Nuvasive (NUVA) 2 Aug 232023 Q2 Earnings call transcript

Thank you. Good afternoon, everyone. With me today are Chris Barry, Chief Executive Officer; and Matt Harbaugh, Chief Financial Officer. Chris will provide an overview of NuVasive’s second quarter 2023 business results and trends, as well as innovation highlights. Matt will review our detailed financial results and full year 2023 outlook, and then we’ll host a question-and-answer session.

the we section this has of on X-K which on is been release, Form IR the our with earnings issued afternoon, earlier posted filed The SEC. website and

financial We have information. also supplemental posted

a will available archive As and later IR be this being on call recorded, reminder, an website our today. is

required and call other current started, statements, such which materially law, forward-looking obligation no update which that I’d get you are factors and respective we expectations could any we actual differ include differ NuVasive’s involve to to or remind results and by that information, forward-looking in materially their results as news as releases expressed based will to on uncertainties, the forward-looking our which by statements. could described cause Before from like date. comments with speak factors or and risks periodic assume during cause assumptions this The to are filings statements implied those actual Except SEC.

addition, GAAP on both non-GAAP measures supplemental directly and information, call the most measures. are included which the to Reconciliations of comparable these on In include measures today’s financial earnings will financial in NuVasive’s release are website. of accessible financial certain this

to now, And like introduce I’d Barry. Chris

Juliet. you, good And Thank afternoon, everyone.

second the our timing. process share my for product Medical will Globus quarter. our remarks, with well combination differentiated portfolios where Earlier On today’s on commercial financial quarter, of share are financial the pending discuss After position performance details reported XXXX additional us today, call, and the we in current views we our and results. merger and quarter the I will for review execution continued Matt

X.X% the prior an reported net NuVasive $XXX.X line and period. million, our a on team Despite the In or currency the noise, with to expectations quarter. on basis quarter sales X.X% year second solid increase XXXX merger-related XXXX challenging half delivered comparison QX first a delivered performance, for constant a a our combination we of competitive NuVasive quarter compared basis with in first of of XXXX. delivered

achieved U.S. achieved Hardware, straight currency a Cervical approximately the Spinal This XX% U.S. our business, spine we for growth from by business than in growth contributions America Our by growth and prior to on Asia more X% from the International basis seventh solid approximately quarter. constant was as XX% growth in and compared driven In period. by as performance year Pacific. led well core Europe, double-digit Latin led

communicated our We to delivering previously growth, strategy. remain our core on pillar focused growth commitment of a

our merger. a global resilient done. teams are to executing well our the who discipline through through We’re pending for remaining with Thank you job teams

we the CXXX, Core XXXX, opportunities to segments PXXX with in XXX Within significant address our and Spine, portfolios, procedural Complex. key continue

spine XXXX a share each Our five lateral postoperatively spine SPS, traditional SPS traditional segment. of our predictable to strong Anterior, a celebrate commercial continue flagship demonstrate innovation our gives years take Across XX competitive procedure. across to and more globe, to position superior XLIF procedure of years and the continues XXXX our clinical In we teams complications and that reducing lateral published similar years study efficiency. and of outcomes while procedures. than perioperative improving five the years surgery fusion two shows validation to have surrounding single-position Journal outcomes in Spine Adding fusions XXXX and XLIF

next-generation cage, supported the including the NuVasive posterior Key of business. System Tube T lift sales by driven Posterior benefited U.S. momentum have and interbody our strategy Complex. delivered XPL, Our the growth, our double-digit our in PXXX portfolio. introduction In our products, renewed MOD procedural Posterior, of in like have know-how experience segments only and solutions creating expandable in launch commercial and our Cervical,

and CXXX portfolio of disc the Reliance by led increased simplified surgeon growth, to U.S. to continues our above-market cervical Turning Cervical, adoption entire Cervical. deliver

opener door making for deformity As procedural anticipated, a in accounts. with progress a Complex, and teams, sub-segment cervical greater the our disc pulling XD, in In through opportunities Reline we’re density additional commercial delivered growth. simplified double-digit pediatric driving cervical is which

fixation into procedure. powerful efficient techniques unifies one Our posterior for deformity and correction system deformity

technology, the globe, across continues Pulse Singapore, with European several in to in case we’re interest increased our in make its first commercial and enabling surgeon seeing An global completed impact new sales geographies Pulse.

enhancements XXXX operating their have feedback release, platform’s surgeons the positive Following software to summer shared rooms. on the

New revision, further navigation cases. the platform. software introductions allowing our to highlight complex optimize deformity differentiated patient were our support us to also These and pediatric innovation to hardware released hardware array, enhancements of and commitment continuous better

include Mark reinstatement recent solution to for Specialized system transport. tumors and by our Precise This The bone caused defects precise be in In achievements trauma. continues technology, business, extends treating the and NuVasive precise segmental NSO UK our positioned of the the long-term of reentry bone growth. CE business Orthopedics the well all-internal

combination Globus our musculoskeletal an planned Medical, we committed together. company with Turning and to innovative global to remain excited creating

the overwhelming and shareholders, combination the will our strategy. the by long-term merger by pending both for support As demonstrated near- companies’ accelerate

