Globus Medical, Inc. Class A

Welcome to the Globus Medical's fourth quarter and full year 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 Business Development and Investor Relations. Mr. Kearns, please go ahead.

Thank you, Dee Dee, and thank you everyone for being with us today. Joining today's call from Globus Medical will be Dan Scavella, President and CEO, and Keith File, 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 .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 2024 fiscal year and our subsequent filings for 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 finished 2024 with a great fourth quarter, making this the fifth consecutive combined earnings release with sales growth, strong financial performance, and -in-class innovative product launches. Revenue for the full year was a record ,000,000, delivering ,000,000 of revenue growth or 61% versus the prior year. We achieved record sales while maintaining industry-leading profitability. Non-GAAP EPS was a record $3.04, increasing 31%, even with the 20% increase in diluted shares versus prior year. And free cash flow was an all-time high of ,000,000, increasing ,000,000 or 145% versus prior year. This strong cash flow will enable us to return to a debt-free status as we exit Q1 2025, paying off the remainder of the $1 billion debt inherited from the nuvasive merger. We had a banner year in enabling tech with our highest level of robot, imaging system, and hub placements, setting the stage in 2025 and beyond for increased implant pull-through. These results reflect continued market penetration, synergy acceleration, and sustained profitable growth through financial discipline. I'd like to congratulate the entire Globus team for their speed, dedication, and success. I look forward to building on this base and accelerating growth in 2025. In addition to our great financial performance, Globus launched 18 new products in 2024 throughout our business. These results are a testament to our incredible team, working tirelessly to drive integration and create scalable solutions so that we can reach steady state quickly and shape the markets in which we compete while delivering meaningful innovation to our surgeons. In Q4, we delivered our highest sales yet with ,000,000, increasing 7% versus prior year. Non-GAAP EPS was $0.84, increasing $0.24 or 40% versus prior year. And free cash flow for the quarter was $193 million, up $111 million, or 136% versus Q4 last year. In Q4, we achieved our highest quarterly enabling tech sales and unit placements to date. We also launched five new products this quarter, flexing our innovation muscle and shaping spine surgeries with our -in-class technologies. Focusing on the quarterly performance of our business, US spine grew 4% in Q4 with significant gains across our product portfolio in expandables, MIS screws, cervical offerings, and 3D printed spacers. The growth is driven by several factors, including a high retention rate at all levels of our field sales team, the strength of our combined product offering, increased product cross-selling, and implant pull-through from robotic procedures. 2024 is one of our strongest competitive rep recruiting years over the past five years, and the recruiting pipeline is robust as we enter 2025. We continue to attract the most successful and tenured competitive professionals. We see the power and future we can offer as a destination of choice for innovation and growth. As mentioned earlier, we launched five new products in Q4, and I want to share these innovative launches with you. The Cortex-MIS system introduces disposable towers that attach to any existing screw from our highly successful Cortex system, offering a per-continuous solution designed to minimize disruption in the posterior cervical and upper thoracic spine. Cortex-MIS is integrated with our advanced Excelsis technology and designed for accurate screw placement using a minimally invasive robotic technique. The Allegiance Retractor system is a ringless interior exposure system designed for quick precise tissue retraction and maximum rigidity. Radio-loosened handheld blades facilitate initial manual tissue retraction and quickly attach to rigid table-mounted arms, ensuring a more stable exposure. Each independent blade handle features a built-in toe mechanism, enabling fine-tuned micro-adjustments without affecting previously well-positioned blades, a challenge common with traditional ring-based designs. This innovative design enhances surgical efficiency and visualization, providing a more reliable solution for alief exposure. The Modulus Alief Anchoring Blades, paired with the Modulus Alief Spacer portfolio, is designed to enable procedural efficiency with the ability to deliver anchoring blades fixation by reducing the number of surgical steps and instruments needed in the surgery. Modulus Alief Anchoring Blades feature low-profile instrumentation for maximum visualization of the anatomy and streamlined delivery of fixation without the need for secondary step. The addition of Modulus Alief Anchoring Blade fixation further strengthens our market-leading alief portfolio. In addition, we launch the Excelsior Flex robotic navigation platform and the ActiFi Uniconjular knee system in Q4. I'll expand further on recon launches in future quarters. 2024 is a record year of launches for us, and this innovation is key to building long-term growth. We are investing significantly in product development and comprehensive PD training to harmonize our processes, expecting this to further expand our significant lead over the competition in IP generation and new product creation. In addition to driving growth from the 18 products we launched in 2024, I look forward to sharing future impactful launches we have planned in 2025. Enabling technology sales for the quarter were $47 million, an increase of 44% versus prior year. As mentioned, Q4 was the highest number of unit placements since launch, growing 47% over prior Q4. Robotic procedures continue to accelerate, growing 17% versus prior year, and exceeding 94,000 robotic procedures performed since launch. The Excelsis Hub launch from 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 in the near future with our XR Augmented Reality headset designed to work with the Excelsis Hub. We expect to gain FDA clearance of the headset in Q1. The DuraPro and Vesera power tool systems launched in Q124 continue to differentiate our power tool offering and pair seamlessly with our enabling technology portfolio. The unique ability of DuraPro 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 effectively. 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 and we enhance our ecosystem offerings and bring more about functionality in our imaging, navigation, and robotic current and future portfolio. Our international spine implant business delivered record Q1 sales or Q4 sales in 13% on a cost and currency basis compared to prior year with high double digit growth in most markets and strong dollar contribution driven by Japan, United Kingdom, Italy, and Ireland. We have yet to fully harness the power of the combined global invasive product offering internationally and feel this will be a significant tailwind as we move forward in 2025 and beyond. To combine trauma in NSO business delivered 8% growth in Q4 driven by the powerful performance of market penetration of our base trauma business combined with the ongoing uptake of the invasive specialty orthopedic growth nail, partially offset by temporary supply chain disruption that will be rectified in the first quarter. The growth potential for this business has never been stronger with our growing product offerings, increased market interest, and tenured sales and product development teams. Integration is progressing well. We exceeded our 2024 synergy targets and were able to accelerate value creation and shareholder return as a result. For year two synergies, we're continuing to implement common systems in our international markets, expand our in-house production for invasive implants, consolidate external vendors, and utilize our existing product offerings to drive cross-selling. There's been a great deal of progress from our teams and we're fortunate to have such strong leaders throughout the world driving integration, realizing synergies, and building a platform for future growth. A few weeks ago, we announced a definitive agreement to purchase all shares of Neverow Corporation in an all cash transaction for approximately $250 million. The acquisition of Neverow further expands our reach into the musculoskeletal market, adding an additional $2 billion market space for us to compete in and grow. We believe our high frequency technology offers collectively superior solutions that can alter the standard of care for patients. Neverow technology has potential beyond its current application to benefit our cranial enabling technology, next generation spinal implants, data mining, and other areas of our business. Their patent portfolio will strengthen our already best in class musculoskeletal innovation suite while Globus' scale and customer base can accelerate market penetration for the differentiated high frequency technology. We see this move as an expansion of our continuum of care and complementary to our current spinal portfolio offering. The strong and dedicated neuromodulation sales force will be able to leverage our existing spine team to drive uptake and penetration while our spine team can offer more solutions to their surgeons. Globus' financial strength will accelerate investments in neuromodulation to expand existing product reach and future product development. Combining Neverow into Globus' existing infrastructure will improve the profitability and cash flow of the Neverow business, generating more cash for future investments and growth. 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 Globus team worldwide for your dedication and support, delivering an incredible year and furthering the pathway to becoming the preeminent musculoskeletal technology company in the world. I will now turn the call over to Keith.

