GLOBUS MEDICAL INC Q1 2026 earnings call

Thank you, Kathy, and thank you everyone for being with us today. Joining today's call from Globus Medical will be Keith Pfeil, President and CEO, and Kyle Kline, 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 2025 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'll now turn the call over to Keith Pfeil, our President and Chief Executive Officer.

Thanks, Brian. Good afternoon, everyone, thank you for joining us on today's call. Our first quarter results demonstrate our ongoing focus as we continue to scale and capture share while maintaining operational discipline, driving margin expansion, favorably impacting Q1 and our full-year results looking ahead. Overall, we are moving with purpose and in the right direction. As we progress through 2026, look for market share taking top-line growth coupled with exciting product launches while increasing gross margins and driving meaningful earnings expansion. Stepping back for a minute, I want to give a little perspective and highlight what we've accomplished by looking at our trailing 12-month performance and the activity that's occurred since the close of fiscal 2022. Since then, revenue has more than tripled.

We've generated 6x the amount of free cash flow, all while closing two significant deals, extinguishing almost $1 billion in debt while deploying over $600 million to repurchase over 10 million shares at an average price of under $60 a share. That represented greater than 25% of the dilution that was created from the NuVasive merger. We sit here today debt-free, generating significant free cash, and have launched over 30 new products during this timeframe. Simply stated, we've leaned in and meaningfully scaled our business while maintaining the DNA of Globus of innovation, execution, and financial prudence. I'm thrilled with our results in Q1 and look forward to what 2026 and beyond has in store for our business.

Turning attention to our top-level performance, Q1 revenue totaled $759.9 million, growing 27% as reported and 25.5% on a constant currency basis. Fully diluted non-GAAP earnings per share was $1.12, growing 64.7% over the prior year quarter. Our Q1 base business revenue totaled $677.2 million, growing 13.2% as reported versus the prior year quarter, led by continued strength in US Spine while also seeing improved performance across Enabling Technologies and international spine. Digging further into US Spine, this business continues to show strength and resilience as it grew 10% in Q1 versus the prior year quarter, marking the third consecutive quarter of 10% growth. Our US Spine sales team remains resolute and focused, operating against a backdrop of driving achievement against key objectives.

We've seen this momentum continue and are now sitting at 58 weeks of consecutive growth. Cross-selling, competitive recruiting, and robotics pull-through are key to this strategy as we continue to capture volume and drive meaningful share growth across the category. Consistent with prior quarters, our growth remains broad as we continue to see double-digit growth across many categories, including standard fixation and MIS pedicle screws, expandable TLIF, ALIF, posterior cervical, as well as cervical plating. Categories such as power tools and products such as DuraPro continue to capture new share and drive incremental cross-selling opportunities as we seek to gain a greater share of each spine procedure. Competitive recruiting remains a strategic priority, and the spine leadership team is aligned from the top down to aggressively perform against this objective.

The process of doing so remains a competitive moat for Globus, and our execution around rep onboarding with sets and inventories continues to differentiate us as our supply chain meets the needs of the field by providing high-return capital investments, which is a testament to our philosophy of having the right products at the right price and being on time. Robotics pull-through remains a key driver, and as we demonstrate greater flexibility in how customers acquire capital, we seek to more aggressively drive the recurring revenue, whether through implants, disposables, service, or case coverage. Strategically, we are slightly altering our approach to capturing more accounts and expand upon surgeon and rep training, thus driving success at accounts with Enabling Technologies. Our first quarter saw Enabling Technologies post revenue of $26.9 million, growing 21% over the prior year quarter.

We saw a sequential step down in Q1 consistent with history. However, we maintained momentum in closing deals while also seeing greater penetration of international markets. Our pipeline of deals remains robust. However, the mix of pipeline deals is shifting with a greater focus on leases and rentals compared to the historical mix of outright sales, which historically resulted in higher upfront revenue recognition. This aligns with my earlier comments and the strategy of refocusing our capital approach to drive implant and other recurrent revenue product pull-through, all of which has been implied in our revenue guidance for 2026. Despite new and enhanced robotic competitors in our space, ExcelsiusGPS remains the standard for ease and simplicity with our floor-mounted, navigation-based robotic approach. The ground-up design with its native platform gives surgeons the access and control they need to facilitate a spine procedure while seamlessly navigating through our workflow.

To date, we've seen almost 130,000 robotic procedures and will continue to penetrate the market to launch new successful programs that foster utilization. No other competitive systems, including recently introduced products, have been able to replicate the reliability, ease, or accurate workflow attributes of our robot. Our international spine business grew 16.4% as reported and 9.8% on a constant currency basis, as we did not repeat the supply chain disruptions which occurred in the first quarter of the prior year. Strength was seen mainly in the EMEA and LATAM regions, and our growth was broad-based, including both direct and distributor businesses across our international markets.

