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Edited Transcript of GMED earnings conference call or presentation 6-Nov-19 9:30pm GMT

Q3 2019 Globus Medical Inc Earnings Call

Audubon Nov 13, 2019 (Thomson StreetEvents) -- Edited Transcript of Globus Medical Inc earnings conference call or presentation Wednesday, November 6, 2019 at 9:30:00pm GMT

TEXT version of Transcript

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Corporate Participants

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* Brian J. Kearns

Globus Medical, Inc. - SVP of Business Development & IR

* Daniel T. Scavilla

Globus Medical, Inc. - Executive VP & Chief Commercial Officer

* David M. Demski

Globus Medical, Inc. - CEO, President & Director

* Keith W. Pfeil

Globus Medical, Inc. - Senior VP & CFO

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Conference Call Participants

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* Andrew William Stafford

Piper Jaffray Companies, Research Division - Research Analyst

* Craig William Bijou

Cantor Fitzgerald & Co., Research Division - Research Analyst

* Matthew Charles Taylor

UBS Investment Bank, Research Division - Equity Research Analyst of Medical Supplies & Devices

* Matthew Stephan Miksic

Crédit Suisse AG, Research Division - Senior Research Analyst

* Michael Stephen Matson

Needham & Company, LLC, Research Division - Senior Analyst

* Richard S. Newitter

SVB Leerink LLC, Research Division - MD of Medical Supplies & Devices and Senior Research Analyst

* Ryan Benjamin Zimmerman

BTIG, LLC, Research Division - Director & Medical Technology Analyst

* Shagun Singh Chadha

Wells Fargo Securities, LLC, Research Division - Associate Analyst

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Presentation

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Operator [1]

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Ladies and gentlemen, thank you for standing by, and welcome to Globus Medical's Third Quarter 2019 Earnings Call. (Operator Instructions) I would now like to turn our call over to Brian Kearns, Senior Vice President of Business Development and Investor Relations. Sir, please go ahead.

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Brian J. Kearns, Globus Medical, Inc. - SVP of Business Development & IR [2]

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Thank you, Jason, and thank you, everyone, for being with us today. Joining today's call from Globus Medical will be Dave Demski, President and CEO; Dan Scavilla, Executive Vice President, Chief Commercial Officer; and Keith Pfeil, Senior Vice President 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 2018 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 Dave Demski, our President and CEO.

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David M. Demski, Globus Medical, Inc. - CEO, President & Director [3]

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Thank you, Brian, and good afternoon, everyone. Globus Medical had an outstanding third quarter, once again delivering above-market growth and industry-leading profitability. Revenue for the quarter was $196 million, up 16% over the third quarter of 2018 as Musculoskeletal Solutions continued to grow well in excess of the market in all sectors, up by 11.8% over last year. Enabling Technologies delivered back-to-back strong quarters, producing $13.9 million in revenue, more than double our Q3 '18 performance. Non-GAAP EPS was $0.43 per share versus $0.39 a year ago, an increase of 10%. Adjusted EBITDA improved to 33.4% in Q3 compared to the 31.5% we posted for the first half of this year. The results include the planned investments we made in growth initiatives such as INR and trauma. Factoring out the impact of these investments would have resulted in an improvement of $0.06 to non-GAAP EPS and added approximately 600 basis points to adjusted EBITDA margin.

Globus continues to achieve market-leading operating margins even as we invest in key strategic initiatives. Musculoskeletal Solutions performed exceptionally well in all areas. The U.S. spine business continued to take significant market share during the quarter driven by competitive rep recruiting and implant pull-through from ExcelsiusGPS installations. We expect to finish 2019 with our third consecutive record year in competitive rep recruiting. We also continue to see exceptional growth in implant sales from accounts with ExcelsiusGPS technology. Finally, we are on pace for a strong year of product launches, capped off by several exciting new products slated for launch in Q4, including our line of 3D-printed interbody spacers and our next-generation expandable TLIF device.

The international spine business grew by almost 15% in Q3, both as reported and in constant currency, well in excess of the market in almost all significant geographies. The third quarter growth continues to be driven by access to new technology, pull-through from robotic placements, increased investments in peer-to-peer education and management changes in certain key markets in 2018. As we alluded to on previous calls, we experienced some deceleration in Q3 associated with the alleviation of pent-up demand caused by previous supply chain issues that are now largely behind us. While some additional deceleration is expected in Q4 as we come up against difficult comps, we are very excited by the strong turnaround in our international business this year, as we remain on pace to produce the highest level of international organic growth in our company's history.

