially flat. However, growth in robotics was the key contributing factor in our year-over-year improvement. We continue to see strong implant growth in most of our international markets. However, this is being partially offset by declines in Japan driven by our previously discussed Salesforce transition. First quarter gross profit was 75.8% compared to 74.4% in Q1 of 2020. The improvements to gross profit were driven mainly by improved manufacturing efficiencies and lower warehouse costs. The lower warehouse costs were primarily labor related as the result of a warehouse move which occurred in the prior year quarter and did not repeat in the current year quarter. Our research and development expenses for the quarter were $14.9 million or 6.6% of sales compared to 15.4 million or 8.1% of sales in the first quarter of the prior year. The reduced spending was driven primarily by lower travel, lower meeting expenses, and lower consulting costs. This lower spending is partially offset by higher salary and benefit costs driven by increased headcount. Looking ahead, we plan to increase our investment in R&D as we've progressed through 2021. Those investments will continue to drive our class leading capabilities across robotics and spine while also positioning us to further penetrate the trauma and joint markets. SG&A expenses for the first quarter were $97.9 million, or 43.1% of sales, compared to $93.5 million, or 49.1% of sales, driven primarily by higher sales compensation costs, partially offset by lower travel, entertainment, and meeting expenses, as well as leverage on our spending as a result of the higher sales volumes. The effective income tax rate for the quarter was 20.7%, in line with expectations, though slightly higher than the 20.2% rate in the first quarter of 2020. As I mentioned earlier, adjusted EBITDA for the quarter was 35.2% and is reflective of my earlier comments, specifically around revenue growth, gross profit improvement, and overall leverage. We ended our first quarter with $838.4 million of cash, cash equivalents, and marketable securities. Net cash provided by operating activities was $63.6 million, and free cash flow was $49.9 million, as mentioned earlier. At this time, the company is revising its previously announced 2021 guidance of $880 million in net sales and $1.83 in fully diluted non-GAAP EPS. We now expect full-year net sales to be $925 million and our non-GAAP EPS to be $1.89, representing 17.2% revenue growth and 31.3% non-GAAP EPS growth versus 2020. Looking back on our strong Q1 results and our expectations for the remainder of the year, we remain well positioned to aggressively execute across all fronts. We continue to be extremely positive about our business and its ability to take share across our entire portfolio, all while bringing new and exciting products to market. This, coupled with our commitment to expanding R&D investments while aggressively pursuing acquisitions that complement our portfolio, will position us for continued growth over the long term and drive exceptional shareholder value. I truly feel the best is yet to come. We will now open the call for questions.
spk09: Ladies and gentlemen, just as a reminder, if you'd like to ask a question, please press star and then number one on your telephone keypad. Your first question comes from the line of Matt Mixick with Credit Suisse.
spk04: Okay.
spk11: You're breaking up, Matt. We can't hear you.
spk08: Here, let me try this. Hold on. Sorry. Is that better?
spk11: Yes, it is.
spk08: Okay. Sorry about that. So congrats on a really strong quarter. Just I don't even know what to say. Some of these numbers are really impressive. But one question on robots and a follow-up on implants. So... We have seen just really strong growth across the robot category, I guess you could say, since the middle of last year. I feel like we ask the same question every quarter. But if you could maybe describe where some of this 80%, 90% growth that you're seeing is coming from, maybe the types of centers or... you know, is it a competitive regional, you know, there's a robot in a city and a center across town feels like it needs to have a robot now also, you know, maybe describe what feels like an inflection point and then what sort of timing we can think about in terms of pull through on these robots. So if you're seeing this strength here, does it take a quarter or two to sort of start driving the implants that follow? And I mentioned one quick follow up on implants.
spk11: Sure, Matt. I think we're seeing the growth is really everywhere. We've got centers that are buying their second or even third robot. We have the first robot in town kind of situations. We're in community. We're in universities. I think you're really seeing the technology starting to take off just generally, and we're starting to see that. You may be right. I hope you're right that we're at that inflection point where it becomes mainstream technology. And to your second part of your question, when we see implants from it, it's usually the quarter after. I mean, that first quarter is about getting it installed, getting folks trained on it, getting it up to speed. And then once they start using it, we'll see the implants pulled through in the following quarter.