On the product front, I'm pleased to announce that early in our second quarter, we received two FDA 510(k) clearances for both our patient-specific SCRIPT spacer system, comprising of seven patient-specific lumbar interbody systems, as well as patient-specific SCRIPT rods. Both the SCRIPT spacers and SCRIPT rods are designed by surgeons using the ScriptStudio design and surgical planning software application. SCRIPT lumbar spacers are static-integrated, and expandable thoracolumbar interbody fusion devices additively manufactured with patient-matched end plate topography for maximum stability. The patient-specific SCRIPT spacers may be placed using ExcelsiusGPS instruments for navigation with ExcelsiusGPS, ExcelsiusHub, and ExcelsiusXR. SCRIPT patient-specific rods are precision-bent to the surgeon's pedicle screw placement plan and designed to reduce time spent on intraoperative rod bending. Rods are compatible with our CREO, Reline, and REVERE pedicle screw systems for both open and MIS procedures.

ScriptStudio screw plans can be uploaded to our ExcelsiusGPS and ExcelsiusHub systems for robotically navigated screw placement intraoperatively. Our platform keeps the physician at the center of the planning process with an intuitive interface, allowing the surgeon to efficiently fine-tune disc height restoration, spinal alignment, and pedicle screw placement, translating their precise clinical intent directly into the implant design. Our software is treated as an advanced tool rather than a replacement for clinical judgment, ensuring the implant perfectly executes to the surgeon's operative strategy. Our expandable offering incorporates our proven technology, allowing surgeons to insert the implant at a lower height designed to minimize nerve retraction and reduce the impaction forces required to implant the spacers. Once in the disc space, the spacer can be expanded to restore optimal disc height.

Finally, our patient-matched spacers and rods are bundled with our high-quality implants and best-in-class disc prep and retractor systems while integrating with our Excelsius suite, thus ensuring final placement matches the digital pre-op plan to ensure proper navigated placement. With our SCRIPT approvals, we will be the only company positioned to offer a complete portfolio of patient-specific lumbar interbody spacers and rods integrated with our enabling technology, truly establishing us as the one-stop shop for lumbar patient-specific implants. The team is working tirelessly to finalize the launch plan to bring these new exciting products to market shortly. We remain excited for the future as the team embarks on an enhanced focus of development and investment to bring new products to market in 2026 and beyond. I sit here today truly excited for what we have in store for 2026.

Our trauma business posted a 30.4% increase over the prior year quarter, with growth coming from both our core trauma line through share taking as well as our Precice limb lengthening portfolio. Our ANTHEM elbow plating system continues to be a standout product, exceeding our expectations as surgeons have responded to this product based on the anatomic fit of this plating system. Consistent with comments last quarter, demand on this product has continued to surpass initial expectations such that we will be delivering additional sets to the field in the second quarter. Growth in Precice was driven by our ability to now fully satisfy the market after we transitioned manufacturing from the former NuVasive facilities to Globus in early 2025. Manufacturing output has now surpassed the historical output at the former facility, such that we are now able to fully supply the market.

Our commercial focus will remain on level one and level two trauma centers as we seek to drive share growth with a smart approach to investment that balances inventory and set availability in a manner that drives high ROI. We will remain diligent in sticking to this plan as we move ahead. First quarter Nevro revenue finished at $82.7 million as we've adopted the Globus approach to driving profitable sales growth. Although the strategy rollout led to sales declines, we had expected lumpiness to occur with this business as we worked through bringing it under the Globus umbrella in its first 24 months.

Thanks, Keith, and good afternoon, everyone. Our first quarter delivered exceptional results on both the top and bottom line and is an impressive beginning to 2026 for the entire Globus team. Sales grew 27% as reported compared to the first quarter of the prior year, with over 13% of growth coming from the base business, including strong growth from substantially all of our underlying businesses. Our top-line results were once again highlighted by the domestic spine business, which had its third straight quarter of 10% growth. We continued to see margin expansion in the quarter, with adjusted gross profit margin over 69% as we remain focused on disciplined execution of manufacturing and supply chain initiatives. We also achieved record Q1 fully diluted non-GAAP earnings per share of $1.12.

In today's prepared remarks, I will provide insights into our quarterly business performance, including the impacts of Nevro and an update on guidance for 2026. First quarter 2026 results were highlighted by revenue of $759.9 million, growing 27% on an as-reported basis and 25.5% on a constant currency basis. GAAP net income was $124.3 million, resulting in $0.90 of fully diluted GAAP earnings per share. Non-GAAP net income was $154.9 million, delivering $1.12 of fully diluted non-GAAP earnings per share, or 64.7% of non-GAAP EPS growth over the prior year quarter. Adjusted EBITDA margin was 32.3% in the first quarter of 2026.

Our Q1 2026 base business Globus adjusted EBITDA margin was 34.8%, and standalone Nevro adjusted EBITDA margin was on 11.8% for the quarter. Our first quarter net sales of $759.9 million reflect base business Globus sales totaling $677.2 million, growing 13.2% as reported and 13.1% on a day-adjusted basis, with the same number of selling days in the U.S. and international and one more selling day in Japan compared to the prior year. Base business Globus sales grew 11.9% on a constant currency basis.