Under the leadership of Mitsuo Asai, our business in Japan has been very strong since the acquisition from Alphatec in 2016. After a long and successful career, Asai-san is retiring this month. We are very pleased to announce that Steve La Neve assumed the role of President, Globus Medical Japan in August. Steve is well suited for this position, having led Medtronic's overall business in Japan for a number of years before becoming Medtronic's global sector President of Worldwide Spine, Biologics and Kyphoplasty. We are very excited to have Steve join our leadership team in this important role.

Our trauma business made good progress again in Q3. We launched the AUTOBAHN Troch Nail, the ANTHEM Tibial Plating System and the ANTHEM Clavicle Plating System in Q3, thereby completing the development of all systems in our core portfolio. We continue to build sales momentum, matching our ninth consecutive record quarter, increasing sales by over 50% sequentially and by over 8x from a year ago, albeit off a small base.

Revenue from Enabling Technologies was $13.9 million in Q3, an increase of 125% over the third quarter of 2018 and up sequentially over the $12 million recorded in Q2. We are fully recovered from a soft Q1 and very bullish about the potential of our INR division as we close out 2019 and look forward to 2020.

Our optimism is based on a number of factors. One, strong adoption trends by surgeons who are experiencing the benefits of Excelsius technology as they incorporate it into their practice of medicine. Two, Globus is widely acknowledged as a technology leader in spine robotics as expressed in our smarter, faster, stronger marketing campaign, which highlights the clinical advantages that surgeons have repeatedly endorsed in their evaluations of ExcelsiusGPS. Three, we are building on our technology lead in spine robotics. We unveiled the interbody module at the recent NASS convention to outstanding reviews, and we are on schedule to launch the spine deformity solution early next year. Four, we are investing heavily to expand our scope in Enabling Technologies. We gave surgeons a preview of our imaging system at NASS to an extremely enthusiastic response. We are also in the final stages of completing the cranial module for ExcelsiusGPS. We expect both of these systems to be available in the first half of 2020. Finally, we have a number of other projects under development in INR that will roll out in 2020. We will provide more information on these developments next year.

The long-term potential of computer-assisted technology to transform orthopedic surgery is tremendous. We are aggressively investing to ensure that Globus remains at the forefront of this transformation with a holistic, integrated and highly synchronized strategy. Our performance over the past 2 quarters demonstrates our ability to compete and capture share today as we work toward and invest for tomorrow.

In summary, we are excited about our third quarter performance and momentum and are poised to finish 2019 in record fashion as demonstrated by our market-leading growth in musculoskeletal solutions, a sustained turnaround in Enabling Technologies, significantly improved EBITDA driving industry-leading profitability and a strong pipeline of new product introductions on tap for Q4.

I would like to take this opportunity to introduce Keith Pfeil, our new Senior Vice President and Chief Financial Officer. As we announced in June, Keith comes to us after 16 years with a publicly traded consumer products company, where he most recently served as CFO. We are pleased to broaden our senior leadership team with the addition of Keith. His analytical approach, his experience with making and integrating acquisitions successfully and his track record of driving efficiencies will serve him well in his role at Globus.

I would also like to recognize the contributions from Dan Scavilla -- that Dan Scavilla has made as our CFO for the past 4 years. Dan has done an outstanding job of leading our financial organization as we have expanded the scope of our businesses to INR and trauma and continue to grow the company while maintaining fiscal discipline and producing exceptional cash flow. The addition of Keith will enable Dan to focus on his role as Chief Commercial Officer of Globus by building our trauma business and continuing to be responsible for most of the operational functions within Globus.

I will now turn the call over to Keith.

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Keith W. Pfeil, Globus Medical, Inc. - Senior VP & CFO [4]

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Thanks, Dave, and good afternoon, everyone. The third quarter results for Globus reflect yet again another strong quarter of revenue, profit and cash flow generation. The growth in sales was largely driven by continued above-market gains within U.S. spine as well as significant growth with Enabling Technologies, international markets and trauma. Profitability remains robust, while we continue to invest in R&D and expand our sales force. Cash flow remains strong as we push for growth while maintaining our commitment to invest in sets for future placement within spine, trauma and joints.

