Globus Medical, Inc. Class A

Good day and thank you for standing by and welcome to the Globus Medical's third 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, Li-Huei, 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 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 on the schedules accompanying the press release and on the investor relations section of the Globus Medical website. With that, I'll turn the call over to Dan Scavilla, our president and CEO.

Thanks, Brian, and good afternoon, everyone. This quarter's earnings release will have a different format than our usual approach. On September 1st, after clearing the FTC second request timeframe, we executed the Globus NuVasive merger. With the timing of this event, We have a full third quarter revenue and financials for Globus, combined with the month of September only for Nuvasiv revenue and financials. For this quarter, and possibly the next, we'll share total financial results and comment on standalone Globus and standalone Nuvasiv to show how these businesses are performing. However, as we move into 2024 as one company with one focus, we're not planning on providing standalone company information. For Q3, We delivered record sales of $384 million, a day adjusted growth of 53%, or $130 million versus Q3 2022, reflecting three months of Globus and one month of NuVasive sales. Non-GAAP EPS was $0.57, up 15%, and cash flow remained strong with $29 million, a 38% increase from prior year. Adjusted EBITDA for the quarter was 29%. Globus standalone sales for Q3 were $281 million, increasing $27 million or 12% on a day adjusted growth versus prior year, delivering an adjusted EBITDA of 32%. Sales were driven by the continued above-market growth of 8% in the U.S. versus prior year and increasing momentum internationally of 25% growth, including significant gains in Japan. Enabling technology sales remained strong with 10% growth and over 59,000 procedures performed to date. Trauma achieved its 15th consecutive quarterly record, adding 53% annual growth or 12% sequentially. The foundation remains strong, and I'm proud of the GMED team delivering solid growth and profitability as we enter into our combined future with Nuva. Nuva's standalone sales for the month of September were $102 million, down 2%, primarily driven by one less selling day in the U.S., combined with a one-time 2022 credit not repeated in 2023 for U.S. Spine. Newvasive clinical services and pulse sales were lower versus prior year, partially offset by continued strength in international and newvasive specialty orthopedics, or NSO. Pulse sales have been impacted by customer uncertainty with the merger, while international remains focused on continued market penetration and NSO on market reentry of key technology. I'm seeing the incredible talent we have with our new teammates from Nuvasiv and I'm excited to join forces as we focus on gaining momentum throughout our businesses. In Q3, we launched Hedrone, our anterior 3D printed inner body fusion device, and Stredo, a cerclage wiring system for trauma. Year to date, we've launched nine products and plan to launch several more new products by the end of the year. Our product pipeline is full and further enhanced by what is being developed in San Diego. setting the stage for a record year of product introductions in 2024. Over the next few months, we'll be adding to our best-in-class expandable portfolio, new INR offerings including eHub navigation system to provide seamless navigation when combined with our E3D system, and expansion of the precise trauma nailing system. Moving into integration status and starting with the deal rationale. Both companies recognized that a combination of Globus Innovasiv would create a leading world-class organization. The global scale and expanded customer reach with minimal Salesforce overlap, combined with a comprehensive and innovative portfolio in spine, enabling tech and orthopedics, positions us well for long-term sustained growth. Combining our product development strengths focused on rapid development of innovative solutions to address unmet clinical needs of our surgeons and their patients, while continuing to focus on surgeon education and research, will help us shape solutions through the continuum of care as we bring procedural solutions into the marketplace. Investing in our complementary operational footprint will allow rapid expansion of in-house capabilities to support commercial growth and drive cost savings. Our financial discipline provides the ability to redirect investments into key growth areas while improving combined profitability and cash flow. With the unblinded data available to us after September 1st, we were able to move from integration planning into execution, focused on our combination of sales forces. The actual surge in overlap is better than we projected, both domestically and internationally, falling below the 5% we shared previously, which helps in defining territories and reducing overlap. We're completing and communicating our U.S. commercial structure currently. Newly formed teams are beginning to develop 2024 action plans, cross-training and account building as they complete the busy Q4 season and prepare for launching into the new year. international is also progressing well with regional and market leadership defined we're completing international territories in november with cross training planned in december overall i'm pleased with our work here and