Globus Medical, Inc. Class A

Welcome to Globus Medical's second quarter 2021 earnings call. At this time, all lines will be on mute and the Q&A session will be held after the prepared remarks. I will now turn the call over to Kelly Huller, Senior Vice President, General Counsel. Ms. Huller, please go ahead.

Thank you 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 our 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 CESEC 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 GAAP measures are available in the schedules accompanying the press release and on the Investor Relations section of the Globus Medical website. With that, I will now turn the call over to Dave Demski, our President and CEO.

Thank you, Kelly, and good afternoon, everyone. Globus had another outstanding quarter in Q2, building on the momentum we've established over the past two years as we continue to take market share. Given the impact of COVID-19, it's difficult to draw meaningful insights about the business by comparing the results to Q2 2020, so my comments will be primarily focused on comparisons to the second quarter of 2019. Revenue for the quarter was a record $251 million, up 29% over 2Q19. Non-GAAP EPS was $0.56 per share, a 38% increase, and adjusted EBITDA was a strong 35%. Once again, INR and U.S. fine led the way. INR revenue was a record $21 million, up 73% over 2Q19, and our third consecutive quarter of strong growth. The clinical superiority of Excelsius GPS continues to be recognized by surgeons, as reflected in our recent announcement of surpassing 20,000 procedures using Excelsius. More significantly, the average number of procedures per robot reached an all-time high in 2021, reflecting an acceleration in adoption. U.S. Spine continues to take significant market share, growing by 30% over Q2 2019. Pull through from robotics, contributions from new product introductions, a resurgence in our biologics business, and competitive recruiting were all factors driving growth. We're beginning to see several virtuous cycles emerge, all emanating from the value created by the adoption of our robotic technology. We have surgeons who utilize Excelsis for the majority of their cases, master increasingly complex pathologies because of their technology, and may even perform surgery in situations that would be considered inoperable without robotic assistance. These surgeons wholeheartedly endorse Excelsis to their peers, leading to additional robot sales. We have surgeons who have not previously used Globus implants, but due to Excelsis, gain exposure to our entire line of innovative spinal implants and have begun to utilize Globus for non-robotic cases as well. We have surgeons who may not have initially championed the purchase of the robot, but after seeing the success of their colleagues, also adopted technology, which has driven globus implant usage and led to the purchase of additional robots. Finally, we have attracted successful competitive reps who, after losing a portion of their business to a robotic conversion, had decided to join the team with the best technology, bringing additional business with them. As these scenarios increasingly play out, we are seeing what amounts to a flywheel effect on our business. At the heart of it is the utilization and value created by the Excelsior's technology. It's not about merely placing robots. It's a focus on utilizing technology to improve spine surgery. The growth we have seen in our U.S. business over the past two years is a testament to the power of the transformation taking place. On the international front, our spinal implant business grew by 5% in the quarter. Strong growth in most markets was offset by declines in Japan, a trend we identified last quarter and expect to continue throughout 2021. Unfortunately, the transition in Japan, while necessary for the long-term health of our business, is masking a very strong performance by much of the rest of the world. We launched Hedron L in Q2, adding a 3D printed spacer to Rise L, Elsa, Corbel, and Transcontinental to create the most comprehensive suite of lateral interbody solutions on the market today. This broad product portfolio gives surgeons the ability to perform lateral access surgery utilizing multiple expandable options, multiple static spacers, and integrated plate spacer solutions to address all levels of the lumbar spine through 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. Moving to INR product development, we are awaiting 510K clearance for the Excelsis 3D imaging system and remain cautiously optimistic regarding clearance and launch of the system late in Q3. The full launch of the Excelsis cranial module is slated for later this quarter as well. Shifting to trauma, revenue is up over 250% compared to the second quarter of 2019, 29% over the second quarter of last year, and relatively flat sequentially. We are focused on Salesforce expansion and have several exciting product launches planned for the second half of this year in 2022. In summary, we're off to a fantastic start in 2021. It promises to be an amazing year if we continue to execute the way we did in the first half. 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.