Third quarter revenue was $196.2 million, representing 15.9% growth as reported or 14.5% on a day adjusted basis with 1 more selling day in the quarter as compared to prior year. GAAP net income was $38.3 million, and non-GAAP net income was $43.5 million, driving $0.43 of fully diluted non-GAAP earnings per share. Adjusted EBITDA was 33.4%, and we delivered $43.8 million of free cash flow.

Shifting our attention to sales. U.S. revenue for the quarter was $162.7 million, growing 17% versus the prior year quarter. Our U.S. spinal implant business continues to sustain above-market growth as we remain focused on transitioning competitive reps into Globus while also experiencing implant pull-through from accounts utilizing our ExcelsiusGPS platform.

International revenue for the quarter was $33.5 million, growing 11.2% as reported. Constant currency impacts were immaterial to the quarter. We continue to experience growth through market penetration across our international markets. However, we specifically note robust growth within Japan, the U.K., Italy, India and Austria. It is important to note that while our growth rate slowed as planned compared to the second quarter, it is in line with expectations and consistent with our previous comments related to large distributor orders placed in the first half, which would not repeat in the second half.

Overall, musculoskeletal sales for the quarter were $182.3 million, growing 11.8% versus the prior year quarter, while Enabling Technology sales were $13.9 million for the quarter, representing 125% growth compared to the prior year quarter. The significant growth in Enabling Technologies is being driven by the increasing surgeon interest in our ExcelsiusGPS platform.

Moving further into the P&L. Q3 gross profit was 76.9% compared to 77.6% in the third quarter of 2018. The decline in gross profit was primarily due to a onetime benefit realized in the third quarter of 2018, which did not repeat in the current year quarter. Adjusting for that benefit, gross profit was 77.3% in the prior year quarter.

Research and development expenses for the quarter were $14.5 million or 7.4% of sales compared to $15.5 million or 9.2% of sales in the third quarter of 2018. It is important to note that we incurred $2.5 million of onetime expenses in the third quarter of 2018 primarily related to technology and licensing fees. Our R&D expense continues to be reflective of significant investments in INR platforms, which will be realized in 2020 as we continue to lead the market and drive innovation through new product launches.

SG&A expenses for the third quarter were $88.5 million versus $75.1 million in the third quarter of 2018, reflecting our expansion of the U.S. spine sales force, investments in international and robotics. The GAAP income tax rate for the third quarter was 18.1% compared to 17.3% in the third quarter of 2018. The slight uptick in rate was a result of slightly lower deductible expenses as compared to prior year, which was in line with expectations.

Adjusted EBITDA for the quarter was 33.4% which improved as planned, growing 140 basis points sequentially versus the second quarter of 2019. Versus the third quarter of 2018, adjusted EBITDA is lower by 70 basis points, which is reflective of the continued R&D investments within robotics as well as increased investments within our U.S. sales force, driven by competitive rep placements in our international sales force due to our focused market penetration and expanded outreach.

GAAP net income was $38.3 million, and non-GAAP net income was $43.5 million. GAAP diluted earnings per share were $0.38, while non-GAAP diluted earnings per share were $0.43 compared to $0.39 in the third quarter of 2018, reflecting 9.9% growth. This growth is reflective of the continued strong sales performance across the portfolio while driving investments for the long term.

We ended the quarter with $660.7 million of cash, cash equivalents and marketable securities. Third quarter net cash provided by operating activities was $55.9 million, and free cash flow was $43.8 million. Our Q3 cash flow includes $10.1 million of tax payments in the quarter as well as ongoing investments in sets for our spine and trauma businesses. The company remains debt free.

The company is increasing its full year 2019 sales guidance from $775 million to $783 million, reflecting the continued overall strength across our portfolio while maintaining appropriate conservatism. Non-GAAP diluted earnings per share guidance remains unchanged at $1.72 as we remain steadfast driving investments within our INR platform, which will fuel new and exciting product launches in 2020 and beyond. We remain on track to deliver strong year-over-year growth, both in sales and earnings.

We will now open the call for questions.

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Questions and Answers

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Operator [1]

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(Operator Instructions)

And your first question comes from the line of Matt Miksic of Crédit Suisse.

