Globus Medical, Inc. Class A

Welcome to Globus Medical's second quarter 2023 earnings call. At this time, all lines will be on mute and a Q&A session will be held after the prepared remarks. I will now turn the call over to Brian Kearns, Senior Vice President of Business Development and Investor Relations. Mr. Kearns, please go ahead.

Thank you, Didi, 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, Senior Vice President and Chief Financial Officer. This review is being made available via webcast, accessible through 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 from 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 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 had a fantastic second quarter, setting a new sales record of $292 million, increasing 11% or $28 million versus Q2-22. Non-GAAP EPS increased to 63 cents, up 12%. and we had a strong free cash flow of $17 million, up 31% versus Q2-22. Adjusted EBITDA for the quarter was 33%. Through the first half of 23, Globus has delivered $568 million, an increase of 15% for $74 million over the first half of 22. Non-GAAP EPS was $1.15, up 18%. and free cash flow of $54 million was up 44% versus first half 22. These outstanding results are due to the hard work of our dedicated team members across the company and our focus on driving sustainable and profitable growth. Keith will cover these achievements further in his section. U.S. Spine grew 6% in Q2 with notable gains across our product portfolio in biologics, MIS and pedicle screws, and 3D printed implants. This above-market growth is driven by competitive rep productivity and robotic pull-through. In Q2, we launched three new products, Reflect, Marvel, and Osteofuse. Reflect is a humanitarian device designed to correct progressive scoliosis in young patients while preserving motion, maintaining stability, and allowing for future modulated growth. Unlike rigid metal rods for fusion, the system uses a flexible, durable cord tensioned on the convex side of the spine, to harness the power of patient growth for curve correction. This is a groundbreaking technology that is now available for children in the U.S. Reflect technology has been used in over 5,000 procedures worldwide and is quickly becoming a very attractive option for parents and children who can now avoid or delay a fusion. Marvel growing rods are designed for patients under the age of 10 with early onset scoliosis to obtain and maintain correction while allowing continued growth through minimally invasive distraction. The powerful geared expansion mechanism accessed through a small incision provides tactile feedback and a large expansion capability for reliable distraction and minimal soft tissue disruption. Reflective Marvel are part of our strategy to increase innovation and our presence in the pediatric deformity market. Ossifuse HSA or high surface area is composed of 100% allograft bone without an added synthetic carrier. The demineralized cortical fibers have a unique architecture with high surface area for cellular attachment and moldable handling. Ossifuse is a key component in our growing biologic portfolio. As we move into the second half of 2023 and into 2024, I anticipate a strong cadence of product launches throughout our portfolio. Enabling technology had record sales of $35 million, up 18% versus prior year, driven by robotic and imaging system sales. Robotic penetration and adoption continue to be strong as we open new accounts in markets worldwide. We continue to make positive inroads with our Excelsis 3D imaging system in the U.S., and we're also seeing increased interest in sales and combination deals with both Excelsis GPS and E3D as surgeons see the advantage of our seamless integrated offering. Robotic procedures continue to accelerate, growing 41% versus prior year and exceeding 54,000 robotic procedures performed to date, driven by strong procedural adoption of pedicle screw placement, inner body placement, and cranial applications. We're also expanding our investment in enabling technology product development to enhance our ecosystem offering and bring about more functionality in our imaging navigation robotics current and future portfolio. We're well-positioned to partner with our surgeons to bring meaningful innovation into the space. Market interest remains high for our state-of-the-art technologies, and we're entering Q3 with a strong pipeline. Our international spine business, excluding Japan, had a record quarter in Q2, growing 29% on a constant currency basis compared to prior year. We generated double-digit growth and strong momentum in most markets. Spain, UK, Australia, Ireland, India, and Poland all produced growth of 30% or more for the quarter. In addition, Japan had 9% constant currency growth for Q2. We expect to see gains in Japan throughout the year as we focus on above-market gains to recapture share. Our trauma business delivered its 14th consecutive quarter of sequential growth, generating 63% growth versus Q2-22 and 12% sequentially. Trauma performance is driven by Salesforce expansion and strong uptake in all product lines, with substantial growth throughout our portfolio. We have a robust product pipeline in trauma, and I anticipate several meaningful launches in the second half of 23. To update you on merger status, as mentioned in our last earnings call, both Globus Medical and Nuvasiv shareholders voted overwhelmingly in support of the merger, with over 99% voting for the transaction. We received a second request from the FTC in May, and have been focused on providing the necessary responses while continuing with cross-functional integration planning, we remain fully committed to the merger, and our expected Q3 23 closure date remains unchanged. In summary, we remain focused on the core elements for long-term and sustained 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.