Thanks, Dave, and good afternoon, everyone. Globus is coming off a fantastic second quarter and continues to build momentum through ongoing market penetration of our in-plan business and further adoption of our robotics technology. Q2 continues a trend of strong revenue, profit, and free cash flow growth. Before I jump into my discussions on the quarter, I want to highlight that I will focus the majority of my comparative comments in the second quarter of 2019. However, there are a few areas where I will provide comparisons against both Q2 of 2019 and Q2 of 2020. This will provide the most meaningful insights into our business. Our second quarter revenue was $251 million, growing 29% as reported versus Q2 of 2019 and 28.9% on a constant currency basis. On a day-adjusted basis, sales were higher again by 28.9%, the same number of selling days in the U.S., and two more selling days in Japan when compared to Q2 of 2019. Q2 net income was $41.5 million, and non-GAAP net income was $57.9 million, driving 56 cents of fully diluted non-GAAP earnings per share. Adjusted EBITDA was 35%, and we generated $50.8 million of free cash flow. Our second quarter U.S. revenue was $215.1 million, or 34.5% higher versus the second quarter of 2019, reflective of continued share growth across our implant business and the increasing adoption of robotics technology within INR, which is inclusive of Dave's earlier comments. International revenue for the second quarter was $35.9 million, growing 3.9% compared to Q2 of 2019. We experienced strong growth in most international markets, which was dampened by lower sales in Japan based on our previously discussed sales transition. As mentioned in Q1, we expect Japan to be a headwind as we progress through 2021. However, this will strengthen our position in Japan over the longer term. Q2 gross profit was 74.6% compared to 77.4% in Q2 of 2019. The primary drivers of the decline were higher planned depreciation expense related to instruments and cases, slightly higher product costs driven by the mix of sales, and additional inventory reserve expenses associated with a non-recurring write-off of raw materials. Research and development expenses for the quarter were $15.5 million, or 6.2% of sales, essentially in line to Q2 of 2019, but lower as a percentage of revenue driven by the impact of higher sales. The planned increases in spend we outlined last quarter have not materialized yet as labor markets remain tight. However, we remain committed to expanding our R&D team as we continue to develop new and innovative products across our portfolio. SG&A expenses for the second quarter were $107.3 million, or 42.7% of sales compared to $88.4 million or 45.4% of sales in the second quarter of 2019. The higher spending in Q2 of 2021 was mainly a result of higher sales compensation costs. However, SG&A is lower as a percentage of revenue due to the leverage impact of higher sales. The effective income tax rate for the quarter was 15.1% as compared to 19% in the second quarter of 2019. The lower tax rate was driven primarily by tax benefits associated with stock option exercises. As a reminder, Q2 of 2020 results include the large charge to R&D expenses associated with the Synos acquisition, which also impacted our effective tax rate. We concluded Q2 with $914.2 million of cash, cash equivalents, and marketable securities. Net cash provided by operating activities was $59.2 million, and free cash flow was $50.8 million. Year-to-date free cash flow is $100.7 million, and on a rolling four-quarter basis, the company has generated a record $202.7 million of free cash flow, reflective of higher earnings in the business, lower capital expenditures, as well as working capital improvements. At this time, the company is increasing its 2021 guidance to $950 million in net sales and $2 in fully diluted non-GAAP earnings per share. The industry is experiencing a declining case volume early in the third quarter as surgeons take extended vacations and regional shutdowns of elective procedures emerge due to the Delta variant of COVID-19. We expect the impact from vacations to reverse in September and October once kids go back to school. While it is hard to predict the impact of the recent increases in COVID cases, I will remind everyone that the spine market has shown great resilience in dealing with COVID-19 and Globus specifically has been able to take market share through the previous outbreaks. While we expect the situation to be transitory, we do project a sequential decline in revenue in Q3 associated with the procedural slowdown. Our second quarter results continue the strong start to 2021. Year-to-date, we've generated $478.4 million in revenue, 35.1% in adjusted EBITDA, and $1.05 in non-GAAP diluted earnings per share. As we look ahead to the back half of the year, We are focused on our continued push to take in plant share and drive the adaptation of our robotics technology while continuing to launch new and exciting products. We will do all of this while maintaining our strong operational focus on execution and discipline in our approach to managing the business. We are committed to expanding our investment and will continue to pursue complementary acquisitions, all of which will drive long-term shareholder value. I'm thankful to our Globus team and their pursuit of excellence. as we continue to serve our customers and patients. We will now open the call for questions.