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Matthew Stephan Miksic, Crédit Suisse AG, Research Division - Senior Research Analyst [2]

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Congrats on a pretty strong quarter here. So maybe one question on just the tone of the spine market, and I think you mentioned, David, your opening remarks, it's driven in part by pull-through via Excelsius. Maybe if you could give us a sense, did anything else sort of -- what would you line up maybe after the robot in terms of growth drivers or competitive share gains? And then I have one follow-up.

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David M. Demski, Globus Medical, Inc. - CEO, President & Director [3]

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Well, yes, thanks, Matt. I think that the 2 drivers of our growth in spine are competitive rep recruiting and onboarding as well as the pull-through from Excelsius. After that, you just -- you've got your normal product launches in spine.

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Matthew Stephan Miksic, Crédit Suisse AG, Research Division - Senior Research Analyst [4]

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Right. Well, and yes, it's the other products I guess I was fishing for, but just really impressive underlying spine growth. So I'll maybe go to the robot and then jump back in queue here. Just the third quarter, historically, kind of a -- maybe a slightly tougher quarter in capital sales for everybody and folks who sell robots as well. What, if anything, have you seen in terms of interest or acceleration or competitive dynamics that drove some of the, at least upside to our estimates in the third quarter here for Excelsius?

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David M. Demski, Globus Medical, Inc. - CEO, President & Director [5]

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Yes. Well, I think the market overall remains strong. There's just a growing interest on the part of surgeons in terms of robotics in general. And then I think we've done a really good job of articulating the differences in Excelsius through our marketing campaign. I don't know if you've seen any of it on social media, but surgeons have consistently, as they've done their evaluations, pointed out that they think our product's better. And we needed to just really go back and focus on those basics and conveying that information to surgeons, and our team did a great job of getting them to understand that and getting the deals closed in Q3.

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Matthew Stephan Miksic, Crédit Suisse AG, Research Division - Senior Research Analyst [6]

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That's great. I'll keep it at 2 and jump back in queue. But congrats again.

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David M. Demski, Globus Medical, Inc. - CEO, President & Director [7]

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Thank you.

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Operator [8]

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Your next question comes from Shagun Singh of Wells Fargo.

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Shagun Singh Chadha, Wells Fargo Securities, LLC, Research Division - Associate Analyst [9]

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I guess the first one on the robot. Can you give us a little bit more color on what's driving the uptake? And then how should we think about Q4? Historically, you've indicated that 30% to 40% of the year's total placements would be placed in Q4. Is that how you're thinking about it? I think that would imply about 14 to 21 systems, so pretty broad range, but Q4 is your strongest quarter. And then I was just wondering if you could call out the contribution to your year-over-year musculoskeletal growth from Excelsius pull-through, competitive reps and new products. I think in Q2, you had indicated that it was about 40%, 40% and 20%. So just looking for an update there.

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David M. Demski, Globus Medical, Inc. - CEO, President & Director [10]

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Sure, Shagun. I'll try to tackle those in order. I think, as I spoke to Matt about, I think our success in the third quarter was really about being able to articulate the advantages of our system and getting surgeons to really understand that and buy into that and get the deals closed. We're not going to comment on a quarter-by-quarter basis in terms of what we think the cadence will be. It's really challenging to predict capital in general, and it's not our practice to really get into the quarter. So I will say our pipeline is very strong. We're really comfortable with the team we have in place, and we're working hard to get deals closed at this point.

And to your last question about the breakdown, I don't think we've actually commented on that split. I don't think your split that you just mentioned was accurate. But we're not going to get into that granular level of detail. It's competitive information, and I'm not comfortable sharing it.

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Operator [11]

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Our next question comes from Richard Newitter of SVB Leerink.

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Richard S. Newitter, SVB Leerink LLC, Research Division - MD of Medical Supplies & Devices and Senior Research Analyst [12]

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A solid quarter here. I have a couple. I wanted to start maybe just making sure that I'm understanding what the core U.S. implant -- spine U.S. implant growth rate is. I'm calculating something in the 8.5% to 9% range inclusive of an extra day and about, call it 7% excluding the selling day, and that assumes about a $2 million contribution from StelKast revenue. Is that directionally correct? I just want to make sure I'm kind of getting the right sense of what your core U.S. implant growth rate is.

