Globus Medical, Inc. Class A

Welcome to Globus Medical's third quarter 2024 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 Investment Development and Investor Relations. Mr. Kearns, 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 of and Keith Fowle, Chief Operating Officer 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 will now turn the call over to Dan Scavilla, our president and CEO.

Thanks, Brian, and good afternoon, everyone. September 1st marked the one-year anniversary of the Globus NuVasive merger, making this quarter the fourth consecutive combined earnings release with sales growth, strong financial performance, and best-in-class innovative product launches. Globus delivered an exceptional third quarter with sales of $626 million, growing 63% or $242 million. Non-GAAP EPS was a record 83 cents, increasing 45% even with the 20% increase in diluted shares versus prior year. We also had a record free cash flow of $162 million in Q3. This amount is equivalent to our 2023 full year free cash flow. These results reflect our continued drive in market penetration, synergy acceleration, and sustained profitable growth through financial discipline. Based on our results so far, I would like to compliment the entire Globus team for their speed and effort in completing the most successful spine merger in history. There's still a great deal of work ahead of us, but I look forward to building from this base and accelerating growth as we move into the future. In addition to our great financial performance, Globus launched four new products in Q3 across our businesses, reaching 13 product launches year-to-date and more to come this year. These results are a testament to our incredible team working tirelessly around the clock to drive integration, overcome challenges, and create scalable solutions so that we can reach steady state quickly and shape the markets in which we compete while delivering innovation to our surgeons. Focusing on the performance of our business, US Spine grew 55% in Q3, with significant gains across our product portfolio in expandables, MIS screws, biologics, lateral and cervical offerings. The growth is driven by several factors, including a high retention rate at all levels of our field sales team, successful distributor to direct conversions, the strength of our combined product offering, increasing product cross-selling, implant pull-through from robotic procedures, and contributions from prior period competitive rep recruiting. Competitive rep recruiting remains strong in Q3 and the pipeline is solid as we enter Q4. 2024 is positioned to be one of the strongest competitive recruiting years as we continue to attract the most successful and tenured competitive professional reps who see the power and future we can offer them as a destination of choice for innovation and growth. As mentioned earlier, We continue to flex our innovation muscle, launching four new products from our prolific R&D pipeline in Q3. I want to share these meaningful launches with you. The Excelsis Navigation Hub pairs navigational accuracy with innovative patient safety features such as patient array shift tracking and navigation of door pro-oscillating instruments. The Hub seamlessly integrates with Globus products and procedures offering enhanced navigation of best-in-class instruments and implants for a complete procedural solution from the cervical spine to the sacrum. It is the only freehand navigation system on the market to offer the versatility of three distinct imaging workflows. The first is with Excelsius 3D imaging with automatic registration for optimized flexibility and efficiency. The second is preoperative CT to fluoroscopy merging. And the third is interoperative 2D fluoroscopy. Excelsior's Helped Navigated Instruments are an expansive and comprehensive suite of navigated instruments that enable the navigation of a wide variety of open and minimally invasive spine procedures, including XLIF, TLIF, posterior cervical fusion, thoracolumbar fusion, and SI joint fusion. They are designed for optimal camera tracking throughout the procedure and are compatible with innovative angled navigation arrays that reduce the need for interoperative camera adjustments, streamlining all workflows, while maintaining backward compatibility with existing Xelsys GPS navigated instruments. The ACTIFY 3D Total Knee System is a contemporary total knee solution that pairs cementless reconstruction with operative efficiency and anatomic fit. Compatible with manual robotic-assisted workflows, ACTIFY 3D is engineered to combine implant endurance and a porous lattice interface for cementless fixation, addressing surgeon preferences and varying patient anatomies. ACTIFY 3D complements the Excelsis Flex robot with the TKA total knee arthroplasty application that received FDA clearance in late Q2. eFlex enables consistent, accurate anatomic cuts while maintaining surgeon flexibility and tactile feel. It accommodates varying surgeon preferences by offering