Thanks, Dan, and good afternoon, everyone. We capped off 2024 with a strong fourth quarter, helping to successfully complete our first combined fiscal year following the September 2023 merger with NewVasith. Operationally, we continued to execute on key integration objectives, while financially we achieved meaningful sales growth and expanded profitability along with record free cash flow, helping to build our overall cash position as we closed out the year. Full year 2024 revenue was $2.519 billion, growing .6% on an as-reported basis and .1% on a constant currency basis. Pro-forma sales growth on an as-reported basis was .2% and .5% on a constant currency basis. Net income was $103 million, resulting in 75 cents of fully diluted earnings per share and includes $281.4 million of pre-tax merger and acquisition related costs as well as restructuring expenses. Non-GAAP net income was $419.6 million, which delivered $3.04 of fully diluted non-GAAP earnings per share, representing .2% non-GAAP EPS growth over the prior year, despite a .3% increase in the fully diluted share count driven by the -for-stock merger. Full year adjusted EBITDA was .2% and we generated a record $405.2 million of free cash flow. Included in the full year results is an approximate 10 cent headwind to non-GAAP EPS and a .72% unfavorable impact to adjusted EBITDA driven by foreign currency loss. Moving into the fourth quarter, our Q4-24 revenue was $657.3 million, growing .6% on an as-reported basis and .9% on a constant currency basis over the prior year quarter. Day adjusted sales growth was 5.2%, with one more selling day in the fourth quarter of 2024 as compared to the prior year quarter. Fourth quarter net income was $26.5 million, growing .3% over the prior year quarter, resulting in 19 cents of fully diluted GAAP earnings per share. Q4-24 non-GAAP net income was $117.4 million, which resulted in 84 cents of fully diluted non-GAAP earnings per share, growing .1% over the prior year quarter. Q4 adjusted EBITDA was 30% and we generated a record $193.2 million of free cash flow. Included in our Q4 results is an approximate 6 cent headwind to non-GAAP EPS and an unfavorable .5% impact to adjusted EBITDA driven by FX loss. Musculoskeletal sales for the fourth quarter of 2024 were $610.3 million, growing .5% as reported compared to the prior year quarter. Our U.S. and international spine businesses were the primary drivers of growth, which was partially offset by lower neuro-monitoring revenue driven by lower net revenue per case. Q4-2024 enabling technologies revenue was $47 million, growing .5% as compared to the prior year quarter, driven by an overall record of capital units sold during the quarter. Moving into geographic sales, Q4-24 U.S. revenue was $521.9 million, growing .3% as reported versus the prior year quarter. The growth drivers are driven by enabling tech, U.S. spine and trauma, partially offset by lower neuro-monitoring revenue. International revenue for the fourth quarter was $135.4 million, growing .7% as reported and .9% on a constant currency basis, with the primary driver being the spinal implant business. As Dan noted earlier, the primary countries driving growth include Japan, United Kingdom, Italy and Ireland. Gap gross profit in the fourth quarter of 2024 was .2% versus .4% in the prior year quarter, driven by operational improvements as well as lower inventory step-up amortization. The fourth quarter of 2024 was the last quarter in which we incurred step-up amortization related to the invasive merger. Adjusted gross profit, which excludes the impacts of step-up amortization, was .1% compared to .5% in the prior year quarter. The improvement was driven by lower freight expenses as well as other operational spending improvements partially offset by higher inventory write-offs. Full year 2024 gap gross profit was .6% compared to .1% in the prior year. The decline in gross profit was driven predominantly by the inclusion of inventory step-up amortization and higher product cost as a result of the inclusion of a full year of newvasive in the consolidated results versus four months in the prior year. Full year 2024 adjusted gross profit was .4% compared to .6% driven again by the full year inclusion of the invasive in the consolidated results compared to only four months in the prior year. As a reminder, legacy and evasive product costs are a higher cost than globus driven primarily by their higher mix of outsourced production. Looking ahead to 2025, we expect our full year adjusted gross margin to be in the range of .5% to .5% representing step improvement compared to 2024 as our insourcing efforts begin to take shape. It remains our long-term goal to be a mid-70s adjusted gross profit business driven by manufacturing insourcing and operational excellence. Research and development expenses in Q4 were $33.4 million or .1% of sales compared to $52.3 million or .5% of sales in the prior year quarter. The decreased spending is reflective of headcount savings and lower operational spending within R&D driven by the realization of cost synergies. Full year 2024 research and development expenses were $163.8 million or .5% of sales compared to $124 million or .9% of sales in the prior year. Our 2024 R&D includes $12.6 million of spending related to an in-process research and development acquisition from our first quarter. Excluding that acquisition, 2024 R&D expense was $151.1 million or 6% of sales compared to $124 million or .9% of sales in the prior year. The increased dollar spending is due to the inclusion of Nubasa for the full year, which primarily resulted in increased personnel related expenses. The decrease as a percentage of sales is driven by cost synergies realized as a result of achieving integration objectives. Looking ahead to 2025, we expect R&D expense to