spk08: That's great. And then on implants, if you could maybe give some sense of where in the category of implants that you're seeing the most strength and where, if anything, you saw some slowness in the beginning of the quarter, as some of the other companies have talked about, meaning sort of cervical or interventional spine or types of centers. Any color would be very helpful as to the pattern that you saw in Q1. Thanks.
spk11: Sure. You know, no real discernible pattern in terms of mix from our standpoint. We are getting really strong growth from some of the products we introduced last year, our 3D line of spacers as well as Sable. We've also, as I mentioned in my prepared remarks, Creo One has really gotten off to a quick start for us. So that, other than that, I don't see a pattern as you alluded to or maybe somebody else had mentioned on a call.
spk08: Great, thanks so much. Thank you.
spk09: Your next question comes from the line of Kayla Crum with Truist Securities.
spk13: Great, thanks guys. I'll echo the congratulatory comments. Just on the enabling tech business, I mean, awesome performance with 14 million in sales. What do you say that's now sort of a baseline for quarterly performance going forward? And can you help us understand how you're assuming that this business will grow into the second part of this year with further contribution from imaging?
spk11: Yeah, Kayla, capital is really challenging to predict how you're going to do because each sale is unique. It's much easier for us to predict where we're going in the implant business because that's recurring. Certainly, we expect to grow from here. We think this business has a lot of runway to it, both for Globus as well as the industry. All of those factors are pulling in the right direction, and we're going to be rolling out some additional technology, as you know, later this year, hopefully. That's the plan in Q3. So I do believe we'll see higher sales, but we're not going to put a number to that at this point.
spk13: Okay, that's fair. And then you mentioned you plan to be aggressive from an M&A perspective. I guess What does that mean relative to how you guys have acted historically? I think historically you've chosen to look at either earlier stage assets or less expensive, more mature assets. I mean, should we expect to see more of the same in terms of that strategy, or are you considering some higher priced assets or growthy assets at this point? Thank you for taking the questions.
spk11: Sure. Yeah, we are looking to be more aggressive there in terms of the amount we're going to invest. So we're looking a little bit bigger. But the emphasis is really on expanding the differentiation within our portfolio. So we're looking for technology, not necessarily scale. And that's how we're looking at things at this point.
spk13: Great. Thank you.
spk11: Sure.
spk09: Your next question comes from the line of Steven Lichtman with Oppenheimer.
spk06: Thank you. Hi, guys. On the solid sequential performance of U.S. spine, which was even better than it was, I guess, in 2019, just wondering if you could delve a little bit more into what you were seeing, if there was anything in the quarter that particularly snapped back. I know you mentioned, Dave, the biologics business. Was that sort of an outsized contributor to the – Strong sequential that you saw from 4Q to 1Q.
spk11: I don't really know what our sequential growth was.
spk05: I thought it was down from Q4 to Q1. It was down overall. But the U.S. spine business, I mean, overall, I wouldn't say, like, our implant business, our U.S. spinal implant business is performing extremely well. And though biologics did, you know, bounce back, as you commented, It doesn't take away from it.
spk11: We've been seeing that, Steve, in terms of biologics for the last six months or so, and that's a continuing trend. But typically Q4 is stronger than Q1, and I just don't have the numbers in front of me right now. And I'll just remind you that COVID hit January pretty hard. It had an impact in February as well. And then March was a strong month for us, so I'm not sure how much. I know there were still some COVID restrictions in some markets in March, but it was It was pretty light. So it's just the four things I mentioned continued to be the things that we're executing well on. It pulls through from robotics. It's the new products we've launched. Biologics has made a comeback. I think we've commented on it the last couple quarters. It's continued into Q1. And then finally, competitive recruiting is always part of our growth strategy.
spk06: Got it. Great. And then just secondly, can you talk a little bit more about your updated margin goals for the year? I'm not sure if you talked about EBITDA for the full year. And when you talk about R&D acceleration, can you put any numbers on that for us, any ranges in terms of as a percent of sales for the year?
spk05: Sure. So from an R&D perspective, we historically said that we run about 7% of sales. based on some of the comments around investment in spine, robotics, trauma, and joints, we'd expect that number to move a little north of that as we look ahead in 2021. As we think about, what was that very first part of your question? Could you repeat that one more time? Just EBITDA, a margin for the year. Our EBITDA, I mean, we came into the year expecting that we were going to see margin expansion from 2019 and 2020. We still view ourselves as a mid-30s EBITDA business, even with this increased investment. You know, we're really happy with how the year started. You know, when we came into 2021, you know, the COVID impacts in the beginning of the year caused, you know, a little bit of concern. But when we look back and see how we finished, we feel really good about where we're sitting and we feel comfortable in saying we're still a mid-30s EBITDA business.