imageless and CT-based workflows, ergonomic and unrestricted jiggless resections, and restores surgeon control while active tracking is engaged. The system features advanced registration and planning algorithms to enable streamlined and efficient procedures. The system is slated for launch in Q4. For trauma, the Captivate Sola headless compression screw system provides a fast and efficient solution for fracture repair, bone reconstruction, joint fusion, osteotomy, and arthrodesis. This headless screw is capable of accommodating a wide range of patient anatomies, the intuitive graphic case design, aids efficiency, and reduces space in the OR. In addition to driving growth from the 13 products we've launched so far this year, I look forward to sharing future impactful launches as we go through the rest of 2024. This is a year of record launches for us, and this innovation is key to building long-term growth while working through near-term merger integration. We are investing significantly in comprehensive product development training to harmonize our product development processes between Audubon, San Diego, and Methuen. and this is expected to further expand our significant lead over the competition in IP generation and new product development. Enabling technology sales were $38 million, an increase of 39% versus prior year. Q3 was the highest number of unit placements since launch, growing 50% over prior Q3, including the acceleration of our rental program where, unlike unit sales, we've recognized revenue over the rental contract life. Robotic procedures continue to accelerate, growing 34% versus prior year, and exceeding 84,000 robotic procedures performed since launch. As mentioned earlier, the Excelsior's hub launch in Q3 is going well as we enter the freehand navigation market, opening the largest market segment of navigation for Globus innovation and growth. The combination of the E3D imaging system with the eHub navigation platform gives Globus the most comprehensive and sophisticated navigation offering available. We also plan to advance navigation further in the near future with our XR augmented reality headset designed to work with the Excelsior's hub. We expect to gain FDA clearance of the headset in Q4. The DuraPro and Versera power tool systems launched in Q1 continue to differentiate our power tool offerings and pair seamlessly with our enabling tech portfolio. The unique ability of door pro-oscillating drill to add extra safety around soft tissue structures, including neurovascular anatomy, while allowing for easy removal of bone, helps surgeons work safely and efficiently. Market interest remains high for our state-of-the-art Excelsis 3D imaging system, with most surgeons immediately recognizing and appreciating the stark differentiation over existing systems and seeing the value of combining E3D with the Excelsis GPS or HUB. We're delivering on our promise to create and launch our enabling tech ecosystem, an ecosystem that is designed and built from the ground up to communicate together seamlessly. Investment in this area remains strong as we enhance our ecosystem offering and bring about more functionality in our imaging, navigation, and robotic current and future portfolio. Our international spinal implant business delivered record sales in Q3, growing 86% on a constant currency basis compared to prior year, with high double-digit growth in most markets and strong dollar contributions driven by Japan, Germany, the UK, Italy, Brazil, and Colombia. We have yet to fully harness the power of the combined globus and invasive product offerings internationally and feel this will be a significant tailwind moving forward in 2025 and beyond. The combined trauma and NSO business delivered 99% growth for Q3, driven by the continued powerful performance and market penetration of our base trauma business, combined with the fast uptake of the Nuvasiv specialty orthopedic growth nail. The combination of these two businesses is one of the strengths of our merger, offering a broad range of products and market-changing innovation. Integration is progressing well as we continue to cross-train our field. implement common global systems, expand our investment in sets, and bring new products to market. There's been a great deal of progress from our teams, and we're fortunate to have such strong leaders throughout the world. You can see from this quarter's financials, synergies have been identified, and actions have begun to realize benefits, focusing on out-of-pocket spending and prioritizing investments to match future growth plans. In-house organizational structures have been implemented, and we're working towards reaching steady state by year end. 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. I want to thank the worldwide Globus team for your dedication and support, delivering an incredible quarter and furthering the pathway to becoming the preeminent musculoskeletal technology company in the world. I will now turn the call over to Keith.