be in the range of 6% to 7% of net sales. SG&A expenses in the fourth quarter were $253.5 million or .6% of sales compared to $244.7 million or .7% of sales in the prior year quarter. The decreased spending as a percentage of sales is driven by the realization of cost synergies, lower third party legal costs, partially offset by higher year-end sales compensation costs. Full year 2024 SG&A expenses were $981 million or .9% of sales compared to $643.4 million or 41% of sales in the prior year. The increased spending is driven by commission impacts from higher sales as well as the full year inclusion of Nubasa in consolidated figures, which primarily resulted in increased personnel related expenses, third party professional service fees, and rent expense. These increases were partially offset by cost synergies realized, reflected in the lower spending as a percentage of sales. Looking ahead to 2025, we expect our base GMED business SG&A expense to be in the range of .5% to 38.5%. The gap tax rate for the fourth quarter was negative .4% compared to .8% in the prior year quarter. The decreased rate is driven by non-repeating acquisition charges in the prior year quarter as well as higher stock option windfall benefit and favorable tax credits in the current year quarter. Our Q4-24 non-gap tax rate was .1% compared to 22% in the fourth quarter of the prior year. The increase in our non-gap tax rate was driven predominantly by higher state taxes. On a full year basis, our gap tax rate was 14.7%, while our non-gap tax rate was 25.9%. Looking ahead to 2025, we expect our non-gap tax rate to be approximately 25%. Q4-24 operating and free cash flow were both records at 210.3 and $193.2 million respectively. Full year 2024 operating and free cash flow was also a record at 520.6 and $405.2 million. The increased operating and free cash flow is driven by the volume impacts from higher sales as well as more disciplined cash spending related to integration and synergy capture as well as modest working capital improvements. Shifting over to cash and liquidity, our cash, cash equivalents and marketable securities were $956.2 million at December 31, 2024, increasing $363 million as compared to the prior year end. The improved cash position is driven primarily by higher free cash flows as previously mentioned and net proceeds from stock option exercises partially offset by share repurchases related to our open share repurchase authorization. We had no short-term borrowings against our $400 million unsecured line of credit at December 31, 2024. Looking ahead, we plan to pay off our senior convertible notes in cash totaling $450 million, which is due in March of 2025. Separate of the near-term debt pay down, our capital allocation priorities in 2025 and beyond will focus on funding internal investments for product development, inventory and capital expenditures while facilitating complementary M&A, which aligns with our go-forward strategies. Organic and inorganic investments will remain the primary intent for capital deployment, though we will continue to utilize share repurchases within our capital structure. We expect capital expenditures to be in the range of 5 to 6% of sales in 2025. And lastly, we have $190.3 million open and authorized on our share repurchase program at December 31, 2024. Consistent with history, we expect any share repurchases to be funded using cash on our balance sheet. As we close out 2024 and enter 2025, synergies related to the evasive merger remain consistent with my comments in our third quarter earnings call. We expect to achieve $170 million over three years and have realized approximately 55% in the first full year post-merger close. We expect to realize 40% in year two and the remainder in year three. Subsequent to year end, the company announced on February 6, 2025 that it entered into an agreement to acquire Neverocorp for $5.85 per share or approximately $250 million. This deal is still subject to shareholder and regulatory approval and other customary closing conditions. We expect this deal to close late in the second quarter of 2025. We plan to fund this acquisition purchase price with cash on our balance sheet. Shifting to guidance, on a standalone basis, Globus Medical reaffirms its full year 2025 revenue guidance of $2.66 billion to $2.69 billion and fully diluted non-GAAP earnings per share range between $3.40 to $3.50. Following the consummation of the Neverocorp acquisition, which we expect to close late in the second quarter of 2025, Globus Medical reaffirms its full year revenue of $2.68 billion to $2.9 billion and fully diluted non-GAAP earnings per share ranging between $3.10 to $3.40. We expect Neverocorp to be accretive to earnings in the second year of operation. Looking back on 2024, we were successful in leaning in and driving towards a fast and meaningful integration. We achieved sales growth and spine as well as across the portfolio. We brought systems together, eliminated cost redundancies and launched significant new products. All of this translated into sales and profitability growth as well as strong cash flow generation. In 2025, we will seek to continue these trends while focusing more on operational integration of manufacturing and distribution while accelerating our pursuit of top line growth. Thank you to our employees for their commitment and dedication. We will continue to win by listening to our customers and seeking to drive further innovation in a competitive marketplace. Our employees are well suited to meet the challenges of the market and to help Globus succeed by introducing products that improve musculoskeletal care while differentiating us from the competition. We remain excited for the future as we continue our relentless pursuit of excellence. Operator, we will now open the call for questions.

