This conference call transcript was computer generated and almost certianly contains errors. This transcript is provided for information purposes only.EarningsCall, LLC makes no representation about the accuracy of the aforementioned transcript, and you are cautioned not to place undue reliance on the information provided by the transcript.
spk07: Welcome to Globus Medical's first quarter 2023 earnings call. At this time, all participants are in listen-only mode. After the speaker's presentation, there will be a Q&A session. To ask a question during this session, you will need to press star 1-1 on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, please press star 1-1 again. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Brian Kearns, Senior Vice President of Business Development and Investor Relations. Please go ahead.
spk14: Thank you, Antoine, and thank you, everyone, for being with us today. Joining today's call from Globus Medical will be Dan Scavilla, President and Chief Executive Officer, 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'll now turn the call over to Dan Scavilla, our president and CEO.
spk13: Thanks, Brian, and good afternoon, everyone. Globus achieved strong results in Q1, delivering record sales of $277 million, a 21% increase in cost in currency, or $46 million in growth versus Q1 2022. Non-GAAP EPS was 53 cents, increasing 25%. And free cash flow was $37 million, up 51% versus Q122. Adjusted EBITDA for the quarter was 31%. Keith will speak more about these items in his section. 2023 is starting out to be a strong year for the Globus standalone business. That should deliver record sales, strong cash flows, mid-30s EBITDA, and gains in EPS. Looking deeper into Q1 performance, your spine grew 14% in the quarter with notable gains across our product portfolio in expandables, biologics, MIS screws, 3D printed implants, and cervical offerings. This above-market growth is driven by competitive rep recruiting from prior quarters, robotic pull-through, and a normalization of post-COVID procedures versus prior year. In Q1, we launched our MARS T-LIFT pedicle-based retractor as part of our focus on procedural efficiency to offer specialized options to meet surgeon preferences. We also continue to make significant progress in launching our prone lateral patient positioning system. 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 efficiency increase ease of implant placement, and minimize surgeon fatigue. It integrates seamlessly with our Excelsis GPS and E3D solutions and also enables significant capabilities in non-robotic procedures. When combined with our Excelsis platform and our range of expandable inner body offerings, we can provide unique and customizable lateral solutions for our surgeons. Enabling technology sales were $25 million, up 91% on a constant currency basis versus prior year, driven by robotic and imaging system sales. This represents our highest Q1 robot sales to date. We continue to see increased interest in sales with significant international gains of Excelsius GPS and EMEA and AsiaPAC that will lead to future implant pull-through and strong market share gains. As we enter Q2, we have one of the strongest robot pipelines since launching the system. robotic procedures continue to accelerate, growing 51% versus prior year, and exceeding 49,000 robotic procedures performed to date. We continue to make positive inroads with our Excelsis 3D imaging system. Surgeons have said this is a game changer as they experience the benefits of integrated imaging. 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, and seamless integration with our Xcelcius GPS robotic navigation system. It is a key component of the Globus ecosystem designed and built from the ground up to communicate with Xcelcius GPS in the operating room. Market interest remains high for this state-of-the-art technology and customer orders continue to grow. Xcelcius 3D is positioned to be a major growth driver for 2023. Our international spinal implant business, excluding Japan, delivered record sales in Q1, growing 30% on a constant currency basis compared to prior year. We delivered double digit growth in most markets and continue to see strong growth in key markets. Japan delivered 17% constant currency growth for Q1. We expect to see gains in Japan throughout the year as we focus on recapturing market share. Our trauma business delivered its 13th consecutive quarter of sequential growth, delivering 53% growth for Q1, and 16% sequentially. Trauma performance is driven by Salesforce expansion and strong uptake in all product lines, delivering strong growth throughout our portfolio, including the Autobahn Evo femoral nail system launched last quarter that it continues to take and make inroads for market share gains. To update you on the merger status, both Globus Medical and Nuvasiv Class A shareholders voted overwhelmingly in support of the merger, with over 99% approving the transaction. This is a major milestone, and the support of the combined shareholders moves us closer to realizing the deal. Earlier this week, we received notification from the Federal Trade Commission for a second request, and we are working with the FTC to address their open questions. The second request will impact the anticipated deal closure timing, moving from mid 2023 to Q3 2023. However, it does not alter our commitment to the deal, We're our belief that this combination will benefit the surgeons and patients in the markets where we compete. We're placing all resources required to quickly address the FTC questions and drive to a successful outcome. In closing, we remain focused on the core elements for long-term sustained growth. One, innovative new product introductions. Two, robot and imaging system sales. Three, competitive rep recruiting. And four, 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 thanks dan and good afternoon everyone we are extremely pleased with our first quarter results and they demonstrate our growing position in the market strong sales growth was seen across our portfolio and geographies as we've continued to take share
spk11: while also not experiencing the procedural softness seen in last year's first quarter. Our Q1 revenue was $276.7 million, growing 20% as reported and 21% on a constant currency basis. Net income was $49.1 million, resulting in fully diluted GAAP earnings per share of 48 cents. Non-GAAP net income was $53.8 million, delivering 53 cents of fully diluted non-GAAP earnings per share, representing 25.1% growth over the prior year quarter. Turning our attention to sales, Q1 musculoskeletal revenue was $251.6 million, growing 15.7% as reported when compared to the prior year quarter. Growth was led primarily by our spine business, driven by strong procedural volumes both in the U.S. and international, driven by continued share-taking, as well as softer comps when compared to the prior year quarter. First quarter 2023 enabling technologies revenue grew 90.8% as compared to the prior year quarter, driven by ongoing demand for our robotics and imaging system technologies. I specifically note that our robotic pipeline and its development was strong coming out of Q4 and remains so heading into our first quarter of 2023, both in the US as well as internationally. First quarter US revenue was $234.1 million, growing 19.2% as reported, led by our spine and INR businesses, as well as our biologics and trauma businesses, as Dan mentioned earlier. International revenue was $42.6 million, growing 24.7% as reported, and 31.5% on a constant currency basis. Growth was again led by our international spinal implant businesses, mainly in Australia, Brazil, Poland, the UK, Spain, and Germany. Our strategy remains consistent as we seek to drive greater share in our focus countries across our international markets. Gross profit in the first quarter of 2023 was 74.4%, essentially flat to the 74.3% in the prior year quarter. Increased product costs as a result of product and geographic mix were partially offset by lower inventory write-offs related to scrap, as well as improved manufacturing and supply chain efficiencies. Research and development expenses for the quarter were $21.1 million or 7.6% of sales consistent with the prior year. The increased dollar spend remains consistent with our strategy of growth around procedural solutions as reflected in higher spend mainly in our spine and