look forward to completing this shortly as we get as we set the stage for the new year we're also receiving significant inbound interest from competitive sales professionals who are seeing the opportunity to carry a bag second to none the combined company will be a destination of choice for sales personnel who cherish an incredible product portfolio, financial security, and longevity. To date, we've seen some smaller sales disenergies, but these still fall well within our projected estimates provided in the S4. One of the immediate benefits of the combination is our ability to cross-sell our existing portfolios. We made significant investments in key product sets earlier this year and are poised to begin cross-selling as early as next quarter. expanding it over time as we get more sets completed. Surgeons will soon start gaining access to our broader expandable offerings, 3D printed interbody portfolio, cervical disc, robotic prone lateral system, eGPS e3D, neuromonitoring solutions, improved retractors, MAGIC, and the precise family of limb lengthening trauma products. We also made significant investments in long lead time components and manufacturing resources, to scale up our enabling tech capacity and we're increasing production output now in preparation for increased demand. For implants and instrumentation, we're not rationalizing the product offerings as part of our synergy targets. We believe our surgeons should have their choice of products and will, over time, shape our future portfolio offering. Our financial discipline gives us the ability to continue to keep these products available without negative impacts while continuing to innovate future offerings. In our product development innovation engines, we will carry forward our rich histories of rapid development and launch to remain an industry thought leader, working with our surgeon partners to address unmet clinical needs from pioneering the XLIFT procedure that is now the gold standard of lateral surgery, market-leading expandable cage technology, the best spinal robot, and the most advanced interoperative CT imaging. We are working to create surgical proceduralization of all key spine procedures combining with enabling technology to create the standard of care across all of Spine. Our intellectual property portfolio has been number one in the spinal industry for the last decade, and we are committed to further expanding this lead, especially in the enabling tech arenas, as we continue to be at the forefront of imaging, navigation, and robotics. We remain committed to continuing all in-progress projects on both sides and expect to have a core PD hub on the West Coast. We brought together significant resources to enhance our surgeon engagement program, from adding scientific affairs, increasing research and clinical investments, adding strong talent to our professional affairs team, coordinating education programs, and enhancing our presence in teaching institutions. In addition, we've added innovative marketing communication teams. We're well poised to increase our impact with surgeons and further strengthen how we interact with them in all aspects of our business. The complementary fit of our operations remains a strength of the merger. Our strong financial position will allow us to expand investments in West Carrollton production facility to support our inventory needs. The Memphis Distribution Center is expected to support global distribution for the combined organization. We will continue to invest in high-tech manufacturing equipment for our implants, instrumentation, and enabling tech production capabilities. We're currently working to consolidate volumes and orders with third-party vendors to accelerate delivery times and drive cost savings. Synergy targets have been refined and communicated to functional leads who are planning out actions for the next several years, focused on out-of-pocket spending and prioritizing investments to match our future growth plans. Organizational designs are in progress with planned rollout in the beginning of 2024. As we've said before, this is not a slash-and-burn exercise. The acquisition payback is not driven by deep spending cuts, and we're not racing to impress the market with a quarterly flash. We remain focused on long-term sustained growth and not making cuts that impact our strengths. I want to conclude by sharing a recent event that reminded me of who we are. As part of the integration, we sent a group of former Nuva teammates to visit our enabling tech facility in Methuen. They expressed excitement regarding the number of employees focused on the marketed products, the short-term development launches, and the long-term game changers, along with the building square footage we have invested in. supporting enabling tech. This increased their realization that an ecosystem designed and built from the ground up to seamlessly communicate with each other with options to expand functionality over time is positioned to outperform patchwork to market alternatives. We will continue to accelerate and increase our investment in this space and place these offerings through our expanded commercial team as part of addressing unmet clinical needs and shaping procedural solutions. I believe the potential for Globus has never been greater. It's up to us to harness our resources and shape the future of our market. We have at our fingertips everything we need to realize this. I will now turn the call over to Keith.