At this time, if you would like to ask a question, you will need to press star 1 on your telephone keypad. Thank you. Please stand by while we compile the Q&A roster. Our first question comes from the line of Shagun Singh from Wells Fargo. Your line is open.

Thank you so much for taking the question. I guess just two from me. You know, the first one on capital, you know, obviously it was a very strong quarter and it appears that, you know, you approached an inflection probably exiting 2020. So if you can just touch on the outlook of the business in the second half, you know, just given seasonality and then, you know, even beyond that in 2022 and beyond, that would be helpful. And then I have a follow-up.

Yeah, I, This is Keith. Thanks for the question. Generally speaking, we feel extremely positive about our business. As we look to the back half of the year, everything that we've done in the first half has shown that we've executed well and we're taking share. As we look to the back half, we remain positive across our entire business. As it relates to 2022, I think it's a little early to give comments on 2022, but as we look at our last several quarters, we feel that we're well positioned to drive to the future for sales growth.

I got it. The question was just a little bit focused on capital. So just Excelsior's GPS, can you talk to us a little bit about the outlook of that business, just given that it seems like it's at an inflection point. So how should we think about it in the back half, just given seasonality and then beyond that, just specific to capital?

Thanks, Shigun. I think the third quarter is typically a slower quarter relative to some of the other ones in capital. Usually the fourth quarter is at the end of the budget cycle for a lot of accounts. So that tends to be the strongest. And then there's a little second wave at the second quarter. So you might see a little dip there. But generally speaking, we're very bullish about the adoption of Excelsius. And I think that's creating additional demand. So our pipeline continues to be very strong. And we're very bullish about the technology for the rest of this year and into next year as well.

I got it. And then, you know, just with respect to your guidance, you know, if you look at it over 2019, can you just help us understand what you've included in there for backlog? You know, we are hearing that the spine backlog was substantially realized during the first half. So what are you including in the back half for backlog? And then, you know, anything on the impact of, you know, the coronavirus variants that would be helpful. Thank you.

I think as we look to the back half of the year, Shagan, again, we remain positive. When I go back to 2019 and I look at our business, our current guidance in 950 implies 10% compounded annual growth from 2019 to 2020 to 2021. As we look, and I would also comment that that growth is organic. That growth is coming across all facets of our business and to drive that level of organic growth shows that we feel very positive about where we're going.

Thank you. Our next question comes from the line of Matt Mixick from Credit Suisse. Your line is open.

Hey, thanks. Thanks so much for taking the questions, and congrats on another really strong quarter. I'm sure everyone on the line would love to hear, if you're willing to, to share that average procedures per robot number that you mentioned hitting a high mark this quarter, but I'm guessing that you would have said it if you were going to share it, but we'd love to hear it. But, you know, two questions for me, I guess, if I could follow up on your comment on vacations. I suspect that will get some folks' attention just because that had been kind of a hypothesis heading into, you know, Q3 potentially that we may see something like that at If you could just, if possible, maybe sketch out what has the historical, Dave, you mentioned the historical revenue trend in Q3 is down. How much more of an impact are you expecting if it's down three historically? Should we expect down five? Just some sense of what the increment is, and then I have one follow-up if I could.