enabling technologies businesses, which will help sustain sales growth as we move ahead. SG&A expenses in the first quarter of 2023 were $122.4 million or 44.2% of sales compared to $100.7 million, or 43.7% of sales, in the prior year quarter. The increased spending is primarily reflective of higher personnel-related expenses primarily driven by sales compensation, as well as higher meetings, travel, and training expenses. Sales compensation increases are primarily the result of achieving growth targets, while travel is the result of the timing of our annual global sales meeting. The effective income tax rate for the quarter was 22.3%, up slightly to the 22.1% noted in the prior year and in line with expectations. Adjusted EBITDA was 30.8% in the quarter and is reflective of my earlier comments on gross profit and SG&A impacts and is largely in line with our Q1 23 expectations. Non-GAAP EPS in the first quarter of 2023 was 53 cents compared to 42 cents in the prior year quarter. The 11 cent growth includes 3 cents of non-operating items, namely higher interest income and a lower share count partially offset by higher depreciation expense. Free cash flow was $37.3 million in Q1, $12.6 million higher versus the prior year quarter, driven by higher cash profits and lower CapEx, partially offset by working capital investments in inventory and accounts receivable. We ended the first quarter with $984.4 million of cash, cash equivalents, and marketable securities. The company remains debt-free. Our standalone 2023 guidance remains unchanged at $1.1 billion in net sales and $2.30 in fully diluted non-GAAP EPS. In closing, I want to reiterate a few brief comments in addition to Dan's earlier comments as it relates to the Globus NuVasive merger. Once regulatory approvals are obtained and the transaction closes, we expect to deliver 20 plus percent non-GAAP EPS accretion by the completion of the first full year following deal closure. We expect near-term sales dis-synergies to be partially offset by revenue synergies around complimentary product offerings of both companies. In addition, we expect to deliver on $170 million of cost synergies, of which we expect to achieve 50% by the end of year one following deal closure, 75% by the end of year two, and 100% by the end of the third year. We remain confident in the strength of our Globus business and remain steadfast in driving organic growth while seeking to close and integrate our merger with Newvasive. Post-close, we will continue to seek both organic and inorganic growth opportunities as we continue to develop new and exciting technologies internally while also deploying cash for complimentary M&A opportunities. We seek to achieve on our long-term objectives and want to thank our Globus team members as we continue to improve the lives of patients with musculoskeletal disorders. Operator, we will now open the call for questions.
spk07: Thank you. At this time, we will conduct a Q&A session. As a reminder, To ask a question, you will need to press star one one on your telephone and wait for your name to be announced. To withdraw your question, please press star one one again. Please stand by while we compile the Q&A roster. All right. And our first question comes from Mike Miksek from Barclays. Please go ahead.
spk15: Hey, good evening. Thanks so much for taking the questions. And congrats on a really strong quarter, guys. Thanks. So, and one question about the sort of pending merger and one on the operations, if I could. So, on the, you know, the merger, just wondering if you have, I know that you were spending a fair amount of time together to the extent that you're allowed at this stage. And I'm wondering if there's anything that you have learned or seen that's either strengthened some of the areas of synergy and opportunity that you saw before and had talked about before you wanted to appropriate or anything that's sort of incremental in terms of your insights in those meetings and, again, planning sessions to the extent that you can at this stage. And then I want to follow up.
spk13: Thanks, Matt. This is Dan. I'll answer that. You're right. We continue to work together for planning and organization and learning with this. And I would tell you that throughout the value streams and the work streams that we've set up, it's really been more positive the more we work together. And I know there's a lot of talk about culture out there, and I'll admit that there are differences in culture. But what I've learned is it's over-exaggerated. I think we are more similar than folks would realize when you get down to the core of it. They've got an incredibly strong leadership team. I found that every person there is top quality. And the willingness and the thought process of how to move forward is very aligned. So I'll be honest, the more I work, the more encouraged I am to see that. I think as I learn about their strengths, as we've talked about before, whether it be the surgeon experience or even marketing or how they do training, seeing how that could further Globus going forward as well, to me, remains enticing to do.
spk21: Great.
spk15: And just on the strength in the quarter, you know, the league was quite a bit stronger, stronger than we were expecting, quite a bit stronger than I think most folks were expecting. Could you talk a little bit about, I'm sure you're going to get this question, and we might as well tackle it up front, is the strength in the quarter and then the sort of tempering aspects of holding back on a raise. So sources of the strength, if there were surprises to you, and then why not take up something here for the remainder of the year?
spk11: This is Keith. I'll take that, and Dan can add anything he wants at the end. But I think the first quarter was extremely strong. I talked a little bit about the robotic pipeline remaining strong coming into the quarter. That was definitely a benefit. But I think as I look at the year and look at the quarter specifically, we had a very, very strong international quarter. In some of our international markets, We do have some distributors, and there could be some stocking orders in there that may have kind of pushed that up a little bit. And quite honestly, when I step back and look at the year, we still feel extremely good about the business, but we still think it's too early to give a raise to the full year. You know, a lot could still happen in the year, but we're really happy with how the quarter landed.
spk13: Yeah, and Matt, I'll build on that. We don't plan on exiting the year as a standalone company. We're expecting to execute on this, and so any standalone guidance for the year, while directional for you, isn't really meaningful as we get into the rest of the year.
spk15: Sure, that's fair. Well, thanks so much.
spk13: Thank you.
spk07: Thank you, Matt. One moment for our next question.
spk04: Our next question comes from Shagan Singh from RBC.
spk07: Please go ahead.
spk02: Great. Thank you so much for taking the questions, and congratulations on the shareholder support for the deal. So I understand a big focus right now is to get through the FTC process, and they have made a second request. Does that come as a surprise to you? Are there any specific areas of products, you know, that have been identified, you know, interbody cages, biologics? I know one of your filings mentioned neuromonitoring and enabling tech, where you guys, you know, have leading positions. I'm just wondering if there's anything you can share on the FTC process and potential divestitures.
spk24: And then I have a follow-up.
spk13: Thanks, Shagan. This is Dan. I would tell you that, you know, as you know, second requests are not unusual, and I would say that from what I've seen, certainly no need for alarm with this. We remain committed to the deal. It doesn't do anything to change where we are or what we want to do with this. Shifts the timing a little bit. I can't go into the specifics of it. There's nothing out there that felt alarming in what was given to us. I will tell you that. And everything I had seen so far has been fairly general, nothing focused in specifically that I think right now we're aware of or that I could share. So to me, I think it's an overall data search. We have to step up and give them what they need. We'll do that as fast as we can so that we can progress forward and realize the potential that's in front of us.
