- Revenue: $630 million, growing 116% or $338 million.
- Non-GAAP EPS: $0.75, increasing 20% versus prior year.
- Free Cash Flow: $26 million for the quarter.
- Adjusted EBITDA: Over 30%.
- US Spine Growth: 100% in Q2.
- Enabling Technology Sales: $37 million, up 6% versus prior year.
- International Spinal Implant Sales: Grew 200% on a constant currency basis.
- Combined Trauma and NSO Business Growth: 321% for Q2.
- Q2 GAAP Net Income: $31.8 million, resulting in $0.23 of fully diluted earnings per share.
- Q2 Non-GAAP Net Income: $102.7 million, delivering $0.75 of fully diluted non-GAAP earnings per share.
- Musculoskeletal Revenue: $592.9 million, growing 130.8% compared to the prior year quarter.
- Enabling Technologies Revenue Growth: 5.8% in the second quarter compared to the prior year quarter.
- US Revenue: $499.5 million, up 103.5% as reported compared to the prior year quarter.
- International Revenue: $130.2 million, growing 182.3% on an as-reported basis compared to the prior year quarter.
- GAAP Gross Profit: 58.7% in the second quarter of 2024.
- Adjusted Gross Profit: 67.2% excluding step-up amortization impacts.
- R&D Expenses: $37.7 million or 6% of sales.
- SG&A Expenses: $238.1 million or 37.8% of sales.
- Net Interest Expense: $2.3 million.
- GAAP Tax Rate: 33.2%.
- Non-GAAP Tax Rate: 24.4%.
- Cash, Cash Equivalents, and Marketable Securities: $520.7 million at June 30, 2024.
- Q2 Net Cash Provided by Operating Activities: $54.3 million.
- Capital Expenditures: $27.8 million or 4.4% of revenue.
- 2024 Net Sales Guidance: $2.47 billion to $2.49 billion.
- 2024 Non-GAAP EPS Guidance: $2.80 to $2.90 per share.
Release Date: August 06, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Globus Medical Inc (GMED, Financial) reported robust Q2 2024 sales of $630 million, a 116% increase year-over-year.
- Non-GAAP EPS increased by 20% to $0.75 despite a 35% increase in outstanding shares due to the merger.
- The company launched four new products in Q2, reaching nine product launches year-to-date, setting the stage for a record number of launches in the coming months.
- US spine segment grew 100% in Q2, driven by gains across various product portfolios and increased implant usage through robotic pull-through.
- International spinal implant business delivered record sales in Q2, growing 200% on a constant currency basis compared to the prior year.
Negative Points
- GAAP gross profit margin declined to 58.7% in Q2 2024 from 73.8% in the prior year quarter, primarily due to the NuVasive merger.
- Net interest expense increased to $2.3 million in Q2 2024 from net interest income of $8.3 million in the prior year quarter.
- The GAAP tax rate for Q2 2024 was 33.2%, up from 22.7% in the prior year quarter, driven by higher valuation allowances on foreign losses.
- Free cash flow was $26.5 million, which, while positive, indicates a temporary impact due to higher accounts receivable balances driven by systems integration.
- The company expects a sequential step-down in revenue for Q3, which could create a headwind on EBITDA.
Q & A Highlights
Q: At what point should we expect you to start updating the pro forma numbers for the full front-to-back integration of NuVasive?
A: We have gotten off to a strong start and remain confident in our merger thesis and cost synergies. After we get through the third quarter, we will start to look back, recast our performance, and provide insights moving forward. We are focused on achieving the $170 million in cost synergies and improving gross profitability to the mid-70%s range. (Keith Pfeil, CFO & COO; Daniel Scavilla, CEO)
Q: How should we think about EBITDA margins for the full year, given the strong Q2 performance?
A: While we don't give specific EBITDA guidance, we expect a slight step down in Q3 due to sequential revenue decline and additional capital sales. For the full year, achieving 30% EBITDA margin will be challenging, but we aim to get close. (Keith Pfeil, CFO & COO)
Q: What are you seeing on the capital side, especially with new competitors entering the spine robot market?
A: We remain focused on our long-term enabling tech plan and expanding applications through proceduralization. We take new entrants seriously but have not seen any shifts in the capital market that would alter our plans. Our Q2 performance was strong, and we will continue to execute our strategy. (Daniel Scavilla, CEO)
Q: Can you provide more color on the strong growth in your robotics segment and the potential for doubling placements?
A: The market's willingness to adopt the technology is a key driver. While we have primarily focused on Globus's technology, we are working on integrating NuVasive products, which should accelerate growth. We aim to push for significant growth but may not necessarily double placements. (Daniel Scavilla, CEO)
Q: How do you view the impact of recent reimbursement changes on your business, particularly in the ASC space?
A: We are not modeling any significant impact from recent reimbursement changes. We are well-positioned to adapt to any shifts towards ASC procedures and remain confident in our ability to compete effectively. (Daniel Scavilla, CEO)
Q: Can you provide an update on the cross-selling opportunities and synergies from the NuVasive merger?
A: Cross-selling is occurring incrementally, and we have a large number of sets on order to enhance this further. While it's challenging to quantify precisely, we are seeing a natural lift in sales from the blended teams. (Daniel Scavilla, CEO; Keith Pfeil, CFO & COO)
Q: What are your plans for capital allocation, especially given the strong free cash flow generation?
A: We will maintain a strong balance sheet and focus on internal development, machinery, and equipment. We also plan to look at M&A opportunities within the musculoskeletal space after digesting the NuVasive merger. (Keith Pfeil, CFO & COO)
Q: How do you plan to approach the market with your new ExcelsiusFlex robotic navigation platform for total knee arthroplasty?
A: We will take a derisked approach, growing in concentric circles and focusing on both direct and capital reps. We aim to penetrate both ASC and inpatient markets effectively without detracting from our spine capital focus. (Daniel Scavilla, CEO)
Q: Can you provide more details on the trauma business and its growth drivers?
A: The trauma business is growing due to market penetration, product launches, and the integration of NuVasive's NSO. We expect continuous and incremental growth similar to our spine business. (Daniel Scavilla, CEO)
Q: How do you view the potential impact of the Excelsius Prone system on your market position?
A: We created the market for this system and continue to enhance it with better patient positioning, retractor stability, and surgeon ergonomics. We aim to maintain a strong position and further enhance our capabilities with neuromonitoring. (Daniel Scavilla, CEO)
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