spk06: Great. Congrats, guys.
spk05: Thank you.
spk09: Your next question comes from the line of Shagun Singh with Wells Fargo.
spk10: Great. Thank you for taking the question, and congratulations on a really outstanding quarter. So I was just wondering if you could talk about trends in April, how that is tracking relative to March, and then how much of the sales growth in Q1 was backlogged. And then just with respect to guidance, you've increased revenue outlook by about 5%, but EPS just by about 1.5% at the midpoint. So could you just discuss the puts and takes there and how you thought about it? Thank you.
spk11: So I'll take the first part to gun. March was a really strong month. April continued to be really strong as well. So I feel like the economy and, you know, the spying business at least is back and operating at really pre-COVID levels. So I feel really good about that aspect of the business. I'm going to let Keith handle the guidance.
spk05: Yeah, so the guidance, so we grew top line by from, 880 to 925, but our bottom line didn't grow quite as much. Really, when you step back and look at that, obviously the volume is driving an increase. But a couple things I want to call out is that we did talk about some investments in our trauma, spine, robotics, and INR businesses. Also, our share count is a little bit higher. But when you step back and look at our overall guidance and you compare it to 2019, we're growing our top line by about 17.8%. Our bottom line at $1.89 will grow about 12.5%, but I do want to call out when you're doing that comp and you're looking at our overall growth, when you go back and look at 2019 and look now, there's about $0.19 of add-backs for what I would call non-operating items. That would include interest income, tax, higher stock comp, and higher share count. When you take that $0.19 and add it to our $1.89, you get to something closer to $2.08, which would give us about 24% on a more normalized basis. So really when you step back and look at our revised guidance, we really think we're well positioned, especially looking at where we were in 2019.
spk10: That's really helpful, Connor. And just with respect to the backlog, how much of the sales growth in Q1 was attributable to the backlog?
spk05: Yeah, that's a little bit more of a tougher question. I mean, when you think about last year, coming into our Q1 release last year, we called out about a $20 million impact driven by COVID. Surely this year, we were impacted in January, and we started to see that sequential improvement in February and March. But if I step back and look at it, I would say it's almost a push year over year. Dave, anything you'd add to that?
spk11: You're saying quarter one last year versus this year on an implant basis is kind of flat. It's a little challenging to decipher because different sections of the country are at different COVID kind of reactions and restrictions. But as well as we can understand, I think there's probably a net zero impact between Q1 last year and Q1 this year from a U.S. implant standpoint.
spk10: I got it. Thank you so much.
spk11: Sure.
spk09: Your next question comes from the line of Matt Henriksen with Citibank.
spk16: Hi, good afternoon and congrats on a great quarter. Let's start with the ortho trauma results. You mentioned it was up 100% and then kind of, you know, although it's going to improve sequentially and we'll be at that growth rate, can we just add a little more detail on kind of what's driving that growth? What are the strategies around the Salesforce expansion and kind of how we expect that to play out throughout the rest of 2021 and into 2022?
spk04: Thanks, Matt. It's Dan Scavilla. So a couple of things. I mean, certainly we're pleased to have and get inroads in the markets that we have, and we continue to see that occur, not only in Q1, but we'll expect that to go through the year. At the same time, we have stepped up in our recruiting, and we see that there's an activity that's helping us further bring reps on board. I don't really break it out by quarter, but, again, I would think that, again, off of smaller numbers, the higher growth rate helps, and getting more people in will matter rep by rep right now with that. Dave also mentioned that I would support we have what I consider significant product launches coming at the second part of the year. And that will further help us drive in and grow that way. So we've always said trauma is going to be a longer-term growth year by year and not an explosion. And I think it's playing out that way. We just have to continue with our investments and our focus.
spk16: Okay. Thanks for the color there. And then just moving to cervical, that's starting to get more attention with the recent acquisitions and recent product launches. You have your secure C with the two-level indication. But kind of what are your thoughts on the market overall compared to kind of traditional fusion? And then any commentary that you have on any future development would be great. And thanks for taking the questions.