spk02: Got it. And can you talk about the sales force morale as the deal is announced, but it's still pending closing? Is it driving any amount of uncertainty among your sales rep? What steps are you taking to ensure that competitors don't poach on your sales rep? And then also, maybe you can talk a little bit about the trends you're seeing in competitive rep recruitment versus recent quarters. Thank you for taking the questions.
spk13: You got it. So I would tell you all of us are really looking forward to consummating this and moving forward. So any delay is certainly not a welcome thing. But I would tell you that as I talk directly with the sales leaderships of both companies and down to the rep level, the excitement remains there. And it's incumbent upon us to work through this and push it forward. Our field and the Nuvesa field realize that bringing together our teams and and looking at those technologies and combining them can really drive incredible benefits for surgeons and patients. They know that this is the place to be and they know that this pipeline is stronger than all others. So I think we just have to remind any of those who might be a little weary that this is the place to be and it's incumbent upon us to work through it and get it done that way. As far as recruiting goes, what we've mentioned in the past is this deal, while it certainly is consuming a lot of our time as it ought to, It's creating a lot of competitive rep interest, folks who want to join this team and look at what the future is. And so it feels to be a bit more proactive competitive rep recruiting coming to us versus us going to seek it out right now as we realize this.
spk03: Thank you for the color.
spk07: Thank you, Shagan. One moment for our next question. Our next question comes from David Saxon from Needham & Co. Please go ahead.
spk09: Great. Hi, Dan and Keith. Thanks so much for taking the questions, and congrats on a really strong quarter here. Maybe first on enabling tech. I mean, you called out good robotics demand trends. It sounds like those remain strong. So I just wanted to kind of get your thoughts on where we are in terms of robotics penetration in spines. Where does that shake out longer term and is that like a steady grind or is there something that can inflect that at some point?
spk11: This is Keith. Thanks for the call. I would say that we're still in a trend with the robotic market that the capital is still being accepted in the market and it's growing. We think about penetration in the market. I still think there's plenty of market for us to grow. I think adopters are still continuing to come on. It's still our belief that as time passes, robots will be part of the future from a surgical perspective for spine procedures.
spk13: Yeah, I would add to it, too. I think it's more of a steady grind. It's about creating awareness and certainly people's willingness to test and therefore adopt. And so given the new technology that it is for everybody, it's just a matter of working through that versus a large explosion that may occur instantly.
spk09: Okay, got it. And then maybe on international, specifically on Japan, I mean, they grew or that team grew, which, I mean, I can't remember the last time Japan was in the green. So, you know, how's that going? Is the team fully right-sized there? Or is there still wood to chop? And then I think you called out some stocking orders through international distributors. Any way to quantify the benefit you saw there? And thanks so much.
spk13: Thanks. So I'll start it, and then Keith can kind of finish it up. So, you know, we've been investing, first off, in international outside of Japan, giving them the tools to penetrate. And it's great to see the traction there. And I think that team is motivated and driven. With every country I speak to, I'm feeling really good about their mindset and the potential that's there. Japan, as you know, we've done some right size, some reorganization, some adjusting of vendors and things like that, or customers, excuse me. And I feel as we've been calling out that that would be bottoming out. We've seen that occur really starting in the fourth quarter. And with the team that's in place now regaining traction, when you say more wood to chop, I don't think we're looking to downsize that team. I think we have to enhance its size and we continue to recruit and look as a method to penetrate and grow even more.
spk11: And as it relates to the stocking orders, my earlier comment, You know, when I look at internationally, places where we would see some stocking orders would be Spain and Brazil. You know, from the standpoint of the growth rate, it definitely would have, you know, slowed the growth rate down a little bit, but I would not say materially. We came out of the quarter, you know, finished very strong. And as we look ahead, we feel confident that we're going to grow, you know, high teens as we look at internationally the rest of the year.
spk05: Great. Thanks, and congrats again on the quarter. Thank you.
spk04: Thank you, David.
spk07: One moment for our next question. Our next question comes from Sam Darno from BTIG. Please go ahead.
spk08: Actually, I think this is Ryan on for Sam. Sorry, we got our lines crossed. So a couple things there for me. A couple questions. So number one, You know, you guys had a great quarter. You know, competitively, where do you think you're taking share from? And is there any concern that you're taking from the asset that you may be buying? And just, you know, how can you reassure investors that you're not kind of, you know, just spinning your wheels, I guess, from a share perspective there?
spk13: Hey, Ryan, it's Dan. It's a great question, and that would certainly be ironic. So I would tell you that while we don't share that level of detail, especially right now through the planning phase, I would say that our share gains really come, again, in a market-appropriate way. So you look at kind of how you tick down with the big guys, being in Medtronic, J&J, Striker. I still feel like that's where most of that will come from. Certainly, to the best of my knowledge, we've never been – Strong at taking share from NuVasive. We've always tended to kind of go after the market and run in parallel versus really heavily compete against each other. Happens occasionally, but I would say it's more rarely than a fact.
spk08: Okay. And then, Keith, SG&A was a bit higher than we expected this quarter. And just want to understand kind of why is it up so much and kind of how you think about it for the balance of the year.
spk11: Yeah, so SG&A definitely was up a little bit more than we expected in the quarter as well. You know, I commented on sales training being higher as well as some travel. We had our global sales meeting Q1 this year. Last year we had it later in the year because of COVID, so there was a little bit of a timing flip year over year. And then just generally speaking, we're out there, town and street from a meetings perspective. But most importantly, sales comp was up, really driven by achieving quotas as well as the growth of the sales force from competitive recruiting in the past. As we look ahead, this should balance out a bit, but on a full year basis, I would say that it feels like it will be a little bit higher, but it doesn't change the fact that we still think we're a mid-30s EBITDA company.
spk08: Okay. I'll hop back into you. Thanks, Ben. Good quarter.
spk06: Thanks.
spk08: Thank you, Ryan.
spk04: One moment for our next question.
spk07: Our next question comes from Richard Newiter from Trust Securities.
spk19: Please go ahead. Hi, this is Sam on for Rich. Thanks for taking our question. The first one I'll ask on robotics. Did you see any greater mix of competitive accounts in this quarter than you've seen with placements in the past?
spk13: Yes, we have. We've seen that we're making inroads beyond just the globalist friendlies, and I think that's a trend we've seen for a while, but certainly in this past quarter.
spk19: Great, thanks. And then just, can you parse out at all imaging versus robotics, sort of how we should think about the mix of that through this year? That would be great. Thanks.
