Globus Medical, Inc. Class A

Thank you for standing by and welcome to Globus Medical's fourth quarter and full year 2022 earnings conference call. At this time, all participants are in a listen-only mode. After the speaker presentation, there will be a question and answer session. To ask a question during the session, you will need to press star 1-1 on your telephone. I would now like to hand the call over to Senior Vice President of Business Development and Investor Relations, Brian Kearns. Please go ahead.

Thank you, Lateef, and thank you, everyone, for being with us today. Joining today's call from Globus Medical will be Dan Scavilla, President and CEO, and Keith Feil, 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 2022 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 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 Dan Scavilla, our President and CEO.

Thanks, Brian, and good afternoon, everyone. Globus finished 2022 with a strong fourth quarter. Revenue for the year was a record $1,023,000,000, crossing the billion-dollar threshold for the first time. We delivered $65 million, where 7% as reported and 8% constant currency growth for the full year. This is above last year's difficult post-COVID comp, where we grew 21% for 2021. We achieved record sales while maintaining industry-leading profitability, generating a record $2.06 in non-GAAP EPS, and an adjusted EBITDA of 33%, even as we continue to invest heavily in INR, trauma, competitive recruiting, and absorb significant currency headwinds. We also launched seven new products in 2022. Four of the launches occurred in the fourth quarter. Revenue for the quarter was $275 million, up 10% as reported, or 12% in constant currency. Non-gap EPS was 59 cents, up 20% versus prior year Q4, and adjusted EBITDA was 33%. US Spine grew 10% in Q4, with notable gains across our product portfolio in expandables, biologics, MIS screws, 3D printed implants, and cervical and lateral offerings. The gains were driven by competitive rep conversions and robotic pull-throughs. We have a strong competitive recruiting year, surpassing the hiring levels in 2020 and 2021. This is usually a leading indicator of growth in the coming years, and we're excited about the potential of the team we've onboarded in 2022. In Q4, we launched our prone lateral patient positioning system as part of our focus on the continuum of care. It is an interactive adjustable bed mount that enables a single position, single stage, lateral surgical approach for direct and indirect decompression, designed to maximize operational efficiencies, increase ease of implant placement, and minimize surgeon fatigue. It integrates seamlessly with our Excelsius GPS and E3D solutions and enables significant capabilities in non-robotic procedures. When combined with our Excelsius platform and our range of expandable interbody offerings, we have unique and customizable lateral solutions available to our surgeons. Enabling technology sales were $30 million, up 20% on a constant currency basis versus prior year, driven by robotic and imaging system sales. This was our highest quarter since launching enabling tech, surpassing last year's Q4 sales that delivered 40% post-COVID growth. We continue to see increased interest in placements with significant international gains of Excelsior's GPS and EMEA in the UK that we feel will lead to future implant pull-through and strong market share gains. Robotic procedures continue to accelerate, growing 25% for the full year and exceeding 43,000 robotic procedures performed to date. We launched the Excelsis 3D imaging system in Q2 of this year and continue to penetrate the market throughout the year. Surgeons have said this is a game changer. Excelsis 3D is a three-in-one imaging platform offering three image modalities in a single cart with high maneuverability, a large field of view, a seamless integration with our Excelsis GPS robotic system. It is a key component of the Excelsis ecosystem in the operating room, an ecosystem that is designed and built from the ground up to communicate together seamlessly. Market interest remains high for this state-of-the-art technology and customer orders continue to grow. Excelsis 3D is positioned to be a major growth driver as we enter 2023. Our international spinal implant business, excluding Japan, delivered record sales in Q4, growing 20% on a constant currency basis compared to prior year. We deliver double-digit growth in most markets and continue to see strong growth in key markets ranging between 25 and 50% for the quarter, with UK and Australia being major contributors. Our trauma business delivered its 12th consecutive quarter of sequential growth, delivering 70% growth for Q4 and 71% for full year. Trauma performance is driven by Salesforce expansion and strong uptake in all 14 product lines, delivering high double-digit growth in each product offering. In Q4, we launched the Audubon EVO femoral nail systems. The intergrade nail is designed to be a standalone, and the retrograde nail is designed for either standalone or plate nail combo procedures with our Anthem distal femur system. Initial surgeon feedback is strong, and we expect the next generation of nail to be a key growth driver in 2023. Our product development engine continues to make progress, focusing on procedural solutions, designing implants, instrumentation, and procedures that will function together within our Globus ecosystem for a seamless and comprehensive approach in spine, trauma, and joints. At the same time, we're expanding our solutions throughout the patient's entire continuum of care, supporting surgeons in preoperative planning, intraoperative execution, and postoperative patient care to capture outcome data for future surgical planning. While this complex approach has extended development timelines beyond our historical rapid pace, I believe the upcoming launches will have greater significance in shaping procedures of the future. Moving into 2023, Globus Medical and Nuvasiv are planning to combine in an all-stock transaction to create a global musculoskeletal company focused on rapid innovation, addressing unmet clinical needs, and improving offerings to our surgeons and patients. The all-stock structure preserves cash to deleverage the company and accelerate investment in assets to fuel growth. The combination capitalizes on our complementary commercial organization where we see little territory overlap and should allow us to accelerate our globalization strategies to increase customer reach and strengthen our surgeon relationships. We plan to bring together the best-in-class technologies from our portfolios to create a differentiated and comprehensive procedural solution offering as part of our approach to address unmet clinical needs and support our surgeons and patients. Our product development engines will combine and increase our focus on rapidly developing innovative solutions throughout the continuum of care from preoperative planning through to surgical monitoring. Our operational footprints are highly complementary, allowing us to better leverage each other's manufacturing and supply chain resources to increase internal production while reducing the amount of capital investment required as stand-alones so we can redirect investment and improve cash flow. Over the past several months, it has become clear to me that both organizations have more in common than they are different. The complementary strengths of Globus Engineering with an invasive surge in relations, education, and training will combine for a truly potent innovation company. We will continue to outpace the market growth where we compete and gain share while maintaining financial discipline to drive sales growth, continue mid-30s EBITDA, accelerate EPS growth, and increase cash flows for our investors. As an update on the merger status, we are currently preparing our HSR submission and the joint proxy statement. Cross-functional integration planning has ramped up so we can pivot to integration implementation once the merger is approved when we clear HSR, secure shareholder approvals, and meet closing requirements. We expect to close the deal in mid-2023. In closing, we remain focused on core elements for long-term growth, innovative new product introductions, robot and imaging system sales, competitive rep recruiting, and merger integration planning. 2023 is all about focus and execution to deliver value to our customers and drive growth. I know we are well positioned to achieve our mission of becoming the preeminent musculoskeletal company in the world. I will now turn the call over to Keith.