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. The Q&A session will be held after the prepared remarks. I will now turn the call over to Brian Kearns, Senior Vice President of Business Development and Investor Relations. Mr. Kearns, please go ahead.

Thank you, Didi, and thank you everyone for being with us today. Joining today's call from Globus Medical will be Dan Scavella, 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 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 best-in-class innovative product launches. Revenue for the full year was a record $2,519,000,000, delivering $951 million 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 $405 million, increasing $240 million, 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 that 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 $657 million, increasing 7% versus prior year. Non-GAAP EPS was 84 cents, increasing 24 cents 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 best-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 who 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 percutaneous 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 anterior exposure system designed for quick setup precise tissue retraction, and maximum rigidity. Radiolucent 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 tow 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 ALIF exposure. The Modulus ALIF anchoring blades paired with the Modulus ALIF 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 ALIF 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 ALIF anchoring blade fixation further strengthens our market leading ALIF portfolio. In addition, we launched the Excelsior Flex Robotic Navigation Platform and the Actify Uniconjuler NEIS 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 continued 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 E-Hub 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 Visera power tool systems launched in Q1 24 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 help 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 Q4 sales in 13% on a constant 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 Globus NuVasive product offering internationally, and feel this will be a significant tailwind as we move forward in 2025 and beyond. To combine trauma and NSO business delivered 8% growth in Q4, driven by the powerful performance and market penetration of our base trauma business, combined with the ongoing uptake of the new invasive specialty orthopedic growth now, partially offset by a 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 Nevro Corporation in an all-cash transaction for approximately $250 million. The acquisition of Nevro 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 clinically superior solutions that can alter the standard of care for patients. Nevro 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's financial strength will accelerate investments in neuromodulation to expand existing product reach and future product development. Combining Nevro into Globus's existing infrastructure will improve the profitability and cash flow of the Nevro 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.