Thank you. To ask a question, please press star 11 on your telephone and wait for your name to be announced. To withdraw your question, please press star 11 again. Please stand by while we compile the Q&A roster. Our first question comes from Vic Sopra of Wells Fargo. Your line is open.

Oh, hey, good afternoon and thanks for taking the questions too for me. I'll throw the first one out there. On the deal that you recently announced for Nebro, just talk about why this was the right time to enter the SCS market and why Nebro was the right target and I have a follow-up.

Hey, Vic. It's Dan. I'll do that. So a couple things. Keep in mind that with our rapid integration that we did in 2024 with NewVase, we actually have set up enough depth in where we're going with integration that we could actually take advantage of this opportunity. And so the fact that it was out there as an asset that we looked at not only for neuromodulation but as I said with applications that we believe will go into our development portfolio in a meaningful way, it really looks like it's a more well-rounded asset for us to build on. And while we're interested in entering into that and capitalizing high frequency in that area, we're thinking that there's reaches beyond that.

Thank you. And my follow-up question is one of your large competitors announced the sale of their U.S. spinal implants business and they also plan to sell their international businesses. Do you expect to benefit from this at all in 2025 or beyond? Thanks.

Now, it's a great question. And look, there's a lot of activity in the market. I like to believe that the moves we made created market disruption and there's still waves going through that. At the end of the day, you know, we say this, we play the long game, we focus on the patient on the table, driving on their clinical needs. And so while all of these things will move around, we're going to stay focused on where we're going, putting innovation out, capitalizing what we have, using our enabling tech to make meaningful moves. And if there's opportunities out there we can benefit from, great. But nonetheless, nothing's occurred that would take us off our plan and our execution approach.

Thank you. Our next question comes from Matt Nixit of Barclays. Your line is open.

Hey, thanks so much for taking the question. To follow up to Vic's question on NEVRO, and congrats, by the way, on the pre-CASLA generation and last year and in the fourth quarter, which, if my numbers are right, may have just funded the year, but on that transaction, if you could maybe, you know, put the investment, level of investment into context of other programs that you have in place and have had in place, like, I don't know, imaging system, orthopedic robot, trauma, just to kind of, is this a bigger swing for you? Is it a similar swing, not to compare which are your favorites or which are most likely to be successful, but just in terms of what your investment level, that would be super helpful, and I have one follow-up.

Yeah, Matt, thanks for that, too. And yeah, we'll never really say which child is our favorite when we talk about the investments and what have you, but to answer your question, simply no. I don't think that this would take a meaningful shift of investment that you would see on our P&L. As you know and as Keith said, we're shooting to have that 6% to 7% range of investment, and I think even with this in, you would still see that factored into where we're going. So it really is not anything that we think will take us off track. There's certainly other areas we want to focus on, which is quicker penetration, possibly spending on sets or scale-up as we need to get into that type of business. But again, none of that that I think you would see as meaningfully move off of where we're going as far as who we are and how we spend. And

if I could add a couple of comments, I would say that from a capex perspective looking ahead, I don't think that this materially changes our approach to our capital expenditures for the base global business when you bring Nebro in on top of that. And when I step back and look at the business and the purchase price, if I compare the purchase price to tangible book value, we're really – you're paying basically tangible book. So from an investment perspective, that seemed to make sense for really what we were getting, tying back to what Dan noted on the long-term growth potential we see with this business under our umbrella.

Yeah, that's helpful. And the follow-up was just on the last couple of quarters have been very strong in terms of robot placements. And just wanted to get a sense, I think, of the same question maybe last week, kind of the quarter before, so I'm sorry. But just how deep into the ranks of your new base of colleagues, global colleagues, how deep are we into doing robot deals here? Are we 20%, 30% into the ranks? Are we successfully executing? Are we halfway there just to get a sense of what kind of looks we could see going forward? Thanks so much.

Yeah. Thanks, Matt. You know, I'll tell you in an interesting way, I would say it's actually better than that. We really just have had realign and modulus ready to go, the instrumentation out there and getting it approved. And so you're really at the cusp of penetrating. We've sold some, but I would tell you that, you know, I wouldn't assign a character of 20% or more to that. I really think that we're just starting. And as we've always said, 2025 was the year to go in and penetrate those. I think we're on target for that. So I think the lift and the strength that we are going to see this year in those placements will be deeper in new bases than we have in

the past. Okay. And Matt, just one thing to add to that. I just stepping back from that, I don't see that changing the mix or cadence of our capital sales, typically Qs 2 and 4 are still the heaviest quarters. I still see that being the case as we get into 25.