spk11: No, thanks, Sam, but no, we're not parsing out imaging versus robotics. We look at our enabling tech We're going to continue to bring a suite of products to the market and it's another skew within that portfolio.
spk01: Got it. Thank you.
spk07: Thank you. One moment for our next question. Our next question comes from Kyle Rose from Conaccord. Please go ahead.
spk10: Great. Thank you for taking the questions. Just wondering if you could talk a little bit more about the trauma business. I mean, it seems like it's kind of hitting a bit of an inflection point here. I mean, you clearly have the manufacturing scale to be able to probably flex inventory a little bit higher there. So just wondering what realistically we should expect to see some sort of hockey stick or a larger step up from a growth perspective, if that's building out additional territories and things of that sort. Is there any expectation to kind of push the gas pedal down, so to speak, here?
spk13: Thanks, Kyle. Dan, I was kind of thinking 50-some percent was putting my foot down on the gas, but I kind of get it. We can certainly go deeper. What I would tell you it's a factor of right now is the recruiting and the continuation of adding sets. I think we've got a bag very capable of level one, level two trauma centers and going through, and I think we're seeing that growth come from there. So, you know, I would tell you I'm not overly concerned. We are investing in it. There's nothing related to the pending NUVA acquisition or merger that would actually impact trauma. As you know, we fund it and run it completely separately. So I'll tell you what, I will take that back and see if I can beat it for Q2 as we continue to drive into the market.
spk10: Great. Yeah, you know it's our job to ask what's next. So on the competitive rep hiring, I guess just maybe from a high level, how have those discussions changed with the non-NUVA, non-GMED type of reps now that you're out in the public talking about this future marriage? Is there any difference in the type of reps that might be interested in a broader combined portfolio? Just help us understand how those conversations are trending.
spk13: Yeah, it's a great question. I would say that the conversation is slightly different, but you still have, you know, obviously a mix of folks. I wouldn't say I'm able to categorize them as a particular type. I do know that as people, including Wall Street, really understand the potential of this deal and what this company can do long term, you're really looking at individuals who want to grow and who want to make a difference. And that's really who's coming to the door and saying, how do I become part of this? They know we're going to invest in these portfolios, but we're going to drive this forward, and we're going to continue to invest and expand. And so those folks interested in being part of that story and actually realizing that are the ones, you know, from all different levels coming to us and asking to help join the team.
spk04: Thank you.
spk07: One moment for our next question. And as a reminder, if you want to ask a question, please press star one one on your telephone. One moment. Our next question comes from Matt Taylor from Jeffries. Please go ahead.
spk22: Hi, Dan and Keith. This is Mike on for Matt tonight. Thanks for taking my questions. Just first, you talked about a robust relationship. Robot pipeline entering 2Q. So it doesn't seem like you're seeing any capital spend hesitancy among customers. But just can you talk about how you're thinking about potential macro headwinds and the potential impact on customer capital spending?
spk11: This is Keith. I'll take this and, Dan, you can fill in. But, you know, the market is definitely dynamic. You know, last year we were talking about a robotic pipeline that didn't mature in the U.S. And coming into Q4 and into Q1, it was anything but that. You know, we had a really strong pipeline, lots of demand, lots of really opportunity chasing for the sales team. You know, as we look towards the rest of the year, I still think we have to continue to sell the technology. I mentioned earlier that we're at a place where, you know, more and more robots are being adopted. And I think as time passes and, you know, you call it an inflection point, you see that, you know, the other facilities want to get on it and adopt the robotic technology. I think we have to continue to sell those benefits as we walk into the macroeconomic headwinds. And I think as we do that, we again have multiple ways to sell the robot. The majority of our sales are outright purchases, but there's other ways that we can sell robots and meet competition with volume-based arrangements and things of that nature. So, I think that we're ready to respond to the market depending on what happens macroeconomically.
spk13: And I'll just build on that, Mike. Certainly, the last three years have been more than a training ground for difficult times, whether you get into COVID or post-COVID without staffing or nurses, on and on and on. So, Again, I think like anything, putting this technology into the hands of surgeons to make a difference will remain top priority. And as Keith said, multiple approaches that work with the customer in a way to get that out there, something we'll keep in mind, especially if we're about to walk into a recession. We have to be mindful of what that can do, but not deny technology to people who can really change lives.
spk22: Got it. That's helpful. And then just the follow-up there, you mentioned U.S. kind of. coming out of 2022. Can you talk about any differences that you see U.S. versus O.U.S. just in terms of robotic demand and customer purchasing behavior and how you're thinking about that trajectory through 2023?
spk13: Yeah, I'd say it really just depends market by market, right? Again, you're still Nathan in the U.S. with a lot of ways to penetrate and grow. Again, depending on where you are through the world, there's different uptakes that we're starting to see. I wouldn't necessarily say there's an over-focus of where to go or how to do it differently. Right now, it's just about an education and awareness, hands-on training, and then working with folks to get the technology into their OR.
spk04: Okay, thank you. Thank you. Thank you. One moment for our next question.
spk07: Our next question comes from Vic Chopra from Wells Fargo. Please go ahead.
spk16: Hey, good afternoon, and thanks for taking the questions. I'd like all my congratulations as well. So two for me. First one, can you provide an update on the recon robotics program and what the latest timelines are?
spk13: Hey, Vic, it's Dan. Yep, I'll be glad to do that. We're still progressing through. We have not yet filed. We're in testing for a lot of things when it comes into electronic equipment. We're working through those now. I actually just had a meeting today about how you scale up and get ready for the launch. So I don't have a date to give you just yet because we need to get through the testing in order to do the filing to get this approved. Not seeing anything that is a concern, just a matter of working through it. You know, certainly a goal, if all went well, would we, you know, the potential to see this by year end? And that's what we're going to push towards for right now.
spk16: Great. And then just one more follow-up. I mean, obviously, very strong trends in your robotics business, you know, one of the larger orthopedic competitors has talked about coming out with a spine robot in 2024. And I'm just curious if you have seen anything change in the competitive landscape and whether you expect any impact in 2023 to your ability to continue to sell Excelsior systems. Thanks.
spk13: Yeah, thanks. I would say we're not really, you know, as you remember, when we came out with this, we always knew that we were one of the first and that the market would continue to have entrants and get eventually more crowded. So there's nothing of concern or shock. We are not talking to customers who are thinking about what could happen in 24 months. Right now, they're understanding what the technology is. They recognize ours as the best. And so we'll continue to go ahead and push with that and continue to look and add options and offerings to our platform that's going to even create more value for our customers.
spk04: All right, thank you.
