Globus Medical, Inc. Class A

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.

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.

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