Globus Medical, Inc. Class A

Okay, and thank you for standing by. Welcome to the Globus Medical's fourth quarter and four-year 2023 earnings call. At this time, all participants are on listen-only mode. After the speaker's presentation, there will be a question-and-answer session. To ask a question during a 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 like to hand the conference over to your first speaker today, Brian Kern, Senior Vice President of Business Development and Investor Relations. Please go ahead.

Thank you, Victor, 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 Operating and 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 2023 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 turn the call over to Dan Scavilla, our president and CEO.

Thanks, Brian, and good afternoon, everyone. Globus finished 2023 with strong performance in the fourth quarter. Revenue for the full year was a record $1,569,000,000, delivering $546,000,000 of revenue growth, or 53% versus prior year, including four months of invasive sales. We achieved record sales while maintaining industry-leading profitability, generating a record $2.32 in non-GAAP EPS and an adjusted EBITDA of 30%, even as we continue our strong investments in enabling technology, orthopedics, and competitive recruiting. We also achieved significant progress integrating the new base of merger and continue to fuel our innovation with five new products launched in 2023, positioning us well to gain momentum in 2024. In Q4, we delivered record sales of $617 million, growing 125% or $342 million. Q4 non-GAAP EPS was 60 cents and adjusted EBITDA was 28%. We also had a record free cash flow of $82 million up 79%. This cash will be used to fuel growth, funding innovative launches, product set expansions, and in-house manufacturing. I'll briefly comment on standalone Globus and standalone invasive Q4 revenues. However, as we become one company with one focus in 2024, we will not provide standalone company information going forward. Globus standalone sales for Q4 were $304 million, increasing $30 million, or 11% growth versus prior year, delivering an adjusted EBITDA of 33%. Sales were driven by the continued above-market growth in U.S. spine of 11%, increasing momentum internationally with 20% growth, and strong performance in trauma with 41% gains. enabling technology deliver 2% growth in Q4, driven by higher unit placements offset by product mix, country mix, and financing programs. There are over 65,000 robotic procedures performed to date and growing. The foundation remains strong, and I'm proud of the Globus team delivering solid growth and profitability as we enter 2024. New VESA standalone sales for Q4 were $312 million, up 2% on a pro forma basis. primarily driven by continued market penetration in international spine with 14% growth, market reentry of key technology of Nuvasiv specialty orthopedics delivering 26% gains, and strength in Nuvasiv clinical services increasing 6% versus prior year. This is partially offset by slight declines in U.S. spine attributed to deal disenergies and lower pulse sales impacted by customers' uncertainty with the merger. To date, We have seen some sales disenergies in a few territories, but these fall well within our projected estimates provided in the S4. The former Nuvasiv team are key growth drivers in 2024 with cross-selling and enabling tech penetration. I look forward to partnering with them. In Q4, we launched Victory lumbar fixation plates and buttress plates for anterior lateral and anterior lateral approaches, adding to our broad spinal fixation platform. Entering 2024, our combined product pipeline is full, setting the stage for a strong year of product introductions. Over the next few months, we will be adding to our best-in-class expandable portfolio, new INR offerings including the eHub navigation system for 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. The merger with Nuvasiv created a leading world-class organization with a global scale and expanded customer reach with minimal sales force overlap. The comprehensive and innovative portfolio in spine, enabling tech and orthopedics positions us well for long-term sustained growth. Our combined product development team will focus on rapid development of innovative solutions to address unmet clinical needs through the continuum of care as we bring procedural solutions into the marketplace. The surge in education and research programs will further define us as thought leaders shaping the marketplace, while expanding our complementary operational footprint improves in-house capabilities to support commercial growth and drive cost savings. Our financial discipline provides the ability to redirect investments into focused growth areas while improving combined profitability and cash flow. On the commercial front, We've completed the realignment of the U.S. and international sales teams and in January 2024 implemented the new team structures to support surgeons throughout the world. We've also held several education sessions for reps for product cross-training and enabling tech education. We remain on track for implementing common operating systems in Q1 that will allow us to work as one company and one team. I'm pleased with our work here and look forward to driving meaningful growth through the new structure. We also continue to receive significant inbound interest from competitive sales professionals who are seeking 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. One immediate benefit of the merger is cross-selling our existing portfolios. We made significant investments in key product sets in 2023 and are ramping up cross-selling in 2024. As mentioned, Salesforce cross-training is continuing as planned and will accelerate cross-selling opportunities throughout 2024 as more sets become available. We also made significant investments in long lead time components and manufacturing resources to scale up our enabling tech capacity, allowing for increased production output in preparation for higher demand. We are reorganizing product development, carrying forward the rich history of rapid development to remain an industry thought leader as we work with our surgeon partners to address unmet clinical needs. From pioneering the XLIFT procedure that is now the gold standard of lateral surgery, leading the market in expandable cage technology, and developing the best spinal robot with the most advanced intraoperative CT imaging, we're working to create surgical proceduralization of all key spine surgeries to create the standard of care across the spine industry. 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. To accomplish this, we remain committed to continuing existing projects, and we'll have a strong PD presence on the West Coast focused on spine and enabling tech solutions. We're enhancing our surgeon engagement programs to increase our impact with surgeons and further strengthen how we interact with them in all aspects of our business. Our professional affairs team has been expanded, and we've added scientific affairs, marketing, and communication teams, all with talented individuals. In addition, we're increasing our research and clinical investments, expanding the coordination of education programs, and enhancing our presence in teaching institutions. Operations remains a strength of the merger. We've begun expanding in-house capabilities of the West Carrollton production facility as part of our ongoing synergies. The Memphis Distribution Center is now capable of supporting expanded distribution for the combined entity. We will continue to invest in high-tech manufacturing equipment for implant instrumentation and enabling tech production capabilities. We're also working to consolidate volumes and orders with third-party vendors to accelerate delivery times and drive cost savings. All these activities are progressing as planned. Synergy targets have been identified, focusing on out-of-pocket spending and prioritizing investments to match future growth plans. In-house organizational structures are being implemented and should reach steady state by mid-year 2024. While some employees have been impacted by the merger and reorganization, this is not a slash-and-burn exercise and the merger payback is not driven by deep employee or spending cuts. We remain focused on building an organization to support long-term, sustained, profitable growth. I want to conclude by sharing a recent event that reminded me of who we are. We recently held our combined US national sales meeting, coming together as one team for the first time since the merger and commercial restructuring. It was interesting to watch the hesitancy of the participants evaporate as they saw familiar faces of teammates they've worked with, worked for, or competed against. The combined and well-balanced leadership team showed our sales force that we really are bringing the best of both organizations together to support them and create a once-in-a-career opportunity. By the first evening's product fair, you could no longer tell who came from Globus or who came from Nuvasiv. There was only one strong energy in the room, focused on our combined portfolio and innovation, and a genuine excitement to get back out in the field and win. This team and that meeting reconfirmed my belief that we really are more alike than different, and when combined, we're unstoppable. I cannot wait for the international sales meeting to make that feeling global. 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 markets. We have at our fingertips everything we need to realize this. In closing, I want to congratulate Keith Feil on his recent well-deserved promotion to Chief Operating Officer CFO. Keith is a rock solid leader, a great partner, and is well suited for this role. I will now turn the call over to Keith.