Thank you, Matt. As you expected, we're not going to disclose that average number for robots, but really excited about that. I think that's just validation of what we've been doing, and to see the technology being utilized is really a bellwether for the future. So super excited about that trend. In terms of vacations, I think that The situation this year is we really didn't have much in the spring, I would say. We started to see a little bit after school was over in June, but they just seem more pronounced and prolonged at this point. Obviously, I mean, there's a pent-up demand in our society for travel. We're seeing the surgeons take that, but I fully expect that they'll be back in, you know, once school starts again in September, so we're expecting a strong September, October situation. clearly, you know, given no dramatic change in the COVID situation. But I think that it will be transitory. But from a sequential standpoint, it's going to cause us to dip a little bit here in the third quarter.

Fair enough. And then the follow-up is a question I get often about some of the growth rates you've been putting up over the past several quarters is sort of how to you know, parse the various kind of growth drivers that are causing it to grow so much faster than market. And I know there's many, but if you could zero in on a couple, like how much of a factor is the movement to 3D printed implants and, you know, how much of a factor at this point do you feel like the robot is in sort of closing the distance between, call it, I don't know, 2% underlying growth and 30% to your stack growth that you put up?

Yeah, I'm not going to drill down into real granular numbers, but I will tell you that the robotic technology or the computer-assisted technology is transformational. So we've always been an innovative company that's attracted new surgeons through great technology, through great implant technology. So we're still seeing that, but on top of that, we have this transformation in the way surgery is being done, and I think we're leading the way in terms of robotics. So that's got a big impact at the top level, but it also helps us bring in over reps. You know, sales reps in this business want to sell what is going to be most effective for them. I tried to convey that a little bit with some of the situations that we described, but there's a synergistic effect, so it's really challenging to parse it out and say which one's more important. Clearly, from a long-term standpoint, the computer-assisted segment is something that we're seeing a lot of growth from, and the trend is up, so we're excited about where we're going with that.

That's great. Thank you.

Your next question comes from the line of Richard Miller from SVV-Lelink. Your line is open.

Hi. Thanks for taking the questions, and congrats on another very strong performance. Wanted to maybe just start off on the imaging system that you guys have, I think, you know, with the FDA right now. Any updates on the timelines there? If I missed it, I apologize. And then I'd also just love to hear kind of your views of kind of a year one launch and contribution potential for that product, especially with some other imaging modalities recently FDA approved and or turning commercial from some of your competitors. So thoughts there, and then I have a follow-up. Thanks.

Sure, Rich. Thank you. We're with the FDA now. We responded to some questions and it's back with them, and we're hopeful they'll approve it. this quarter and then we're planning on a commercial launch. It's going to be the end of the quarter or early in the fourth quarter now as it looks. In terms of our projections, it's really challenging to come up with a number, but I will tell you that every surgeon we show it to is excited about getting the technology. We obviously have to work through the contracting process with their hospitals, Just anecdotally, we had several who have stopped the planned purchase of other competitive systems until ours is ready. So the benefits this technology is going to bring are significant versus what's out there today. So we're excited about the impact, and we just need to, at this point, I think, make enough of them next year to satisfy the demand.

Okay, that's helpful. Just on the cadence here, I appreciate the comments around 3Q seasonality maybe being a little more pronounced, vacations. But just on the capital side, what is implied in your guidance for the seasonal kind of cadence of enabling technologies? Is 2Q the high watermark in your guidance and 4Q not? which is typically a seasonally stronger quarter, higher than 3Q, but not necessarily as high as 2Q? Or are you assuming a typical kind of, you know, the 4Q is the strongest quarter in your updated guidance?

I think – thanks for the question. I think the way I look at that is, you know, Q3 is typically a slowdown quarter, followed by Q4 picking up. In terms of high watermark for Q2 versus Q4, I wouldn't say that it's necessarily – going to be a whole lot different than history. Again, we remain positive about where we're going, but we do see that slowdown coming sequentially in Q3 across the entire business, some of which would include the slowdown in robotics as we enter the third quarter.

Thanks a lot. If I could squeeze one more in. Dave, you mentioned, I think, in your opening remarks, international spinal implants growing 5% year over year. Was that a comment off of 2019 or 2020? Yeah, it was off 2019. Thank you.