Sure. So step down and Q1 sequentially and then working your way back to Q4. Correct. Thanks so much. Thank

you. Thank you. Our next question comes from David Jackson of Needham and Company. Your line is open.

Great. Good afternoon, guys. Thanks for taking my questions and congrats on the quarter. Maybe keep a couple on the P&L. So can you just talk about the gross margin cadence we should be thinking about throughout the year as you work to insource some of the new bases manufacturing and then the R&D guidance? It looks like it implies a step up in dollars. So we'd love to hear what's driving that, where the incremental dollar is going and then I'll have a follow up.

Yeah, sure. So my comments are going to be fairly limited. I mean, from a gross margin cadence perspective, we said that 2025 would show some modest improvement in gross margin because remember, the insourcing is focused on getting the machines online and programmed this year. You're going to build inventory, which will roll through the P&L in 2026. So I expect to see the most gross margin expansion next year. As I think, you know, as we move throughout the year, you'll see some modest improvement quarter to quarter. But you have to remember again my earlier comment, what quarters are heavier with capital. When you think about investment for R&D stepping forward into 2025, you know, we're just continuing to invest across our business. You know, as we like from a base perspective, our dollar investment will improve, will increase a little bit. But when you think about kind of our plans, if you go back several years, our investment initially in INR kind of happened. And as that came online, we shifted those dollars to other areas in our portfolio. That concept keeps going. But as Dan said earlier, we're always investing for the long term. So if we see opportunities to drive growth, we're going to bring that investment to market. And right now, as we move forward into 2025, we want to keep that new product cadence going. So we're going to continue to drive investment across the portfolio.

OK, great. Thanks for that. And then maybe just a follow up on the the Neve row deal. I think in the script, you talked about the potential to see benefit for a next gen spinal implant. You know, that sounds interesting. And maybe can you just elaborate on that and kind of what does that actually look like? Thanks so much.

Yeah, thanks. I'll make the answer short and say no. It really is about what we're developing in our product portfolio. And I think you know, as we don't tend to talk about future products and where we're going until we're right at launch. So I'm just simply putting out there the note to think beyond Noramod into where this can be applicable in many things, including data. And so still working through those, I would say stay tuned. But but nothing that's on the forefront coming out this year. Just a little bit more long term strategy where this makes sense.

OK, great. Thanks so much.

Thank you. Our next question comes from Jason Wicks of Ross. The line is open.

Thanks for taking the questions. Just on the Nevro deal in terms of how you get this business accretive in the first year or after the first year, I see most of that is just simply scale and improving distribution. How should we think about that and related to that? Be helpful to understand on the SGA line how much of that is sales and how much of that is GNA?

As I'm going to keep my comments somewhat limited because the deal still hasn't closed yet. When I think about Nevro and moving the business forward, we want to get that that business scaled to drive profitability. Obviously, that will come at some point with sales growth, but also taking a hard look at cost. I think when you look at the approach we've taken with maintaining sales growth and managing costs with an invasive merger, I think it's a fair way to look at at Nevro once it closes. But I want to keep my comments fairly limited.

Okay, I appreciate that. Maybe if I could just push on one more Nevro related question. I assume there's some dis synergies just based on kind of the out comparing sort of what consensus is for Nevro versus what you're looking for, assuming a late second quarter closure. I don't know if you can comment on what the expectation is in terms of potential top line dis synergies from the deal.

Jason, one of the things I'd probably put out there since we haven't really gone in and closed the deal and we still have to go shareholder approvals and etc. Let's kind of pause on that. We'll share it when it's right. I just think the timing is off right now for us to get into that level.

Okay, why don't I switch gears and just ask one more question unrelated to Nevro if you don't mind. And that is, if I think about your enabling tech business, what does it take rate for imaging and are you seeing just straight up imaging sales? I mean, it's a good understanding of sort of how that's developing now that you kind of have a whole suite of products and sort of who's buying what, are they buying the full suite, buying partial suite, or are they simply buying the imaging piece? It would be really helpful to understand.

Yeah, the answer is kind of a little bit mixed. We're definitely seeing an acceleration in sales of imaging. There's no doubt about that. And they are both standalone and often in a package. So it really just depends on what the customer wants. I would say in total, it's accelerating, it's increasing, and it really just depends on the mix of when they want it. It's probably almost a mixed bag. It's not unusual to have both go through. So good position. But again, it really just depends on what the customer wants.

Okay, great. I'll jump back to you. Thank you very much. Thank

you.

Thank you. Our next question comes from Shagun Singh of RBC. Your line is open.

Thank you so much for taking the question. I guess two from me. You know, the first is just on Nebro. You know, the company has had some challenges in the SCS market in recent quarters. What was your assessment of what caused those? Is it the market? Is it the technology? Is it the commercial focus? And why do you think you can be successful with this asset? And then the second question just focuses on M&A. I think this acquisition does give you, expands your call point to the interventionalist. Should we expect you to do more M&A to fill the bag to cater to that call point? Thank you for taking the questions.

Shagun, I would say, you know, when you think about Nebro and what we think we can do with it, I mean, the market is there. I would say that Nebro probably hasn't grown as fast as the market over the last couple of years. I think that bringing it under our umbrella and allowing it to really get into our larger spine business creates opportunities for us. I think our scale and the strength of our balance sheet also helps to maybe sell some of these products in. I would say that those are two key drivers from my perspective.

