Overview:
Globus Medical reported a big jump in the immediately preceding Q4:2024 quarter.
Globus Medical, Inc. reported $598 million in sales and $97 million in operating profit, which as a percent of sales was 16%, a big jump from 9% in the immediately preceding Q4:2024 quarter.
While management expressed disappointment with the quarter, sales were below expectations, Globus actually appears to be reverting to form as one of the most profitable companies in either spine or ortho.
Operating Issues Hit Sales, but Profits and Cash Flows Grew Impressively
Daniel Scavilla, President, Chief Executive Officer and Director, and Keith Pfeil, Chief Financial Officer and Chief Operating Officer of Globus Medical reported first quarter earnings in a recent call with analysts.
Scavilla said, “Globus has had a flat quarter in Q1, finishing slightly down in sales with negative 0.8% growth versus prior year on a constant currency basis. Drivers were softer, enabling tech sales against difficult competition, temporary integration-related supply chain disruption and timing of international distributor orders partially offset by continued strengthening momentum of the U.S. spine business.”
CFO Keith Pfeil said: “Reflecting on Q1, our quarter delivered a mixed set of results. While revenue was down slightly to the prior year quarter, we saw a meaningful expansion in profitability and cash flow. We continued to make disciplined progress across our strategic and operational pillars which will fuel our long-term growth.”
Scavilla added, “While Q1 sales are flat, we’re already seeing stronger results in Q2 throughout the business as we remediate supply chain disruptions, fill open distributor orders, and close robot deals. We will continue to focus on the long game, investing in sustained, profitable growth, and using our financial strength and discipline to accelerate the top line results while continuing to deliver strong EPS and free cash flow.”
He continued that the quarter was “impacted by temporary integration-related supply chain disruption, and a planned reduction in third party biologic sales resulting from expected changes in the reimbursement landscape for wound care products.”
During the quarter, Globus also launched two new products, the Cohere ALIF spacer with integrated screw fixation and the Reline ASF fixation system.
Globus Medical also announced that they are reaffirming the guidance for net sales in the range of $2.8 billion to $2.9 billion but decreasing guidance for fully diluted non-GAAP earnings per share to a range between $3.00 to $3.30 per share.
Analysts Looking for Reassurance About Rest of the Year
Barclays’ Matt Miksic asked if the second quarter will have some of the same challenges as the first quarter.
Scavilla explained that they are already seeing some positive effects in the second quarter, including in the U.S. spine business and the progress being made in addressing back orders. He added that he was confident that the first quarter challenges won’t continue into the rest of the year.
“And look, we own a bad quarter. We’re going to go fix it and drive it forward and come out with the right results here,” he said.
Miksic also asked about the opportunities the acquisition of Nevro Corporation will provide.
Pfeil said that over time they plan to increase Nevro’s gross margins, but for right now they are focusing on reducing its operational expenses so it can operate profitably long term.