Our deal and all is belief remains will this merger unchanged. stakeholders commitment benefit our to the steadfast, that

we previously Commission the of the review with from a May FTC’s with merger X, request connection communicated received second in As on Globus. Trade the Federal

respective period teams three to request. short And of in the proud have past time. very Globus Over of our accomplished great what a to have lengths and the we to our I’m gone responses months, prepare second

that QX that the we response quarter. we request, timing, expected off the backing call, the and to with close that transaction third the the we indicated earnings our we to not everything are on second we are doing During progress make to Based happen. in can

commentary a heard generally, action the I’ve well the what approach deals about headlines, speculation about in FTC the will NuVasive-Globus merger. take M&A recent lot as as FTC’s to of the Given

outcomes remain While there a when of the transaction, range potential is QX reviewing a is we on FTC close. our optimistic

call to Matt. over Now I turn will the

on what Thank XX. you, to second full unchanged on February provided sales good And remains going results I’m we and net Chris. year commentary which our quarter provide afternoon. XXXX guidance, from

today’s Our and information. have detailed financial provided been in results supplemental press release

period. Please discuss both measures. noted, otherwise prior are release non-GAAP will see reconciliations. GAAP unless Today, for our to press and year GAAP non-GAAP comparisons to And the all I

which worldwide on were XXXX was X.X% constant $XXX.X and million, as reported sales quarter X.X% increase a net Second currency increase basis. a a

impacted Foreign currency year by quarter for the million and a $XX.X regional led an was on during an in by quarter. sales net basis Core period over international sales Latin X.X% net second basis. sales our increase the were performance perspective, net prior currency America. million, growth $X.X Spine Europe International and constant negatively X.X% the From as-reported on a of

above market be position in offset in strong. headwinds by Asia-Pacific continues and pricing growth, as Overall, Japan discussed market, Australia, our to grew primarily Japan, previously. reimbursement was procedure in volumes

disc X.X%, attachment growth, simplified the Reliance XXXX primarily Turning U.S. product $XXX.X the surgical year-over-year. mix Services, Spinal cervical lower track net Hardware as led driven provide NCS. record line. me net sales, XX% by net U.S. or to than by and let key a for support rates quarter by Clinical in $XX.X of sales second of X.X% as increase greater achieving U.S. representing well million, biologics continued were ongoing Cervical decrease were payer its and sales highlights Cervical. a U.S. of million, proven NuVasive

to results. operating Moving

to percentage XX.X%, a compared XXXX period. margin non-GAAP $XXX.X second Non-GAAP quarter net million a the quarter sales Second gross of profit was million the prior $XXX.X as was gross in for year year NCS driven XX The period. decrease basis the single-digits. with in points lower consistent by was sales. remained in Pricing XX.X% to of prior decline historical the year-over-year primarily net levels low compared pressure of

compared Non-GAAP year $XXX.X points XX% operating margin Second year basis period. in more an sales to the compared expense and expenses XX million operating offset that the increased of than margin second XX.X%, of quarter increase generated favorable pressure. intentional Overall, non-GAAP higher to prior quarter XXXX net the period. in million XXXX gross operating X% prior control the $XXX.X leverage during to was

year $X.X $X.X $X.X current expense the to and the compared income second foreign year-over-year period. million the decrease less tax in the year the currency was driven from primarily of of million to The was by quarter expense $X.X in for quarter other prior XXXX in million prior Non-GAAP Non-GAAP year second unrealized was million expense gains period. impact period. for compared

to by to increase The Our quarter Currently, effective was and valuation annual allowances. XX.X% effective the rate year second mid-XX% the driven reserves our be XX% year-over-year in tax rate compared tax period. expect in XXXX higher was we tax prior range.

$X.XX income loss the net quarter XXXX, GAAP share of of in or For prior $X loss million share period. the diluted slightly diluted year or of of we net earnings per $X.X than GAAP million reported second of compared per to less $X.XX