Your next question comes from the line of Kyle Rose from Canaccord. Your line is open.

Great. Thank you very much. And I reiterate the comments on the strong quarter. I wondered if you could just talk maybe from a bigger picture perspective what you're seeing as far as capital demand with respect to how customers want to order or pay for the robotics products. And then kind of maybe your expectation on a go-forward basis where you have robots placed, are you seeing any difference in interest from the imaging modality as far as installing upgrades and things of that sort with the installed base that you have within the robotics field as it stands now? Then I have one follow-up.

Sure, Kyle, and then thank you. In terms of how customers will want to pay for it, I think there's really no change in that over time. Everybody has their own capital constraints or willingness to make other arrangements. We're not seeing a big change there. I would say that people are familiar with our technology and how Excelsis works are probably more prone to have interest in an imaging system just because they have experience with us and with our technology. They know the value that it brings. It really opens up for us a competitive segment that we're currently challenged to address. If someone's already adopted computer-assisted technology and that they're doing free hand navigation, they've achieved some benefit from the computer at that point. It's probably a little more challenging to get them to make the next step to robotics.

by having excelsis 3d we're going to be able to have a comparable product to what exists today to compete for that business along with moving people up to robotics great that that's very helpful and then just from a bigger picture perspective i mean we've seen uh over the last several years you know you you go from spine and extend yourself into trauma obviously you're launching more enabling technologies You've you acquired Stelcast just kind of trying to understand where are you in the life cycle of going? You know merging into a broader orthopedic organization when we think about hips and knees And potentially extremities and things of that sort from a long term. What's next?

Well, I think we have a lot of work to do with the starts that we've made particularly in the in the total joint area we really really think the The particular advantage we can bring there is, again, the computer-assisted aspect. So we're still in development of our robotic solution there, and that's where we're going to be able to differentiate ourselves from the competition. So it's early innings there. And then trauma is making great progress as we've walked you through over the last couple of years, and we continue to expand that portfolio and expand our footprint. And as Keith has alluded to, we're active in considering other ways to grow the business through acquisitions. But at this point, we don't have much more to discuss on that area.

Thank you.

Our next question comes from the line of Matt Taylor from UBS. Your line is open.

Hi, everyone. This is John Lee from Matt. Thanks for taking our questions. I guess maybe just one to follow up on, because you mentioned you're seeing some early impacts from Delta and Q3. What are some of the areas in the U.S. or OUS that you're seeing some of that impact and the areas that you're paying more attention to given the increase in hospitalizations?

Yeah, I think it just mirrors where the outbreaks are most significant. So Florida has had a lot of it. We've seen Arkansas, Louisiana at this point. Internationally, I'm not as close to that personally to comment on.

Okay, great. That's helpful. I guess maybe one on trauma. I think it was flat sequentially. You're focused on launching some new products and expanding the sales force. I was just wondering maybe from a product portfolio perspective, You know, where do you think you are relative to the competition? You know, how much more product families and types do you try to include in the portfolio?

Thanks for the question. This is Dan Scavella. So just a couple things. We've always said trauma is a long-term play, and we look at it over the long-term horizon. So while it's relatively flat sequentially, that's not something we're hung up on so much as just along the journey. Q2 was compared to a record high with several of our territories actually breaking records in Q1. So the fact that they maintain that is a very good positive trend for us as we go forward to do this. That said, as Dave mentioned, we've got several key launches that we plan to come out in the second half of the year that will get us further up into the procedural coverage. We think at that point we should have the ability to cover about 70 to 75% of the procedures. with our expansion of our R&D resources that we have planned when hired will accelerate further into 2022 with the ability to actually cover off more of that gap. So I feel very bullish on where we are, the traction we've made, and what the next steps are to really get out there and be a complete trauma portfolio.

All right. Thank you.

Your next question comes from the line of Drew Ranieri from Morgan Stanley. Your line is open.