Yeah, I'm going to agree with that. I think there's a couple of things. Obviously, they needed to be selective in where they worked and what they could do and how they'd invest. I think there's a little bit of market hesitation on size and viability that may have had some impact with them. I think we're coming in and making it clear that we're into this high frequency technology. We believe it is the way and we're going to use our scale and our balance sheet, as Keith said, to go push that with them. So I think that's really what we're looking to do. We're coming to answer your second part of the question. It's certainly possible as we look to fill this out. But again, let's get this first, get it in place first, evaluate what it is we have that we're building internally versus what we may want to do inorganically, and then we'll decide to do that. I don't know if anything would occur of size or meaningful scale right now, and I would tell you we have nothing on the radar for that.

And again, the only thing I would add to Dan's comments is as I think about the Globus business, we see plenty of organic sales opportunity and growth for us internally to drive innovation. Absolutely, M&A will become a bigger part of our portfolio as time passes, but we see plenty of organic growth opportunities.

Thank you. Thank you. Our next question comes from Caitlin Cronin of Kennecor Tenuity. Your line is open.

Hi, congrats on a great quarter. Just to touch on NEVRO. Thank you. I'm just wondering if you have any thoughts on the future of the company and with that the access to the interventionist pain call points for your current SI Joint portfolio?

It's a great question. I would say that while it is interesting, it was not a driving force or even something we valued out to any level of significance with this. I think it's a bag enhancement. We already have some great offerings with SI Joints, and I think the question is can this further it out? And again, we'll have to get through the approval before we get deep enough to truly evaluate this and see. But again, not a driving force of where we said it would go or the reason to drive the deal.

Got it. And then just to touch on Excelsior Flex, which launched in the T4. How is the launch going and what's the commercial strategy in 2025 and beyond?

Dan mentioned that he's keeping the comments fairly brief at this point. As we go into 2025, obviously we will begin to work to market that and sell it. But we had said in earlier calls that we don't see that being a meaningful part of revenue in 2025. This is still something it's a crawl walk run. It's out. We're working to sell it. But as time passes, we will start to see cumulative effects. That to me is more of a 2026 event.

And what I would add to that too is very similar to what we did with Spine is we'll offer a variety of options for people to go out to get this. Right. And so it really just depends on what perhaps we're willing to do with the customer and go. And so I feel pretty good. Again, the strength of our balance sheet can help us do a lot of those things. But, you know, we continue as well to flesh out and strengthen all of the implants that go around that. And so it's a holistic approach of the robotic procedure with these new implants. And we still have to scale up and finish up some of those implants to make sure we get more uptake in the market.

Thank you. Our next question comes from Craig Bishu of Bank of America Securities. Your line is open.

Good afternoon, guys. Thanks for taking the questions. So I want to start with Nevro, but maybe from a bigger picture perspective. Obviously, as was noted in a couple of the other questions, you're going to have access to interventional pain docs, interventional spine specialists. And we just saw Stryker sell their implant business and retain the interventional spine business. So I guess, Dan, wanted to get your thoughts on the convergence or how those two channels play out over time in the spine surgeon and the interventionalist. And if there is some convergence that happens over the next five, 10 years, just want to get your thoughts there.

Thanks, Craig. You know, I think what you're asking, there's always potential for that. And as more procedures come, there's always the interventionalist that may have the ability to do that. We're not signaling a clear step into that or that we're shifting away from anything that's our core spine with this. Remember, we were really pleased with what that high-frequency technology can do and, like I said, longer-term applications of it throughout. And so that was really our main focus right now. It doesn't mean we're not. It doesn't mean maybe never. It's just right now, let's get past this, get the shareholder approval, make sure we see what we have, capitalize on the reason for our purchase here, and then from there see, can we expand in the future?

Got it. That's helpful. And then maybe just a bigger picture on the spine market. Your thoughts as you enter 25, you know, are you still as bullish on the prospects for the market? The spine market ended the year pretty strong. So maybe just your thoughts on where you see it going next year and beyond.

Yeah, and as you know, it's always a guess, right? I think it was a strong year. You know, do I think it will continue to accelerate or get up into some high single digits? My answer is no. I think it has historically been around that 3 percent, and I think over some period of time it will trend somewhere around that over the long term. But again, keep your eye on it. I think the point is, regardless of what its growth is, the goal is to outpace it through the innovation and through the investment in set expansions and those type of things. But as we look at it, you know, I'm still going to go back to the low single digit look that we know historically, and that's kind of our main assumption as we look at it in this year and the upcoming few.

Great. Thanks for taking the questions.

Thank you. Our next question comes from Matt Taylor of Jefferies. Your line is open.

Hey, guys. I guess the first question was wondering, with the AAOS coming, upcoming, should we expect to see more of your knee and hip implants and the ortho-robot problems? I think that's a hot topic at the conference. If you can talk a little bit related to that, ASCs are kind of a hot topic at the conference. If you can comment a little bit about what's the ASC for SPY and the value prop for robotics and ASCs for SPY.

So with the AAOS, yeah, we will have a bigger presence now that we have a bigger bag and we've moved our technology through to approval. So you will see some of that or more of that than we have been able to do in the past as we get there. Your ASC question, a little bit more on the spine side, I know it's a hot topic, right? Will they expand and continue to grow? The answer is yes. Will it ever be 100%? I think we just have to understand where it's going to get to and in doing so offer value to patients and not disrupt hospitals or create bankruptcy for hospitals and look at where that is. So as we balance out where patient care is, we're going to be ready to support these and go. And with that, work with surgeons to see what makes the best sense to go through that. Tough to call it the number because it's all over the board with what people think. But again, at the end of the day, we're not thinking it goes away, nor do we think it becomes the only thing out there. And we just are positioning ourselves to kind of, if you will, be in the middle to understand where that growth is, perhaps similar to or even less than where joints are landing.