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Keith W. Pfeil, Globus Medical, Inc. - Senior VP & CFO [13]

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This is Keith, and thanks for the question. This quarter, we decided to really focus on talking about musculoskeletal in total. Our business, whether it's musculoskeletal or enabling, we feel strong about where our business is across the entire portfolio. In saying that, the strength within musculoskeletal is really across the entire thing. And the reason why we are really pulling up and want to talk about musculoskeletal in total is because some of these smaller acquisitions such as StelKast or the growth of trauma, at this point, they're really small and immaterial to the total. And until these businesses grow to a more meaningful number, we're going to really focus on talking about musculoskeletal and enabling.

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Richard S. Newitter, SVB Leerink LLC, Research Division - MD of Medical Supplies & Devices and Senior Research Analyst [14]

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Okay. I guess immaterial, like sub-$5 million immaterial, is that fair?

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Keith W. Pfeil, Globus Medical, Inc. - Senior VP & CFO [15]

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That's fair.

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Richard S. Newitter, SVB Leerink LLC, Research Division - MD of Medical Supplies & Devices and Senior Research Analyst [16]

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Okay. And while we're on the subject of trauma, would love to just hear, Dave, in the past, when we've asked you about ways to calibrate for next year, just because it's truly an incremental revenue opportunity, the Street is modeling it, is the right way to think of that ramping, I think the consensus has you in the $10 million to $12 million range. Do you feel comfortable with that as a placeholder for right now?

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Daniel T. Scavilla, Globus Medical, Inc. - Executive VP & Chief Commercial Officer [17]

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Rich, it's Dan. Thanks for the question. I would think that's fair. If you remember, one of the things we've said is that Q4 for us with trauma would be a significant quarter because we've got our products launched. We're starting to make access into the market. And in itself, that would be one of the main drivers. I think just early on, for 2020, that's a reasonable placeholder to take. And as you know, we'll fine tune that as we get through January into our release.

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Richard S. Newitter, SVB Leerink LLC, Research Division - MD of Medical Supplies & Devices and Senior Research Analyst [18]

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Great. Maybe if I could squeeze one more in. You mentioned some new rollout indications on tap next year. Dave, at NASS, one of the things we consistently heard about is a -- the killer app, so to speak, from physicians is going to be something that gets into the disc space and that actually allows for bone cutting. I'm just curious, is that something that is potentially for Globus being that you're one of the bigger innovators on the robotic front right now, is that something that's possible within kind of a 2020, maybe even 2021 time frame? Or is that something that's kind of further out, more in the 3 to 4 years, that some of the other competitors are talking about?

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David M. Demski, Globus Medical, Inc. - CEO, President & Director [19]

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Yes, Rich, I'll say this about that, it won't be next year. I don't want to comment further than that on it. But that is not one of the things that we're planning on rolling out next year.

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Operator [20]

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Our next question comes from Craig Bijou of Cantor Fitzgerald.

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Craig William Bijou, Cantor Fitzgerald & Co., Research Division - Research Analyst [21]

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Congrats on a strong quarter. Wanted to start, maybe a follow-up on robots. And I know earlier in the year, you referenced a lengthening selling cycle. And obviously, coming out of NASS, we saw the -- we saw a competitive offering that is going to come. So maybe if you can just talk about what you're seeing from the robotic selling cycle now, if it's kind of shortening again. And then as we start to hear more about competitor systems coming next year, how do you see that environment evolving over the next, say 12 months, 12 to 18 months?

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David M. Demski, Globus Medical, Inc. - CEO, President & Director [22]

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Yes. Thanks, Craig. It's hard to say how it's going to evolve. I can comment on where we are. I don't think it's shortened again. I think it's still highly competitive. I think right now, it's a 2-horse race. But I think we're both in most of those deals, so there's a longer process to sort of go back and forth and evaluate both alternatives. I would imagine more viable competitors would make that process even a little bit more challenging to wade through and for surgeons and executives to decide what technology is best for their purpose, but we can only wait to see what will happen if some others get some products out there.

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Craig William Bijou, Cantor Fitzgerald & Co., Research Division - Research Analyst [23]

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Okay. That's helpful. And then I know you talked about the international strength and maybe just a little bit more color there, the markets that you really see as an opportunity for a sustained or durable growth over the next couple years. I know Japan has been a focus ever since you guys made the Alphatec acquisition but maybe just a little bit more color on the markets and the potential there.