spk07: With no further questions, this concludes the Globus Medical first quarter earnings call. Thank you for joining us today and have a nice evening. We will now disconnect. Welcome to Globus Medical's first quarter 2023 earnings call. At this time, all participants are in listen-only mode. After the speaker's presentation, there will be a Q&A session. To ask a question during this session, you would need to press star one one on your telephone. You would then hear an automated message advising your hand is raised. To withdraw your question, please press star one one again. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Brian Kearns, Senior Vice President of Business Development and Investor Relations. Please go ahead.
spk14: Thank you, Antoine, and thank you, everyone, for being with us today. Joining today's call from Globus Medical will be Dan Scavilla, President and Chief Executive Officer, 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 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'll now turn the call over to Dan Scavilla, our President and CEO.
spk13: Thanks, Brian, and good afternoon, everyone. Globus achieved strong results in Q1, delivering record sales of $277 million A 21% increase in constant currency or $46 million in growth versus Q122. Non-GAAP EPS was 53 cents, increasing 25%. And free cash flow was $37 million, up 51% versus Q122. Adjusted EBITDA for the quarter was 31%. Keith will speak more about these items in his section. 2023 is starting out to be a strong year for the Globus standalone business. that should deliver record sales, strong cash flows, mid-30s EBITDA, and gains in EPS. Looking deeper into Q1 performance, U.S. spine grew 14% in the quarter with notable gains across our product portfolio in expandables, biologics, MIS screws, 3D printed implants, and cervical offerings. This above-market growth is driven by competitive rep recruiting from prior quarters, robotic pull-through, and a normalization of post-COVID procedures versus prior year. In Q1, we launched our MARS T-LIFT pedicle-based retractor as part of our focus on procedural efficiency to offer specialized options to meet surgeon preferences. We also continue to make significant progress in launching our prone lateral patient positioning system. 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 efficiency, increase ease of implant placement, and minimize surgeon fatigue. It integrates seamlessly with our Xcelcius GPS and E3D solutions, and also enables significant capabilities in non-robotic procedures. When combined with our Xcelcius platform and our range of expandable interbody offerings, We can provide unique and customizable lateral solutions for our surgeons. Enabling technology sales were $25 million, up 91% on a constant currency basis versus prior year, driven by robotic and imaging system sales. This represents our highest Q1 robot sales to date. We continue to see increased interest in sales with significant international gains of Excelsius GPS and EMEA and AsiaPak that will lead to future implant pull-through and strong market share gains. As we enter Q2, we have one of the strongest robot pipelines since launching the system. Robotic procedures continue to accelerate, growing 51% versus prior year, and exceeding 49,000 robotic procedures performed to date. We continue to make positive inroads with our Excelsis 3D imaging system. Surgeons have said this is a game changer as they experience the benefits of integrated imaging. 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 and seamless integration with our excelsis gps robotic navigation system it is a key component of the globus ecosystem designed and built from the ground up to communicate with excelsis gps in the operating room market interest remains high for the state-of-the-art technology and customer orders continue to grow Excelsis 3D is positioned to be a major growth driver for 2023. Our international spinal implant business, excluding Japan, delivered record sales in Q1, growing 30% on a constant currency basis compared to prior year. We delivered double-digit growth in most markets and continue to see strong growth in key markets. Japan delivered 17% constant currency growth for Q1. We expect to see gains in Japan throughout the year as we focus on recapturing market share. Our trauma business delivered its 13th consecutive quarter of sequential growth, delivering 53% growth for Q1 and 16% sequentially. Trauma performance is driven by Salesforce expansion and strong uptake in all product lines, delivering strong growth throughout our portfolio, including the Autobahn Evo femoral nail system launched last quarter that it continues to take and make inroads for market share gains. To update you on the merger status, both Globus Medical and Nuvasiv Class A shareholders voted overwhelmingly in support of the merger, with over 99% approving the transaction. This is a major milestone, and the support of the combined shareholders moves us closer to realizing the deal. Earlier this week, we received notification from the Federal Trade Commission for a second request and we are working with the FTC to address their open questions. The second request will impact the anticipated deal closure timing, moving from mid-2023 to Q3 2023. However, it does not alter our commitment to the deal or our belief that this combination will benefit the surgeons and patients in the markets where we compete. We are placing all resources required to quickly address the FTC questions and drive to a successful outcome. In closing, We remain focused on the core elements for long-term sustained growth. One, innovative new product introductions. Two, robot and imaging system sales. Three, competitive rep recruiting. And four, 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.
spk11: Thanks, Dan, and good afternoon, everyone. We are extremely pleased with our first quarter results, and they demonstrate our growing position in the market. Strong sales growth was seen across our portfolio and geographies as we've continued to take share while also not experiencing the procedural softness seen in last year's first quarter. Our Q1 revenue was $276.7 million, growing 20% as reported and 21% on a constant currency basis. Net income was $49.1 million, resulting in fully diluted GAAP earnings per share of 48 cents. Non-GAAP net income was $53.8 million, delivering 53 cents of fully diluted non-GAAP earnings per share, representing 25.1% growth over the prior year quarter. Turning our attention to sales, Q1 musculoskeletal revenue was $251.6 million, growing 15.7% as reported when compared to the prior year quarter. Growth was led primarily by our spine business, driven by strong procedural volumes, both in the US and international, driven by continued share-taking, as well as softer comps when compared to the prior year quarter. First quarter 2023 enabling technologies revenue grew 90.8% as compared to the prior year quarter, driven by ongoing demand for our robotics and imaging system technologies. I specifically note that our robotic pipeline and its development was strong coming out of Q4 and remains so heading into our first quarter of 2023, both in the US as well as internationally. First quarter US revenue was $234.1 million, growing 19.2% as reported, led by our spine and INR businesses, as well as our biologics and trauma businesses, as Dan mentioned earlier. International revenue was $42.6 million, growing 24.7% as reported, and 31.5% on a constant currency basis. Growth was again led by our international spinal implant businesses, mainly in Australia, Brazil, Poland, the UK, Spain, and Germany. Our strategy remains consistent as we seek to drive greater share in our focus countries across our international markets. Gross profit in the first quarter of 2023 was 74.4%, essentially flat to the 74.3% in the prior year quarter. Increased product costs as a result of product and geographic mix were partially offset by lower inventory write-offs related to scrap as well as improved manufacturing and supply chain efficiencies. Research and development expenses for the quarter were $21.1 million or 7.6% of sales consistent with the prior year. The increased dollar spend remains consistent with our strategy of growth around procedural solutions as reflected in higher spend mainly in our spine and enabling technologies businesses