Okay, great. Very helpful. I guess a quick follow up on the navigation headset product. I was curious if you can talk about some of the key benefits of that product and also the economic model for it.

Sure. As far as economic model, it's going to work with the hub. That's really the main thing. And we'll eventually have robotic application as well. So we go through that. The main thing beyond its lightweight ability, more data, the ability to flow through, is just going to be the line of sight directly onto your patients as opposed to looking off on a screen. One of the things I really like is the fact that with those cameras as well, it creates less interruption with people who are around the operating table. And it's also a great teaching tool because if you have someone you're teaching, you can actually see through their eyes what they're seeing directly is going to help them out that way. So it's lightweight. It's got a great line of sight. It has the ability to help you have better visualization when it comes to not blocking cameras. And then as a teaching tool itself, it's really something that I think can become useful as we get deeper into teaching institutions with it. Economic model is really tough to explain. Of course, we're looking to sell them. And if there's other reasons to do not and come up with a different package, we'll consider it. But I think right now, along with the hub, that's going to be the main thing that will put out a quote for people to purchase. We

have we have the ability to really sell, rent, lease. We can do it really in any way that the customer is looking to do. But it will be a complementary purchase with existing capital.

OK, thank you very much.

Thank you. Our next question comes from Richard Newiter of True Security. Your line is open.

Hi, this is Ben on for Rich. I see that the twenty twenty five EPS range, including the acquisition, is three ten to three forty. So I'm wondering if you can talk about some considerations that may drive that either to the top or the bottom of that range.

You know, that's a great question. Again, I'm going to keep my comments limited. I go back to the fact that we know that we expect it to close the back half or the back half of the second quarter late in the second quarter. So you should assume that the sales are going to go along that cadence from the standpoint of the guidance range. It really comes back to number one, driving sales retention or driving modest sales growth, as well as our ability to really get better control of the cost structure. I leave my comments there, you know, as you think about our overall combined implied guidance.

Thank you. And just one more. I know there's been some discussion throughout MedTech of potential tariff exposure for companies that manufacture internationally or business there. I'm wondering whether you have any exposure and what your thoughts is on the matter.

Our exposure is very limited. Roughly ninety five percent of our products are US based or sourced in the US. So any tariff exposure is extremely immaterial to our cost structure for twenty twenty five. And that's assuming ten or twenty five percent.

I'd even add the other five percent is more of long term instrumentation as opposed to implants or disposables as well. So it even further limits down the risk that we see.

Thank you.

Thank you. Our next question comes from Matthew O'Brien with Piper Sandler. Your line is open.

Thanks for taking the questions and sorry about the background noise. Sorry to keep feeding this never a horse, but just on the profitability side of things, you know, you've talked about getting back to mid thirties even down margins

for

the overall business. Is that still possible with all the investment that you have to put into Nebro and the updated products or maybe set another way if you can get there, is it just going to be pushed out a little bit versus kind of what we were expecting before you made this investment?

I would say it's a great question, Matt. You know, my prepared comments, I focused on getting back to mid seventies gross profit. That's still our goal. Even with bringing Never End to the fold, I think their gross margin profile lines up pretty well with ours. And we think we can drive operational improvements to enhance margins. So, you know, really the big thing I look at is SG&A spend. And that's something we'll continue to examine as time passes. I wouldn't say I would move off of our mid thirties goal. But as we grow as a company, our focus really shifts a little bit more towards just overall EPS growth. I think that we can maintain a high EBITDA profile and still get to that globus historical mid thirties. But in the near term, focus is on again, insourcing the evasive merger, driving that gross profit expansion next year, the majority of it next year, achieving the additional synergies and then bringing Never End to the fold and really falling back on some of the comments I just made as relates to their spend structure.

Understood. And then question for Dan. I know there's still concerns out there that, you know, you could see more dislocation from the evasive sales force or just maybe combined sales force about a year after the close of that deal. Is that something? I know you said you had some of the best new rep hires, but have you seen retention move at all? Or is that better than you expected? Maybe just a little bit of commentary about your confidence in retaining a lot of these reps as we move past that one year mark. Thanks.

Yeah, it's a great question. And if you remember, too, we talked a while back. It's not that everyone were on some special guarantees that all expire over time. That was something that was an odd rumor that was put out there. You know, these folks are out there doing their thing and retention has been great. Doesn't mean we haven't lost people, but it's actually less than I would have anticipated. The retention is really high thanks to the great leadership and the structure that was set up out there. I've been out traveling the country extensively and boy, it sure feels good to me with where they are. I think putting 18 new products in the hands of reps can be great. I think, you know, helping a lot of them with the compensation increases that we did when we brought Nuva into us is a good thing. And when they look and come here and see that those products and the future products are even more powerful, I think folks really understand that this is the destination of choice. So I feel good about it. I think that's also why we're getting a lot of competition coming in to look at us and see if they can sign up with us. So far it's been great. Doesn't mean we don't keep our eyes on it. We have to work and earn those people and keep them with us. We respect who they are and what they do. But I think so far we're doing our best to keep them there and they seem great to be responding to us.

Thank you. As a reminder, if you have a question, please press star 1-1. And our next question comes from Steve Lichtman of Oppenheimer. Your line is open.