spk11: Sure, Matt. Let me just gently correct you there. We don't have two levels on Secure C. We only have one level. And I think that's a challenge for us. I think that segment has a lot of future potential. It's not huge right now, but I do think it's a good treatment for patients. We're actively evaluating what our options are there, and we will be a strong competitor going forward in that segment.
spk03: You're next.
spk09: Hello?
spk11: Catherine, you cut out a little bit. We couldn't hear what you said.
spk09: I'm sorry. Your next question comes from the line of Jason Wittes with Northland.
spk01: Hi. Thanks for taking the questions. First, just a clarification. Are you implying that the final month of the quarter pretty much saw an increase in volume, and should we anticipate pretty much de minimis COVID impact for the rest of the year, or I'm just trying to figure out how what you're thinking is on COVID and how it might affect the quarters going forward.
spk11: March was a good month. I think it was the best month in our history, actually, in overall revenue. So it was a strong month. Like I alluded to earlier, there were still some regions, some regions of the country that were shut down and restricting electives, but there were others that I think included some bounce back. So on a net basis, I think March was sort of a typical pre-COVID kind of quarter. Your guess is as good as anyone going forward. April was a good month, and hopefully the vaccine is effective and we're back to normal going forward, but that's Our crystal ball, I don't think, is any more clear than anyone else's.
spk01: Okay, that's helpful. And also, just on the accounts that acquire or place a robot, can you kind of explain, give us a little more color in terms of what happens in terms of their utilization of implants? It sounds like you do see a dramatic increase in usage. I don't know if you can quantitate it or give us some guidance in terms of how an account gets transformed from once they get a robot installed?
spk11: It goes all over the map. The robot itself is much more efficient for surgeons if they utilize our screws, so that in itself typically drives volumes for the cases where they use the robot. Now that we've added interbody solutions to it, again, it works much more efficiently with our interbody devices, and we have a significant number of our sites that are either buying it with Interbody Solutions or upgrading their installed base with that. And then we also have the scenario where we will sign a committed purchase agreement with a hospital, and the rebates from that implant deal will be used to pay off the capital over time, which is something a lot of our competitors do as well. So we have all of those scenarios, so it's hard to say any particular account could be one of those three so it varies and we have not shared the actual quantitative impact and we're going to keep that as competitive information okay thanks for the question and strong quarter thanks thank you your next question comes from the line of Kyle Rose with Canaccord great thank you for taking the questions can you hear me all right Yes.
spk12: So I wanted to kind of take a more of a bigger picture question here and just talk more about the competitive dynamics of the U.S. spine market that we're seeing. I mean, obviously exceptional growth today, but also for really the last, you know, two to three quarters since the third quarter, we're seeing a big step function in growth for Globus relative to the broader group. So maybe if you could just help us, you know, bucket, you know, where that's really coming from, you know, how much is coming from, you know, competitive rep hiring and how much is coming from implant pull-through from the robot, and then how much is kind of coming from just new products and the iterative new product flow that the company's been able to generate. We're seeing exceptional growth here. It indicates some real share-taking, just really trying to understand where that's coming from.
spk11: Thank you, Kyle. I agree with you. Q1 of last year masked a strong quarter, so we've been on this track for about a year and a half, I would say. but I am not going to help you out by telling you where it's coming from. Just from a competitive standpoint, we're pulling all those levers, and we're going to continue to pull them, and I'm confident our team is going to keep executing. So that's all I can share with you right now.
spk12: That's fair. I had to try. Let me ask one more robotic question. Obviously a really strong quarter to start the year. But we're also seeing really good implant growth here. So maybe just help us understand how many or what proportion of your robots are being sold outright versus placed. I'm just trying to understand how much of the unit placements is really outpacing some of the revenue we're seeing on the enabling side.
spk05: The mix of our robots in terms of how they're getting sold hasn't changed. The vast majority of our robotic sales are still outright sales. That really hasn't changed significantly. since we've started selling robots. We can sell all the different ways that Dave mentioned earlier, but still the majority of them are outright purchases.
spk12: Thank you for taking the question.
spk05: Thank you.
spk09: Your next question comes from the line of Ryan Zimmerman with BTIG.