which will help sustain sales growth as we move ahead. SG&A expenses in the first quarter of 2023 were $122.4 million or 44.2% of sales compared to $100.7 million or 43.7% of sales in the prior year quarter. The increased spending is primarily reflective of higher personnel related expenses, primarily driven by sales compensation, as well as higher meetings, travel and training expenses. Sales compensation increases are primarily the result of achieving growth targets, while travel is the result of the timing of our annual global sales meeting. The effective income tax rate for the quarter was 22.3%, up slightly to the 22.1% noted in the prior year and in line with expectations. Adjusted EBITDA was 30.8% in the quarter and is reflective of my earlier comments on gross profit and SG&A impacts and is largely in line with our Q1 23 expectations. Non-GAAP EPS in the first quarter of 2023 was $0.53 compared to $0.42 in the prior year quarter. The $0.11 growth includes $0.03 of non-operating items, namely higher interest income and a lower share count, partially offset by higher depreciation expense. Free cash flow was $37.3 million in Q1, $12.6 million higher versus the prior year quarter, driven by higher cash profits and lower CapEx, partially offset by working capital investments in inventory and accounts receivable. We ended the first quarter with $984.4 million of cash, cash equivalents, and marketable securities. The company remains debt-free. Our standalone 2023 guidance remains unchanged at $1.1 billion in net sales and $2.30 in fully diluted non-GAAP EPS. In closing, I want to reiterate a few brief comments in addition to Dan's earlier comments as it relates to the Globus NuVasive merger. Once regulatory approvals are obtained and the transaction closes, we expect to deliver 20-plus percent non-GAAP EPS accretion by the completion of the first full year following deal closure. We expect near-term sales dis-synergies to be partially offset by revenue synergies around complementary product offerings of both companies. In addition, we expect to deliver on $170 million of cost synergies, of which we expect to achieve 50 percent by the end of year one following deal closure. 75% by the end of year two, and 100% by the end of the third year. We remain confident in the strength of our Globus business and remain steadfast in driving organic growth while seeking to close and integrate our merger with NuVasive. Post-close, we will continue to seek both organic and inorganic growth opportunities as we continue to develop new and exciting technologies internally while also deploying cash for complimentary M&A opportunities. We seek to achieve on our long-term objectives I want to thank our Globus team members as we continue to improve the lives of patients with musculoskeletal disorders. Operator, we will now open the call for questions.
spk07: Thank you. At this time, we will conduct a Q&A session. As a reminder, to ask a question, you will need to press star 1-1 on your telephone and wait for your name to be announced. To withdraw your question, please press star 1-1 again. Please stand by while we compile the Q&A roster. All right, and our first question comes from Mike Miksek from Barclays. Please go ahead.
spk15: Hey, good evening. Thanks so much for taking the questions, and congrats on a really strong quarter, guys. Thanks. So, and one question about the sort of pending merger and one on the operations, if I could. So, on the, you know, the merger, just wondering if you have, I know that you were spending a fair amount of time together to the extent that you're allowed at this stage. And I'm wondering if there's anything that you have learned or seen that's either strengthened some of the areas of synergy and opportunity that you saw before and had talked about before you wanted to or anything Anything that's sort of incremental in terms of your insights in those meetings and, again, planning sessions to the extent that you can at this stage? And then I want to follow up.
spk13: Thanks, Matt. This is Dan. I'll answer that. You're right. We continue to work together for planning and organization and learning with this. And I would tell you that throughout the value streams and the work streams that we've set up, It's really been more positive the more we work together. And I know there's a lot of talk about culture out there, and I'll admit that there are differences in culture. But what I've learned is it's over-exaggerated. I think we are more similar than folks would realize when you get down to the core of it. They've got an incredibly strong leadership team. I found that every person there is top quality. And the willingness and the thought process of how to move forward is very aligned. So I'll be honest, the more I work, the more encouraged I am to see that. I think as I learn about their strengths, as we've talked about before, whether it be the surgeon experience or even marketing or how they do training, seeing how that could further Globus going forward as well, to me, remains enticing to do.
spk21: Great.
spk15: And just on the strength in the quarter, you know, the league was quite a bit stronger, stronger than we were expecting, quite a bit stronger than I think most folks were expecting. Could you talk a little bit about, I'm sure you're going to get this question, and we might as well tackle it up front, is the strength in the quarter and then the sort of tempering aspects of holding back on a raise. So sources of the strength, if there were surprises to you, and then why not take up something here for the remainder of the year?
spk11: This is Keith. I'll take that, and Dan can add anything he wants at the end. But, you know, I think the first quarter was, was extremely strong. You know, I talked a little bit about the robotic pipeline remaining strong coming into the quarter. That was definitely a benefit. But I think as I look at the year and look at the quarter specifically, we had a very, very strong international quarter. You know, in some of our international markets, we do have some distributors and there could be some stocking orders in there that may have kind of pushed that up a little bit. And quite honestly, when I step back and look at the year, we still feel extremely good about the business, but we still think it's too early to give a raise to the full year. You know, a lot could still happen in the year, but... We're really happy with how the quarter landed.
spk13: Yeah, and Matt, I'll build on that. We don't plan on exiting the year as a standalone company. We're expecting to execute on this, and so any standalone guidance for the year, while directional for you, isn't really meaningful as we get into the rest of the year.
spk15: Sure, that's fair. Well, thanks so much.
spk13: Thank you.
spk07: Thank you, Matt. One moment for our next question.
spk04: Our next question comes from Shagan Singh from RBC.
spk07: Please go ahead.
spk02: Great. Thank you so much for taking the questions, and congratulations on the shareholder support for the deal. So I understand a big focus right now is to get through the FTC process, and they have made a second request. Does that come as a surprise to you? Are there any specific areas of products that have been identified, you know, interbody cages, biologics. I know one of your filings mentioned neuromonitoring and enabling tech where you guys, you know, have leading positions. I'm just wondering if there's anything you can share on the FTC process and potential divestitures.
spk24: And then I have a follow-up.
spk13: Thanks, Shagan. This is Dan. I would tell you that, as you know, second requests are not unusual, and I would say that from what I've seen, certainly no need for alarm with this. We remain committed to the deal. It doesn't do anything to change where we are or what we want to do with this. Shifts the timing a little bit. I can't go into the specifics of it. There's nothing out there that felt alarming in what was given to us. I will tell you that. And everything I had seen so far has been fairly general, nothing focused in specifically that I think right now we're aware of or that I could share. So to me, I think it's an overall data search. We have to step up and give them what they need. We'll do that as fast as we can so that we can progress forward and realize the potential that's in front of us.