Hi, everyone. Thanks for taking the question tonight. Just on the seasonality factor and the sequential decline in the third quarter, you came off the record sales in second quarter. I think consensus has you at $230 million for the third quarter. Is that kind of the right way to think about the sequential decline, just given the momentum of the business? And it's just kind of difficult to look back at history and see underlying trends just given that the portfolio has changed and robotics has entered the picture, but any help in kind of framing what the seasonality and sequential decline will look like in the third quarter?

Thanks for the question. This is Keith. I think that you said roughly around 2.30. I think that makes sense. When you look back at history, typically from Q2 to Q3, we're kind of flattish, but with our strong second quarter here and the comments that we raised about seeing the sequential decline, When I look at it, I feel like Q3 is going to look at and feel a little bit more like Q1. So I think that your comment there is reasonable.

Okay. Got it. Thank you. And just on the spend not materializing as the labor market remains type comments, was that solely directed at R&D or was that kind of broadly across SG&A also? Just kind of want to better understand that dynamic. as we're moving into the back half of the year and how your guidance is built around that comment. Thank you.

Yeah, my comment was really focused on R&D, you know, because as I look at the spending, the spending is really flattish compared to 2019. I wanted to raise that because we had talked previously about, you know, being more aggressive in investing, and I wanted to point that out. Yeah, the labor market's tight. It doesn't change our view. The one thing I do want to call out is with our Q2 number of about $15.5 million in R&D, There is a higher people investment in there. One of the things that we've done is we've gone back and looked at our R&D last year during COVID and identified previous acquisition costs that were what I would call stranded. We've worked to take those costs out of the P&L. So there's savings there, which is kind of masking some of the growth. And the last thing I would add is from coming back from COVID, our spending is coming back in things like travel. You'll still see a little bit of a tailwind in R&D as it relates to travel.

Great. Thank you for taking the questions.

Your next question comes from the line of David Saxon from Needham & Company. Your line is open.

Yeah, good afternoon, and thanks for taking the questions. Just one on the imaging launch. I mean, correct me if I'm off, but I guess you've just passed 150 Excelsior's placements. So with the imaging launch, do you feel like you can get – get into a majority of those accounts over the next 12 to 18 months. And then I think you mentioned supply could be an issue. Did I hear that right, or is that just kind of dependent on how the launch goes?

Yeah, thanks, David. The comment on supply was really more anecdotal in that there's been a lot of interest expressed by surgeons as we've previewed the technology to them. It's challenging to translate their enthusiasm to what the hospital's willing to spend. On your other point about selling it to current robotics users, that is a value for us, but I really think the more significant value for us is to go after other users of other technology today, and not just to sell to our same customers. So I really see this as, again, an ability to take market share on the computer-assisted side.

Okay, thanks. And then just a follow-up on the R&D and the labor markets. I mean, trauma and ortho I think has been a focus and is a focus. So is there any impact on those initiatives? And then also, could you just give an update on the total joint robot? I think it was 2022 last I heard. Thanks so much for the questions.

Thanks. This is Dan Scavilla. So earlier on in the year, we had talked about our willingness to invest and expand resources in R&D, and Keith just went into some details on that. That was with the intent of pulling forward and accelerating future launches. So while the entire world, and especially the U.S., is currently looking at some labor shortages, we're not signaling that having an impact on any of our in-process launches at this point. Only what we could bring forward at a faster pace when we do staff up. That's really the intent of those comments. As far as the joint robot, it is progressing very well. We've gone through designs and some of the design freezes to the point where we've had several surgeon trials on it. gaining positive feedback, and we do believe that it is on track for the second half, possibly later part of the second half of 2022, to become marketable based on all the information we currently have.

Your next question comes from the line of Matt Hendrickson from Citi. Your line is open.

Yeah, hi. Thanks for taking the questions. First, turning back to robotics, you talk about a record high average procedures. That is interesting given the fact that you have a lot of new XLCS adopters in the market, and normally new adopters would water down the average. Are you seeing those new adopters get up to speed faster, or are you seeing kind of your legacy users kind of reach an inflection point and get even, utilize the robot even more?