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Keith W. Pfeil, Globus Medical, Inc. - Senior VP & CFO [24]

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This is Keith. Thanks for the question. The comment I would make here is that the international business is an area of growth for us. Obviously, we had a strong first half. We expected a slowdown in the second half. It's in line with expectations. But when you step back and say, okay, what's driving it, we have new management in place over there. We invested in education and outreach to doctors and facilities on an international basis. And really, that's taking hold and help driving the growth. And from our perspective, we're small from a market share perspective there. So we view there to be a lot of white space, and we can take share as we look to grow.

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Operator [25]

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Our next question comes from Matt Taylor of UBS.

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Matthew Charles Taylor, UBS Investment Bank, Research Division - Equity Research Analyst of Medical Supplies & Devices [26]

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So first thing I want to ask about was just on some of the new offerings that you introduced at NASS. And just wanted to get some color commentary on how the response has been to the -- both the interbody offering and the single position surgery that you are pushing now with the Excelsius robot and your new instrumentation.

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David M. Demski, Globus Medical, Inc. - CEO, President & Director [27]

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Sure, Matt. In terms of single position lateral, that's actually been part of the technology since day 1. We have several sites doing that every day, and the response has been fantastic. It really -- it cuts a lot of time out of the procedure if you don't have to flip the patient, and we're seeing just fantastic accuracy and not the level of complications that folks have experienced in a manual situation.

In terms of interbody, we haven't launched that to the market yet. I would say that the response at our booth in NASS was tremendous. There's a lot of interest there. And we're trying to get the equipment together to get that launched in early in Q1. So we expect to see some uptick in the early part of next year on that.

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Matthew Charles Taylor, UBS Investment Bank, Research Division - Equity Research Analyst of Medical Supplies & Devices [28]

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And you mentioned your hiring continues to be strong. In the past, you've talked about record hiring. Are you still seeing those kind of levels of hiring?

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David M. Demski, Globus Medical, Inc. - CEO, President & Director [29]

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Yes. I think we're already past where we were last year as we speak today, and we've got a couple more months left in the year.

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Operator [30]

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Our next question comes from Matt O'Brien of Piper Jaffray.

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Andrew William Stafford, Piper Jaffray Companies, Research Division - Research Analyst [31]

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This is Drew on for Matt, and congrats on a nice quarter here. On the knee platform you acquired last quarter, I guess, kind of as we monitor progress with your robotics platform there, obviously, it's a new market for you guys. Are there any milestones we should be watching for here in 2019 and probably more likely into 2020?

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David M. Demski, Globus Medical, Inc. - CEO, President & Director [32]

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Yes. No milestones in 2019. That's going to be more of a 2020 effort and even that late in the year.

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Andrew William Stafford, Piper Jaffray Companies, Research Division - Research Analyst [33]

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Okay, helpful. And then you kind of touched on this a little bit earlier. But I mean as we said a little bit later here in the med tech earnings cycle, a lot of the spine pure plays have matched pretty strong performance domestically. I guess to ask the question more specifically, are you seeing an uptick in the spine market at all? And then kind of what in your view could be driving that, be it conversions off SCS or pricing, et cetera?

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David M. Demski, Globus Medical, Inc. - CEO, President & Director [34]

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Sure. We're a small player, Drew, so it's hard for us to really understand what the entire market is doing. But I would say, anecdotally, it continues to be relatively strong, but no big spike. We're going into the time of year when we've seen a big amount of demand as the high deductible coverage folks go in to get surgery. That's going to happen again this year, it appears to be. But nothing overall that I would say has been either good or bad. I think it's just kind of business as usual from our perspective.

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Operator [35]

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And our next question comes from Mike Matson of Needham & Company.

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Michael Stephen Matson, Needham & Company, LLC, Research Division - Senior Analyst [36]

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Just wanted to start with the imaging system. So I think you said it would be out in the first half of 2020. So how should we think about the launch and the trajectory there as compared to Excelsius? I realize that's more of kind of a -- you're coming into more of an established or mature market. And I mean is that going to have a material contribution in 20 years? Is it really more of a '21 story with the sales cycle and everything?

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David M. Demski, Globus Medical, Inc. - CEO, President & Director [37]

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Thanks, Mike. I do anticipate having fairly significant sales next year. It's really challenging to predict the land at this point. We're still finishing out the development. We need to get it to the FDA and get it launched. So it's a little early to be predicting sort of the amount of revenue. But the response that we've gotten from folks who have seen it, it brings a lot of value. It really surpasses what's out there today in a lot of respects. So we're excited about being able to sell it, and we hope that we will see a nice ramp in it.