spk02: Got it. And can you talk about the Salesforce morale as the deal is announced, but it's still pending closing? You know, is it driving any amount of uncertainty among your sales rep? You know, what steps are you taking to ensure that competitors, you know, don't poach on your sales rep? And then also, you know, maybe you can talk a little bit about the trends you're seeing in competitive rep recruitment versus recent quarters. Thank you for taking the questions.
spk13: You got it. So I would tell you all of us are really looking forward to consummating this and moving forward. So any delay is certainly not a welcome thing. But I would tell you that as I talk directly with the sales leaderships of both companies and down to the rep level, the excitement remains there. And it's incumbent upon us to work through this and push it forward. Our field and the Nuvesa field realize that bringing together our teams and and looking at those technologies and combining them can really drive incredible benefits for surgeons and patients. They know that this is the place to be and they know that this pipeline is stronger than all others. So I think we just have to remind any of those who might be a little weary that this is the place to be and it's incumbent upon us to work through it and get it done that way. As far as recruiting goes, what we've mentioned in the past is this deal, while it certainly is consuming a lot of our time as it ought to, It's creating a lot of competitive rep interest, folks who want to join this team and look at what the future is. And so it feels to be a bit more proactive competitive rep recruiting coming to us versus us going to seek it out right now as we realize this.
spk03: Thank you for the color.
spk07: Thank you, Shagan. One moment for our next question. Our next question comes from David Saxon from Needham & Co. Please go ahead.
spk09: Great. Hi, Dan and Keith. Thanks so much for taking the questions, and congrats on a really strong quarter here. Maybe first on enabling tech. I mean, you called out good robotics demand trends. It sounds like those remain strong. So I just wanted to kind of get your thoughts on where we are in terms of robotics penetration in spines. Where does that shake out longer term? Is that a steady grind or is there something that can inflect that at some point?
spk11: This is Keith. Thanks for the call. I would say that we're still in a trend with the robotic market that the capital is still being accepted in the market and it's growing. We think about penetration in the market. I still think there's plenty of market for us to grow. I think adopters are still continuing to come on. That's still our belief that as time passes, robots will be part of the future from a surgical perspective for spine procedures.
spk13: Yeah, I would add to it too. I think it's more of a steady grind. It's about creating awareness and certainly people's willingness to test and therefore adopt. And so given the new technology that it is for everybody, it's just a matter of working through that versus a large explosion that may occur instantly.
spk09: Okay, got it. And then maybe on international, specifically on Japan, I mean, they grew or that team grew, which, I mean, I can't remember the last time Japan was in the green. So, you know, how's that going? Is the team fully right-sized there? Or is there still wood to chop? And then I think you called out some stocking orders through international distributors. Any way to quantify the benefit you saw there? And thanks so much.
spk13: Thanks. So I'll start it, and then Keith can kind of finish it up. So, you know, we've been investing, first off, in international outside of Japan, giving them the tools to penetrate. And it's great to see the traction there. And I think that team is motivated and driven. With every country I speak to, I'm feeling really good about their mindset and the potential that's there. Japan, as you know, we've done some right size, some reorganization, some adjusting of vendors and things like that, or customers, excuse me. And I feel as we've been calling out that that would be bottoming out. We've seen that occur really starting in the fourth quarter. And with the team that's in place now regaining traction, when you say more wood to chop, I don't think we're looking to downsize that team. I think we have to enhance its size and we continue to recruit and look as a method to penetrate and grow even more.
spk11: And as it relates to the stocking orders, my earlier comment, You know, when I look at internationally, places where we'd see some stocking orders would be Spain and Brazil. You know, from the standpoint of the growth rate, it definitely would have, you know, slowed the growth rate down a little bit, but I would not say materially. We came out of the quarter, you know, finished very strong. And as we look ahead, we feel confident that we're going to grow, you know, high teens as we look at internationally the rest of the year.
spk05: Great. Thanks, and congrats again on the quarter. Thank you.
spk04: Thank you, David.
spk07: One moment for our next question. Our next question comes from Sam Darno from BTIG. Please go ahead.
spk08: Actually, I think this is Ryan on for Sam. Sorry, we got our lines crossed. So a couple things there for me. A couple questions. So number one, You know, you guys had a great quarter. You know, competitively, where do you think you're taking share from and is there any concern that you're taking from the asset that you may be buying and just, you know, how can you reassure investors that you're not kind of, you know, just spinning your wheels, I guess, from a share perspective there?
spk13: Hey, Ryan, it's Dan. It's a great question, and that would certainly be ironic. So I would tell you that while we don't share that level of detail, especially right now through the planning phase, I would say that our share gains really come, again, in a market-appropriate way. So you look at kind of how you tick down with the big guys, being in Medtronic, J&J, Striker. I still feel like that's where most of that will come from. Certainly, to the best of my knowledge, we've never been – Strong at taking share from NuVasive. We've always tended to kind of go after the market and run in parallel versus really heavily compete against each other. Happens occasionally, but I would say it's more rarely than a fact.
spk08: Okay. And then, Keith, SG&A was a bit higher than we expected this quarter. And just want to understand kind of why is it up so much and kind of how you think about it for the balance of the year.
spk11: Yeah, so SG&A definitely was up a little bit more than we expected in the quarter as well. You know, I commented on sales training being higher as well as some travel. We had our global sales meeting Q1 this year. Last year we had it later in the year because of COVID, so there was a little bit of a timing flip year over year. And then just generally speaking, we're out there, town and street from a meetings perspective. But most importantly, sales comp was up, really driven by achieving quotas as well as the growth of the sales force from competitive recruiting in the past. As we look ahead, this should balance out a bit, but on a full year basis, I would say that it feels like it will be a little bit higher, but it doesn't change the fact that we still think we're a mid-30s EBITDA company.
spk08: Okay. I'll hop back into you. Thanks, Ben. Good quarter.
spk06: Thanks.
spk07: Thank you, Ryan.
spk04: One moment for our next question.
spk07: Our next question comes from Richard Newiter from Trust Securities.
spk19: Please go ahead. Hi, this is Sam on for Rich. Thanks for taking our question. The first one I'll ask on robotics. Did you see any greater mix of competitive accounts in this quarter than you've seen with placements in the past?
spk13: Yes, we have. We've seen that we're making inroads beyond just the globalist friendlies, and I think that's a trend we've seen for a while, but certainly in this past quarter.
spk19: Great. Thanks. And then just, can you parse out at all imaging versus robotics, sort of how we should think about the mix of that through this year? That would be great. Thanks.
spk11: No. Thanks, Sam. But no, we're not parsing out imaging versus robotics. We look at our enabling tech We're going to continue to bring a suite of products to the market, and it's another skew within that portfolio.