spk14: Afternoon. Thanks for taking the questions. I'm going to ask Kyle's question, maybe in a little different manner, Dave, and see if you'll take a bite. But the competitive environment, as we noted, is not kept up with the pace that Globus has. And so to ask it in another way, I mean, what do you think or how would you characterize the competitors in the market, particularly the mid and larger ones, in terms of what they're not doing that you're seeing out there? Because it does seem like you've been at this for over a year now with these types of share gains. And so clearly they're not
spk11: doing something that you figured out and then I don't know if you have any thoughts on kind of your other competitors yeah I would I would be remiss if I spoke ill of anyone in the market but I will tell you Ryan that the fundamental driver is technology right so our implant technology are enabling technology they're differentiated they're stronger they're driving clinical value and So that enables us to just outright sell that, but it's also very attractive for other reps who are stuck at those other companies to come over. They're good reps. They have good relationships. They want to come over and sell the best technology on the market, so that drives our competitive recruiting as well. It's really the thing underneath it. And then we continue to innovate. We've got a really strong group across the company, really. Obviously, spinal implants have been noted for a long time for the differentiation there. Our robotic and enabling technology, we're just scratching the surface with what we have that you know about and what you actually don't know about yet. We have some really exciting things coming. And then in Dan's area, in the ortho area, between trauma and joints, we have some things. You probably won't see that innovation until next year, but those are coming as well. So it all comes down to technology. We're founded as an engineering company, and that remains our core.
spk05: And there's one thing that I would add to that, to Dave's comments, that I would say that we've done exceptionally well is we've executed. I think we've Out of all the things Dave talked about, when you think through the last year, year and a half, I think the company has executed extremely well. That's really helped drive a lot of the benefits that we're seeing.
spk14: Sure. That's very helpful, and I appreciate you giving some color there. Just one follow-up for me. So I think in the fourth quarter, you guys built out some additional manufacturing capacity, and it was really expected, I think, to be up and running in the first quarter of 21, and correct me if I'm wrong there, but Could you just comment on kind of what that does if you were constrained on any product families or categories and kind of, you know, what that additional capacity does and when that comes online for whatever specific product areas that you did expand in? Thank you.
spk11: We are still a bit capacity constrained in some of the segments of the company, particularly 3D. We've added that. You've got to qualify the equipment. You've got to get the products made. You've got to get them sterilized and put through the distribution cycle. We're still not seeing the full impact of that. Actually, with the growth that we've seen here in the last nine months, we continue to add capacity. It's a great problem to have, but it's a challenging problem in the environment that we're in right now to keep up with the demand. Thank you.
spk09: Your next question comes from the line of David Saxon with Needham.
spk02: Good afternoon and really an incredible quarter. First question is just on enabling tech. You noted some international robot placement, so I was just wondering if you could share where those were. And then as you're preparing for the imaging launch, I mean, at this point, do you have some orders lined up that are going to be, you know, easy for the third quarter?
spk05: I'll take the first part of your question. Enabling tech, we really don't disclose what countries that we're selling in. What I will say is that we are actively marketing the product in the countries that we can sell the product in, and there's a lot of buzz about the product, and we're excited about what it can bring going forward.
spk11: David, in terms of the 3D system, we're not able to market it or take orders for it until it's approved. We don't have that. I will say there's been a lot of interest as surgeons have seen the product and given us input on it. And the other thing I wouldn't get too far ahead of our skis is it's with the FDA. So we have to get their approval. And while we do anticipate a third quarter launch, it's subject to their approval. I know the product's going to sell really well. I don't know when we're going to start just yet. We're confident in our submission, and we love the technology and the interest that surgeons have. So from a long-term perspective, it's going to be a great product for us.
spk02: Okay, got it. And then my second question is just on trauma. You noted some product launches you're planning for the back half. So just wondering, you know, How long do you think it will take to get to a full trauma portfolio? Is that kind of like a 12 to 18-month process or is that a little longer term? Thanks so much for taking the questions.
spk04: Hey, David. It's Dan Scavell. Thanks for the questions. So, yeah, the launches that we have planned for the second half of the year, why meaningful, we'll still be filling the bag. Dave and Keith had mentioned is our increased investment that we're planning to do with Globus Ortho both in the joints and the trauma will actually accelerate the development and placement of products in the market at a rate faster than our initial strategic plan. And so we're leaning in using the financial muscle of the company to bring on more resources throughout the organization to actually fill out that bag faster. I don't have an exact date for you. I would tell you though as we exit this year we'll be in a really strong position to compete I think within 12 to 18 months, we'll have more to actually start significantly supporting larger institutions and displacing competition. And that's really the goal of this increased investment is to make that happen faster.