Hi, this is Amir on for Steve and I just have two questions. My first question is, are you guys seeing any changes in the capital purchasing appetite for customers? And then are you guys seeing any increased shift towards rental or volume deals as you enter 2025?

That's a great question. This is Keith. You know, as I think about the appetite, I think the capital market remains strong. Earlier, we got a question, right? I made a statement that I still see the cyclical nature of capital. It's a long selling cycle, you know, eight to 12 months to really secure a robot piece of capital with Q's two and four still being the high water mark quarters. In terms of how a customer acquires the capital, still the vast majority of our purchases are outright buys on, you know, on terms where they pay 30 to 60 days. As I think about other ways to offer capital, we can rent, we could lease, we can do volume based arrangements. I mean, we have the ability to match the market, but still the vast majority of our sales are outright purchases.

Thanks, Keith. And just one last one on my side. Can you give us a sense of the components of the sales guidance for this year by major segments?

Now, we historically haven't. Yeah, we historically haven't done that. There's a lot of moving parts and pieces, and we really look at our business in the aggregate. We're comfortable with where our overarching implied guidance is. And if you look back at my prepared remarks, I think you can get a good view of the guide for the year based business globus and even with considering the depending or NEVRO acquisition.

Makes sense. Thank you all.

Thank you.

Thank you. Our next question comes from Ryan Zimmerman of BTIG. The line is open. Hey,

guys. Thanks for taking our questions. I appreciate you fitting me in here. Just a couple of questions for me. You know, I think about the spine business this year or through 24, Dan. I think on a pro forma basis, we were kind of hovering low single digits, mid single digits on a pro forma basis, arguably in line with the spine market. Now, the street is modeling a higher growth rate in 25, as I'm sure you're aware. And there's a number of drivers in that portfolio. I guess what I'm trying to understand and get to is where you feel like you're under indexed within particular areas of spine, be it cervical with the simplified. Can you accelerate maybe some of the legacy surgical support business and biologics from new base or the fact that you didn't have neural monitoring and legacy globus? Now you do with the base. I'm just wondering if you can kind of dig into that US spine business a little bit and kind of directionally talk about some of the sub components within it.

True thing, Ryan. One question is fun to you answered a lot of the stuff there and but I'll just tell you we under index and biologics. And I think one of the easiest things we could do is get there and move that up further as one of the lifts. So that'd be probably one of the ones. The other areas are called out not so much, you know, neural monitoring coming over more into the globus projects. And by that, I mean the NCS, the monitoring coming over. I think that that's a great cross selling that we call out. So there's opportunity to do it that way. You know, I think the focus on putting together all of the incredible assets we have in pediatric deformity and making that more powerful. I think we have this stuff at our fingertips and we just have to do a better job coordinating, launching that, making that stronger out there. I think those three things are great focuses that I really think are there. Truly capitalizing on cross selling is one of the biggest things for this coming year. And honestly, getting the emerging tech, as we've always said, into those new accounts, all of those things, I think, create strong lift for us as we kind of walk into this year.

And the only thing I'd add to Dan's comments really goes back to enabling tech is as we continue to put more capital out there, you know, we have a robot, we have navigation now, we have imaging. So there's more there's more of a suite of products and launching those programs successfully should help facilitate future implant sales.

Right. Okay, that's fair. And then Keith, last one for me. You talked about your two synergies, you know, the commonalities, the consolidated external vendors, in-house manufacturing, and that's going to be about 40 percent. What's that last 15 percent that you're targeting in year three, you know, just in broad strokes? Where where do you still have that opportunity, you know, as we move? Think about maybe even 26.

Yeah, the year three, it's a great question. Year three is really going to focus on gross margin expansion, gross margin rate expansion, because again, you're bringing the machinery in-house this year, you're bringing the products in-house. As you build that, you should start to see a working capital benefit in 25 that will create its way back to the P&L in 26. Okay.

All right. Thank you guys. Thank

you.

Thank you. Our next question comes from Matthew Blackman of Stiefel. Your line is open.

Good afternoon, everybody. Appreciate you taking my question. I'll just leave it to one. Keith, was there anything one time on the P&L on the fourth quarter I asked because you just do some dumb math and annualize that for QEPS of 84 cents, which I think you said included six cents of FX. Basically get to the bottom end of your standalone 2025 EPS range. I appreciate there might be incremental FX headwinds, but is there something else going on? Am I missing something?

I commented in my prepared remarks that we had some higher write-offs in inventory. That was a little bit of a drag on gross margin. That's worth a couple tenths of a point. And down in SG&A, we probably had some higher bad debt expense. But again, in the aggregate, you're talking a point and a half of impact.

Okay. But again, 85 cents roughly times four gets you to the bottom end 340. And I appreciate it's not linear, but it doesn't seem to assume much incremental synergy capture or revenue growth. Just help me understand what I'm missing about the bridge from where you have exit.

We're comfortable where we're sitting here with year two synergies. When I think about because you asked about the quarter, if you expand out further from the year, there's other headwinds that we saw. There was steward bankruptcy earlier in the year that drove a drag on SG&A expense earlier in the year. But overarching, it's still early. We're confident with where we're positioned going in the next year. I feel good about top line and bottom line. And really, we want to continue to drive execution. The $170 million of synergies over three years, we feel good about them. We achieved year one. We feel confident in year two. And like I said, per the earlier question in year three, that's where we're going to see the gross profit expansion.

Okay. I'll leave it at that. Thank you for taking my question. Thank you.

Thank you. No further questions. That concludes the Globus Medical Earnings Call. Thank you for participating and you may now disconnect.