As mentioned in my opening remarks, we saw growth across substantially all of our underlying businesses, led by U.S. Spine, which achieved 9.6% as-reported growth, and International Spine, which grew 16.4% on an as-reported basis and 9.8% on a constant currency basis. Trauma and our neuromonitoring businesses each grew over 30%, and Enabling Technologies started the year off with over 20% growth compared to Q1 2025. Nevro contributed $82.7 million of revenue during the quarter. On a sequential basis, Nevro's revenue contribution declined by $17.1 million, or 17.1% compared to the fourth quarter of 2025.

As mentioned over the prior few quarters, since announcing the Nevro acquisition, our goal with Nevro was to rightsize the business to drive profitable sales growth while reducing excess spending to quickly adopt the Globus approach. In 2025, we saw positive progress in profitability through enacting significant organizational and procedural changes, culminating in an achievement of non-GAAP EPS accretion occurring in the first three quarters. In Q1 2026, we continued to see the lasting and sustainable impact of these cost control actions. However, in the first quarter, we also saw a decline in revenue driven by the structural changes made within sales and marketing of the Nevro business at the tail end of 2025.

Although we weren't sure on exact timing, we had expected this decline to occur at some point in the early innings of owning the business, and it has been anticipated in our top and bottom line guidance for 2026. Pivoting back to overall results, musculoskeletal revenue achieved $733 million, growing 27.3% over Q1 2025. Base business Globus musculoskeletal revenue was $650.3 million, growing 12.9% as reported. Enabling Technologies revenue was $26.9 million, growing 21.1% as reported. The Enabling Technologies business saw a bounce back in both sales dollars and units when compared to a softer Q1 2025.

While we remain flexible in our offerings for our customers to acquire capital, as shared in Keith's comments about the pipeline earlier, we note that Q1 2026 results were primarily from cash sales, which we've seen historically in this business. U.S. revenue during the first quarter of 2026 was $604.9 million, growing 25% as reported. Base business Globus U.S. revenue during the first quarter of 2026 was $537.7 million, growing 11.1% versus the prior year quarter. Our base business Globus U.S. growth was primarily driven by our U.S. Spine, neural monitoring, and trauma businesses, all of which have achieved double-digit growth for three straight quarters when comparing to the comparable quarter of the prior year.

Q1 2026 international revenue was $155 million, growing 35.6% as reported and 27.8% on a constant currency basis. Globus-based business international revenue was $139.5 million, growing 22.1% as reported and 15.1% on a constant currency basis compared to the prior year quarter. International growth was seen across the board, with our EMEA and LATAM regions achieving double-digit as reported and constant currency growth, and APAC achieving high single digit as reported and constant currency growth. We note that the growth achieved this quarter was against a prior year comp that was negatively impacted by the timing of distributor orders and temporary supply chain disruptions.

We feel positive on our international spine business prospects this year as we work to finalize international integrations in the back half of 2026. Turning to the P&L, GAAP gross profit margin in the quarter was 66.4% compared to 63.6% in the prior year quarter. Adjusted gross profit margin was 69.2% compared to 67.3% in the prior year quarter, primarily driven by increased sales resulting in fixed cost leverage, favorable sales mix, and the impacts of synergy execution through our manufacturing and supply chain initiatives. Our base business, Globus adjusted gross profit margin was 69.3%. As I mentioned in our fourth quarter prepared remarks, we've leaned into manufacturing and supply chain initiatives, driving to build back to a mid-70s adjusted gross profit target.

From Q3 2024 forward, we've seen improvement in adjusted gross profit metrics in each sequential quarter. Q1 2026 continued that trend, maintaining a 69.2% adjusted gross profit margin from Q4 2025 despite the normal sequential step down seen in revenue from Q4 to Q1. We reiterate our expectation of adjusted gross profit margin falling in the range of 69%-70% in 2026 and our long-term goal for mid-70s adjusted gross profit percentage. Research and development expenses in Q1 2026 were $36.5 million or 4.8% of sales, compared to $33.1 million or 5.5% of sales in the prior year quarter. Base business Globus R&D expenses totaled $32.7 million, or 4.8% of sales.

The resulting decline in legacy Globus R&D, both in dollars and as a percent of sales, is attributable to synergy capture, resulting in lower headcount and leverage from higher sales volume. Nevro R&D was $3.9 million or 4.7% of Nevro sales. As we've worked through the integration of both NuVasive and Nevro, we reset the legacy business product development processes to align with the Globus approach. We expect that this will pay dividends in 2026 and beyond as we look to minimize the timeline from concept to launch for our innovative technologies. In 2026, we expect R&D expense to be in the range of 5%-6% of net sales, with a ramp in spend moving methodically throughout the remainder of the year.

SG&A expenses in the first quarter of 2026 were $297.8 million, or 39.2% of sales, compared to $242.8 million or 40.6% of sales in the prior year quarter. Base business Globus SG&A expenses were $251.7 million or 37.2% of sales. For base business Globus SG&A, the increase in spend is attributable to increased sales compensation costs from higher volume and increased employee benefit costs, partially offset by decreased employee-related costs from synergy actions. Nevro contributed $46.1 million of SG&A expenses in the quarter, or 55.7% of Nevro sales. Q1 2026 net interest income was $5.4 million compared to $1.7 million in the prior year quarter.