spk02: Great. Thank you.
spk09: Your next question comes from the line of Matt Taylor with UBS.
spk15: Hi, guys. Congrats on a great quarter. Thanks for taking the question. I was just trying to square your comments from the last call because I remember you said in January there was like a 15 to 18 percent drag on the U.S. business and just some improvement in February. So it must have been a real rebound in March. And I just wanted to make sure I'm getting the math right. Is that drag relative to kind of the underlying double digits you had been growing last year? So if that's true, then if January was, I don't know, flattish, then you saw some improvement in February that would allow us to back into the exit rate in March?
spk11: Yes, in terms of the, it was relative to our, if you will, the fourth quarter, so our October, November run rates that we were seeing, COVID started to hit again in December. So that was, the commentary was 15 to 18% off that. But keep in mind, as we're comparing to last year, March, you know, we got hit with COVID halfway through March of 20. So as you compare year over year, you've got January and February negative impacts in 21 and a March negative impact in 20. And as one of the earlier callers had asked, I think the impact there was about flat. So the COVID impact was relatively neutral on the U.S. between the Q1 last year and Q1 this year. And then within the quarter, we definitely saw a progression. January was bad. February got better. And March was good.
spk15: Okay. Great. Could you take us through any thoughts or help on what you believe recovery will look like through the year in your international business, just given your exposure to Japan and some geographies doing better or worse? Help us parse that out a bit.
spk11: Yeah, we're doing well in almost every other market, and Japan's going to be a headwind. That's our biggest country. Again, we're confident in the team that we have in place there, the process of rebuilding, if you will, in those areas where we've gone away from certain distributors. It's just our robotic technology is going to roll out this year, so that'll be a leverage point as well. I think it'll mirror what we saw this quarter where the two are going to probably offset each other to a large extent as we go through this year. And hopefully by the end of the year we'll see some of that growth in Japan start to pick up sequentially.
spk15: Great. Thanks a lot.
spk09: Your next question comes from the line of Richard Newiter.
spk03: Thanks for taking the questions and congrats on the performance this quarter. Two questions. The first is on what's assumed in guidance right now. I appreciate that you bumped the outlook on a very strong one, too. But when you had last provided guidance at the beginning of the year, you had suggested that you weren't making any assumption for really much of a pickup in growth in the back half of the year relative to a strong second half of 2020. I'm just curious with the commentary that March picked up big, April's better than March. You know, the guidance rate wasn't quite that much more than the 1QP, and I'm just curious what you're assuming for the back half.
spk05: Thanks for the question. You know, as you think about going from the 880 to 925, clearly, you know, we came out and finished with a strong Q1. You know, as I think about or as we think about Q1 and the Q2, you know, we still expect good momentum in the Q2, but I will say just to clarify that April is a little bit of a slowdown for March, but we still feel strong about where Q2 is going to land. Stepping back and looking at the 925 holistically, you know, I would still say there's still appropriate conservatism in there from a globalist perspective as we look because when you get to Q3 and Q4, we know we had those strong bounce backs last year. and we're still in this environment where we're still not sure how Q3 and Q4 will turn out. But where we're positioned right now, I really fall back on some of the earlier statements, is that we feel positive about where we're at. We came out of a strong Q1. We're going into a Q2 that we feel is going to be a strong quarter. We still want to maintain that conservatism as we look to the back half of the year, just because it's April. A lot could happen between now and the end of the year.
spk08: Okay.
spk05: Got it.
spk03: Sounds like you're still being conservative, but you're encouraged if I'm hearing you correctly. And then just on the capital side, can you remind us what the capital selling cycle, how long it has been historically and what's changed, if anything, kind of now, like how long it takes from kind of the beginning of the conversation to when you close the deal? It's just an extremely strong 1Q placement quarter, and I'm just wondering if something structurally has changed, either a mindset, capital prioritization on orthorobotics, or has anything dramatically shifted there? Thanks.