Yeah, Matt, I'm not sure I have the granularity to answer that. My data is more at the top level, so I think it's probably more the legacy users are utilizing the technology in greater amounts, because to your point, it does take a while for new users to kind of get up to speed and go.

Okay, that's helpful. And then just turning to the international market, Could you just provide a little more color on the progress you're making in Japan? The timeline still seems in line, but just any additional commentary? And then with the Japan headwind, you know, you guys are still up over second quarter of 19. Could you just comment on which markets or which countries were driving that growth?

Sure. You know, the worst is behind us in Japan, but as we're looking back to last year, we still have We've got to get through a full cycle, right, a full year, and then we'll kind of reset the numbers there, and I believe we'll be back to strong growth in that market. In terms of the rest of the world, we're strong in a number of countries historically for us, Australia, UK, Germany, kind of where the major populations are and where good medical care is. We track pretty directly with that.

Great, thanks for taking the questions. Sure.

Your next question comes from the line of Jason Wheaties from Northland. Your line is open.

Hi, thanks for taking the questions. So maybe you mentioned earlier in the commentary that you're doing new types of procedures that haven't been done before with robotics. Can you elaborate in terms of how the robot's being used, and particularly those newer procedures that haven't been done in the past?

I think it just comes down to sort of complex deformities, challenging entryways where they just don't have a lot of room and would not necessarily kind of trust themselves. with a manual procedure. They can rely on the precision of the robot to get into really difficult angles for them and tight spots. It would come in deformity corrections or sometimes like a tumor resection, those kinds of procedures.

Okay, that's helpful. On the trauma business, I don't know if we can get an update in terms of what the run rate is for that business at this point. Just as a sanity check, I know that You kind of talked about growth rates. I'm curious to know kind of what the run rate is at the current moment for that business.

So we don't tend to break out our sections of the business or comment on them or project them forward with that. And especially with trauma, given its size, you know, it can really swing depending on how we hire reps when we launch a product, how we enter into accounts. So it's very difficult to lay that out. But just in general, we stay away and just do our forecasting at the top for total globus.

And when trauma becomes a larger part of our business, we'll break it out at the appropriate time, but right now we tend to really not focus on that from a dollars and cents perspective.

That's all very fair. Can I ask kind of what the threshold might be?

The threshold, I mean, we're several years away from that, I believe. I mean, we have a lot of things planned, but I think we're still a little while away from that.

Okay, and just last question related to trauma, if I could. It sounds like, you know, you'll be about 70% coverage in terms of product portfolio by the end of this year, and it sounds like you'll probably round out the rest sometime into next year, at least from the commentary you had on this call. You know, I'm just curious, in terms of the products you're putting out there, are these sort of filling out portfolio products, or are you kind of beginning to also add in some differentiated products now? that might really move the needle?

The answer is a little both. So certainly you need the basic bag, which we focus on. But with that, it's going to be some plus additional features that have gotten the attention of the market and usage and are allowing us to penetrate the market. What we'll do, though, as we fill that bag and get complete, is accelerate some of those innovations and fast follow-on innovations that we want to do, just like we did in spine. That's the intent. But we're, for now, getting the basic, getting it tested, adding in some strong features and then looking to accelerate that as we go forward.

Great, guys. Thank you very much. I'll jump out.

As a reminder, to ask a question, you will need to press star 1 on your telephone keypad. Your next question comes from the line of Sam Brodowski from Truist. Your line is open.

Thanks for taking the question.

Just Quickly to jump back to the sequential comp, you talked about that revenue from surge in vacations potentially coming back in September, October. Should we read that as maybe a little bit more revenue or a better sequential comp into the fourth quarter as a percentage of the total year, a little bit more revenue in the fourth quarter than typical given that delay of revenue there?