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Michael Stephen Matson, Needham & Company, LLC, Research Division - Senior Analyst [38]

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Okay. And then I know there were a few other questions about the rep hires. But is it safe to assume that you expect a kind of similar plan, similar amount of hires in 2021 -- sorry, 2020 to what we've seen in '18 and '19?

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David M. Demski, Globus Medical, Inc. - CEO, President & Director [39]

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It's a big focus of our sales team. I think we are becoming more and more attractive to the spinal implant salespeople because of our enabling technology as well as the breadth of our implant technology. So I think our story gets better and better, and the best people want to come and sell the best products. So I do intend to continue to focus on it, and we continue to see opportunities. So I see no reason why it would back off at all next year.

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Michael Stephen Matson, Needham & Company, LLC, Research Division - Senior Analyst [40]

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Okay. And then just Excelsius outside the U.S., can you maybe comment on how that's going?

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David M. Demski, Globus Medical, Inc. - CEO, President & Director [41]

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Very happy with it. We've got several installations. We've not broken out the numbers for folks. But we're seeing it being utilized all over the world, and it's very exciting to see that.

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Operator [42]

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And our next question comes from Ryan Zimmerman of BTIG.

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Ryan Benjamin Zimmerman, BTIG, LLC, Research Division - Director & Medical Technology Analyst [43]

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So I want to ask first on guidance for this year and then I have a couple others. So you guys beat by $11 million. You took up guidance by essentially $8 million for the year. I'm just curious if you can -- is that all essentially international headwinds that you're referring to? Or is there something else contemplated in those -- in that guidance for '19?

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Keith W. Pfeil, Globus Medical, Inc. - Senior VP & CFO [44]

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This is Keith. Thanks for the question. When we looked at guidance, taking it up $8 million, really, we really -- we feel good about our business across musculoskeletal and enabling. When you go back to the beginning of the year, we started the year at $770 million. We've taken our number up $13 million from the beginning of the year. When we look out, there is nothing that piques our interest or causes rise of concern. It's really more of us applying appropriate conservatism to our sales number.

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Ryan Benjamin Zimmerman, BTIG, LLC, Research Division - Director & Medical Technology Analyst [45]

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Okay. That's helpful. And then, Keith, this is really a question on margins, but it gets to the introduction of the mobile -- or the C-Arm next year. These will, combined with Excelsius, weigh to some extent on margins. And I'm just kind of curious what your view is or how we should be thinking about your gross margins into 2020 given the introduction of some of these higher capital dollar systems that may carry lower gross margins relative to your implant business?

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Keith W. Pfeil, Globus Medical, Inc. - Senior VP & CFO [46]

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Yes. I mean thanks for the question. Really when I think about gross profit, I think for next year, any impact would be small, immaterial. When I step back and look at the business, I think our gross margin profile is pretty strong. The last couple of quarters, we're sitting 77%, 77%, 77.2%. In the near term, I don't really see that changing.

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Operator [47]

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And our next question comes from Steven Lichtman of Oppenheimer.

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Unidentified Analyst, [48]

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This is actually [David] on for Steve. Just starting off, could you provide any color on sales contribution from trauma in the quarter? And are you still on pace for about $5 million for the whole year?

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Keith W. Pfeil, Globus Medical, Inc. - Senior VP & CFO [49]

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I think I would go back to what I said earlier. First off, thanks for the question. We're looking musculoskeletal as a whole. Those pieces of the business are really small, immaterial, I would really refer back to some of David's -- or Dave's comments in his script. But overall, musculoskeletal performed strong. We don't see any issues across the business, and we continue to move forward to closing out the year.

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Unidentified Analyst, [50]

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Okay. And then just 1 follow-up on the marketing campaign you mentioned last quarter. How has that been received? And did you see an impact from that program in the third quarter?

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David M. Demski, Globus Medical, Inc. - CEO, President & Director [51]

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Yes, David, we did. Thanks for the question. I -- as a couple of other callers have asked about why we saw such a strong quarter, I think it's been our ability to articulate the advantages of our system over the competition, surgeons to understand that. And a marketing campaign really does a good job of drilling down into the unique aspects of Excelsius, why it's smarter, why it's stronger, why it's faster. So yes.

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Operator [52]

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With no further questions, this concludes the Globus Medical Third Quarter Earnings Call. Thank you for joining. You may now disconnect.