spk11: Yeah, thanks, Rich. Well, our goal is to compress that capital cycle and make the technology and the economic opportunity for the hospital compelling enough to break out of the capital cycle so that I would say it was challenging last year when you couldn't get in front of executives and surgeons, and that's still a challenge, but it's possible now. So that is one structural difference between last year. And then I will just remind you that at the end of, as we exited the year, I said our pipeline was really strong. So the deals that we had that we were pursuing as we exited the year, Several of them were closed in the quarter. And I'll say that again. We continue to have a strong pipeline and a lot of potential as we look at Q2.
spk03: Really impressive. Congratulations. Thank you. Thank you.
spk09: And ladies and gentlemen, just as a reminder, if you'd like to ask a question, please press star and then number one on your telephone keypad. Your next question comes from the line of Matt O'Brien with Piper Sandler.
spk00: Hi, this is Karine on format. Thanks for taking the questions and congrats on the quarter. So first off, just following up on imaging, how much of that is baked into guidance for this year or will that be more of a 2022 impact that we should expect?
spk05: We're not going to sit and break out the parts and pieces because we know that, you know, coming from Q1 or coming from our 880 to 925, we know that it was a nice move forward. We still want to maintain some conservatism in our number, but One thing I will say is that even though we're not breaking out the parts and pieces, we do hope to launch it later this year.
spk00: Great, thank you. And then one last one. Can you just expand on some of your efforts in the ASC channel? With the huge push in the ortho space to the shift to the ASCs, how are you positioning yourself to move through that but still stay competitive in the hospital setting?
spk11: That's a great question. I don't know that anybody's fully figured that out at this point, but more efficiency in terms of both capital and our implant sets is probably the way to go there. They're constrained in terms of their capital budgets. They're constrained typically in terms of their operating budgets and their space issues. So we're trying to look at products that address all of those constraints while we focus as well on the hospital environment. So it's a challenging but high-impact opportunity for us.
spk09: Thank you. Our last question comes from the line of Craig Bijou with Bank of America.
spk17: Hi guys. Thanks. Thanks for taking the question. Just wanted to start with a high level, a couple of high level questions on the use of robotics in spine and really wanted to get a sense for, I guess, could you give us a sense for what percentage of your procedures are on the robot? Is it 10% or is that, you know, roughly in the ballpark? And then secondly, you know, Maybe higher level thoughts on how you see the use of robotics in spine over time. Is there a percentage of procedures that you expect that will ultimately be done with a robot? And then how, you know, what's that progression over the next couple of years?
spk11: Thanks, Craig. In terms of our percentage right now, we don't share that information from a competitive standpoint. I will tell you that's an internal focus of the company, though. We're highly focused on driving adoption and utilization in this installed base, because ultimately that's why it's going to continue to grow. As the value of computer-assisted technology is recognized and we're able to measure it, more and more people are going to do it, utilize it. I actually think it's going to be standard of care, and I don't know When that'll be, I certainly think within 10 years. It could be sooner. It's hard to say. I do think that there's a growing acceptance by surgeons of the technology, and I see a lot of anecdotal evidence where guys are just shifting over to everything they're doing, and they're really seeing those benefits. So we're pushing as hard as we can to drive that, and we're doing that both with our our procedural focus in the field as well as trying to make the technology just better, easier to use and more efficient in the OR. So I wish I had a better answer for you, but we're super bullish on where it's going and our ability to compete there.
spk17: I appreciate that. And maybe just a follow-up on some of your acquisition commentary. Your target areas, you know, is it more the enabling technologies, you know, the ortho, you've done a couple deals there, or spine technologies. Anyway, I'm assuming you're looking at all of those areas, but is there any one of those areas that may be more of a focus than the others?
spk11: I think the The answer is we're looking at all of them, but we have a very broad line of innovation in spine, so it's probably less likely that we would find something there. And the opposite of that is true on the ortho side. So those are probably going to be things that fit better into what we're doing and have a bigger impact. But we're open to any and all areas where we can improve the differentiation of our portfolio.
spk17: Great. Thanks for taking the questions, guys.
spk11: Sure.
spk09: I'd like to turn the call back over for any closing comments.
spk07: Thanks very much for everybody. With no further questions, this ends the Globus Medical first quarter earnings call. Thanks for joining us. Have a good night.
spk09: Ladies and gentlemen, this concludes today's conference call. We thank you for your participation. You may now disconnect.
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