Thanks, Sam, for the question. I don't know that I would draw any strong conclusions from that. I think that as we look to the back half, you know, we comment on the sequential slowdown from Q2 to Q3. I had a question earlier that asked, you know, what does that feel like relative to a consensus? And I commented that really it's going to be, I feel it right now, we're going to be a little bit closer to Q1 versus obviously Q2. As I look to the spread, I mean, typically if I go back, several years, we're typically roughly 25% of our sales in Q3 to 27% in Q4. I don't see that being a whole lot different as we look to the back half of the year.

Great. That's really helpful. And then, you know, as we get closer to the launch or, excuse me, the imaging system, do you give us, you know, how is the company thinking about selling the systems to try, you know, greater deployments of robotics, or, you know, how can we think about the imaging system maybe even potentially helping to drive greater share of implants going forward? Thanks.

Thanks, Sam. Yeah, I think it will have the same sort of impact robotics has. I mean, it's going to be, it's going to work better with our implants, and there's a natural tendency to utilize the implants of the enabling technology. So I think that they'll have a very similar impact of what we're seeing in robotics in terms of pulling through implants with it.

Thanks for taking the questions.

Your next question comes from the line of Matt O'Brien from Piper Sandler. Your line is open.

Hi, this is Corrine on for Matt. Thanks for taking the questions and congrats on the quarter. So first for us, With the new competitive navigation systems coming to market, such as Pulse and Holo, how do you foresee this impacting your ability to sell robots in the future and how are you positioning the company to withstand these eventual competitive pressures?

Thanks, Corinne. I think robotics is a step up from navigation. I mean, we've seen that in the success we've had so far. It's the next evolution in computer-assisted surgery, so I don't think the newer navigation systems are going to have an impact on us at all in terms of our robotic sales. It's another competitor from a navigation standpoint, so with the imaging system, there'll be other competitors. I haven't seen everything that everyone has to offer, but I certainly know that we stack up very favorably against the competitors that are in the market today, and we've got some significant advantages over them.

Well, thank you. And just lastly, from a modeling standpoint, on the margins with the, it seems like the top line and the EPS guide does suggest you're probably going to stay in that mid 30% EBITDA range that you've suggested in the past. But can you just confirm that's kind of where you're going to shake out for the end of the year and where that can go into 2022?

Thanks for the question. I can confirm that we still feel like we're a mid-30s EBITDA business as we look to the back half of the year. Going ahead, I think it's still a little early to talk about 2022 from our perspective, but what I would say is that we've had a history of being a mid-30s EBITDA business, and I expect that to continue.

Thank you. Our last question comes from the line of Craig Bijou from Bank of America. Your line is open.

Good afternoon, guys. Thanks for taking the questions. Just a couple on robotics. Dave, I want to go back to one of your comments that you made that you're seeing within the accounts that you've placed at Excelsis, you're seeing use expand beyond the Surgeon Champion. So, on that comment, you know, I found that pretty interesting. wanted to see if that's relatively a new phenomenon or if you're just starting to see that now for maybe systems that were placed a couple years ago. And if you have been seeing it, is it potentially accelerating from what you saw over the last couple of years?

Thanks, Craig. It's been there from the beginning. I would say robotics in general, the interest in that by surgeons has grown, so I think it is accelerating. I don't think it's anything particular to us. I think that there's just more interest in robotics, so more surgeons are interested in getting trained. And the ones where they're in hospitals where we've already sold it, that's kind of a layup for us if they're interested. But we've seen it from the beginning. Some of our early... early sales were to accounts that have, you know, now multiple systems because of the growth and the usage among the, you know, surgeons across the board.

Got it. Understood. And then just, you know, I mean, how would you characterize your growth in the systems where you, or in the accounts where you do have an Excelsius installed? I mean, is it, you know, a multiple on top of kind of what you're growing?

If I understand your question, we grow faster in robotics accounts than we do in non-robotic accounts.

Yeah, that's what I was asking. I was hoping that you might quantify that to some extent.

Yeah, that's competitive information from my standpoint. I'm just not comfortable sharing it.

Okay, fair. Thanks for taking the questions, guys.

Sure.

Thank you.

With no further questions, this ends the Globus Medical second quarter earnings conference call. Thank you for participating and have a good evening.