spk01: Got it. Thank you.
spk07: Thank you. One moment for our next question. Our next question comes from Kyle Rose from Conaccord. Please go ahead.
spk10: Great. Thank you for taking the questions. Just wondering if you could talk a little bit more about the trauma business. I mean, it seems like it's kind of hitting a bit of an inflection point here. I mean, you clearly have the manufacturing scale to be able to probably flex inventory a little bit higher there. So just wondering what realistically we should expect to see some sort of hockey stick or a larger step up from a growth perspective, if that's building out additional territories and things of that sort. Is there any expectation to kind of push the gas pedal down, so to speak, here?
spk13: Thanks, Kyle. Dan, I was kind of thinking 50-some percent was putting my foot down on the gas, but I kind of get it. We can certainly go deeper. What I would tell you it's a factor of right now is the recruiting and the continuation of adding sets. I think we've got a bag very capable of Level 1, Level 2 trauma centers and going through, and I think we're seeing that growth come from there. So, you know, I would tell you I'm not overly concerned. We are investing in it. There's nothing related to the pending NUVA program. acquisition or merger that would actually impact trauma. As you know, we fund it and run it completely separately. So I'll tell you what, I will take that back and see if I can beat it for Q2 as we continue to drive into the market.
spk10: Great. Yeah, you know it's our job to ask what's next. So on the competitive rep hiring, I guess just maybe from a high level, how have those discussions changed with the non-NUVA, non-GMED type of reps now that you're out in the public talking about this future marriage? Is there any difference in the type of reps that might be interested in a broader combined portfolio? Just help us understand how those conversations are trending.
spk13: Yeah, it's a great question. I would say that the conversation is slightly different, but you still have, you know, obviously a mix of folks. I wouldn't say I'm able to categorize them as a particular type. I do know that as people, including Wall Street, really understand the potential of this deal and what this company can do long term, you're really looking at individuals who want to grow and who want to make a difference. And that's really who's coming to the door and saying, how do I become part of this? They know we're going to invest in these portfolios, but we're going to drive this forward, and we're going to continue to invest and expand. And so those folks interested in being part of that story and actually realizing that are the ones, you know, from all different levels coming to us and asking to help join the team.
spk04: Thank you.
spk07: One moment for our next question. And as a reminder, if you want to ask a question, please press star one one on your telephone. One moment. Our next question comes from Matt Taylor from Jeffries. Please go ahead.
spk22: Hi, Dan and Keith. This is Mike on for Matt tonight. Thanks for taking my questions. Just first, you talked about a robust relationship. Robot pipeline entering 2Q. So it doesn't seem like you're seeing any capital spend hesitancy among customers. But just can you talk about how you're thinking about potential macro headwinds and the potential impact on customer capital spending?
spk11: This is Keith. I'll take this and, Dan, you can fill in. But, you know, the market is definitely dynamic. You know, last year we were talking about a robotic pipeline that didn't mature in the U.S. And coming into Q4 and into Q1, it was anything but that. You know, we had a really strong pipeline, lots of demand, lots of really opportunity chasing for the sales team. You know, as we look towards the rest of the year, I still think we have to continue to sell the technology. I mentioned earlier that we're at a place where more and more robots are being adopted, and I think as time passes and you call it an inflection point, you see that the other facilities want to get on it and adopt the robotic technology. I think we have to continue to sell those benefits as we walk into the macroeconomic headwinds, and I think as we do that, you know, we again have multiple ways to sell the robot. You know, the majority of our sales are outright purchases, but there's other ways that we can sell robots and meet competition with volume-based arrangements and things of that nature. So I think that we're ready to respond to the market depending on what happens macroeconomically.
spk13: And I'll just build on that, Mike. Certainly the last three years have been more than a training ground for difficult times, whether you get into COVID or post-COVID without staffing or nurses, on and on and on. So Again, I think like anything, putting this technology into the hands of surgeons to make a difference will remain top priority. And as Keith said, multiple approaches that work with the customer in a way to get that out there, something we'll keep in mind, especially if we're about to walk into a recession. We have to be mindful of what that can do, but not deny technology to people who can really change lives.
spk22: Got it. That's helpful. And then just the follow-up there, you mentioned U.S. kind of. coming out of 2022. Can you talk about any differences that you see US versus OUS just in terms of robotic demand and customer purchasing behavior and how you're thinking about that trajectory through 2023?
spk13: Yeah, I'd say it really just depends market by market, right? Again, you're still Nathan in the US with a lot of ways to penetrate and grow. Again, depending on where you are through the world, there's different uptakes that we're starting to see. I wouldn't necessarily say there's an over-focus of where to go or how to do it differently. Right now, it's just about an education and awareness, hands-on training, and then working with folks to get the technology into their OR.
spk04: Okay, thank you. Thank you. Thank you. One moment for our next question.
spk07: Our next question comes from Vic Chopra from Wells Fargo. Please go ahead.
spk16: Hey, good afternoon, and thanks for taking the questions. I'd like all my congratulations as well. So two for me. First one, can you provide an update on the recon robotics program and what the latest timelines are?
spk13: Hey, Vic, it's Dan. Yep, I'll be glad to do that. We're still progressing through. We have not yet filed. We're in testing for a lot of things when it comes into electronic equipment. We're working through those now. I actually just had a meeting today about how you scale up and get ready for the launch. So I don't have a date to give you just yet because we need to get through the testing in order to do the filing to get this approved. Not seeing anything that is a concern, just a matter of working through it. You know, certainly a goal, if all went well, would we, you know, the potential to see this by year end? And that's what we're going to push towards for right now.
spk16: Great. And then just one more follow-up. I mean, obviously, very strong trends in your robotics business, you know, one of the larger orthopedic competitors has talked about coming out with a spine robot in 2024. And I'm just curious if you have seen anything change in the competitive landscape and whether you expect any impact in 2023 to your ability to continue to sell Excelsior systems. Thanks.
spk13: Yeah, thanks. I would say we're not really, you know, as you remember, when we came out with this, we always knew that we were one of the first and that the market would continue to have entrants and get eventually more crowded. So there's nothing of concern or shock. We are not talking to customers who are thinking about what could happen in 24 months. Right now, they're understanding what the technology is. They recognize ours as the best. And so we'll continue to go ahead and push with that and continue to look and add options and offerings to our platform that's going to even create more value for our customers.
spk07: All right. Thank you. With no further questions, this concludes the Globalist Medical first quarter earnings call. Thank you for joining us today and have a nice evening. We will now disconnect.
Disclaimer