Medical. The resulting principally As a in reminder, income. associated Australian dollar. prior net This was fluctuations exchange the $X the included XXXX the approximately of GAAP the related foreign year of in approximately of overall our currency period, unfavorable weakening U.S. dollar largely was year Simplify the million current with period to acquisition $XX against with in million impacts impact the improvement

of On a increase operating net $XX.X non-GAAP foreign currency of driven to diluted $X.XX in impact $X.XX the net share income unrealized compared million reported non-GAAP of the gains. per year was income of as prior million The or $XX.X earnings diluted profit we share favorable earnings basis, well of or period. year-over-year per growth, by as

now the XX, $XX.X June of we equivalents to as and cash Turning million sheet, balance of cash XXXX. had

credit $XXX the the facility, convertible June under with notes borrowings due we on $XXX million hand. in full million second using quarter, repaid in our early cash combined During from

year second the in was flow, quarter decrease compared compared lower during due million cash capital expenditures the operating $X flow million the as prior to was $XX year cash prior by primarily Free The period. to to period. offset

our We product and continued support as net well launches. capital expenditures growth, current our to sales investments in as future

our July growth I both financial X% beginning unchanged the reported basis between based X% constant XXXX. which of exchange XXXX worldwide to foreign neutral from compared as currency being As the This remains year currency rates at was on for prepared net XX, February on remarks, prior the a to based year. sales rates XX, on year my of guidance and mentioned of is full full

what wrap up see to planning like merger great with a expect companies in I Medical. Lastly, teams continued the for quarter. would integration combined about working the towards from closely together excitement close the progress both continue merger by to our to said towards with the Globus and our Chris reiterating we It’s to company, third finalizing successful

for to And please now I operator will call the the open questions. ask

you. Thank

from a go conducting [Operator question-and-answer question be Please with now will ahead. comes Instructions] Miksic session. First Matt We Barclays.

Hey for taking evening. much Thanks the good so questions.

I that ask anything remarks. you opportunity, bit another talked the say of little of might trends some a words, thing Chris that to In the ahead or could about not be prepared fearful here if speak in the the peeling the your in a you results or about you in may away in indicates operations and maybe business either that that to So, taking other wanted pending organization of would happening. that or be might transaction folks be that’s happening. But reps

it and So on felt about anything not then any And color that. performance whether how by like affected was I have you one follow-up. or

Matt. The question. very Thanks simple answer good. we’re Happy Yes. feeling to answer that is

see kind roughly with growth PXXX. of below a you in Cervical, the look our continued dig and to in starting the X%, of surface growth If strategy see Hardware X% U.S. you grew and we’re the posterior

of Some U.S. NSO business, I’m contractual headwinds. by had the support or offset that’s which business, sorry, partial the some NCS is

of We close have customers. merger-related seen or some slowdown result our a as as to from time of Pulse the anxiety some likely

the we’re to still in because of underlying is some saw But likely say business we slower-than-expected there, sales slowdown strength somewhat also capital the anxious others sales market. the the U.S. but I’m There’s hear capital in there solid. generally nascent what still process.

sales very we’re be seems that speaks that about fact excited combination organization them the talent, that, and which excited that we’re the top and holds retaining about for individually. future the to So actually to what

volume International; market a second being in with growth, really from still solid that’s growth. offset our double-digit Japan, largest good

course As about headwind transitory prepared with dealing his Matt this remarks and in that go talked over should come pricing of the the year.

Japan pressure X% the Spinal the So this coming and Hardware in under perspective. with the a International if from still the at you double-digit U.S. pricing business look in some underlying business, growth strength growth of really year segment

me indicate is business things to those So that holding its own. the

We’re about excited minimizing the time. taking it a distraction. People but combination, we’re one are at step

to thing. the low of August have other follow-up sure a that just an about thinking of for mentioned QX and more And helpful. QX seasonally softer here, the more more mentioned, make see? we’re would starting of in sort helpful. to of expectations that that down you of third vacations model sort color possibility flat the be and folks down mid-single-digits? we half super you’re sort maybe what That’s is quarter – is any normally to because of on Or back just Is that more down would that than cadence If

Yes. in I’m showed June saw the meaning this talk December say really did less I worst seasonality, of summer interesting. unfortunately I particular probably I January. to seasonality, it’s person we July was summer subject. pre-COVID vacation. signs you That return and in would – mean, QX probably mention to to the to had QX

to is gone now either disruption business. You saw I’ve starting COVID-related, three shape. some our a of The that a years of to problem take merger-related

So seasonality. it’s me to just and trends. really for my the see some perspective of a normal little market through say moving general, back sort this in market hard to would is But is identify I of

unfolds. seasonality COVID the it from QX from would by But So COVID, normal expect previous that affected that more helps. if for likely that, than were I I to say seasonality see market years would we’ll consistent a that looked softness saw as you to generally perspective the previous years. compared some QX

Yes. typically first is biggest other add fourth quarter tends Matt, lightest. to then our the quarter thing And the I be second our would only our quarter. by is, the quarter followed

of plan. to we first lull expect what frame don’t in know the was With So when use remarks internal is, word, expect set August. I our thing versus did the the question, January guys regard the some six want But to I much one than did and closer year. It where landed? your first where to get that months prepared see your yes, we in we highlight do Chris’ the we we you back doesn’t in landed budget from time in

right to tracking we’re thought So where going in line we were with we be.

To next question.

Markets. RBC ahead. question go Next comes Capital Singh with Shagun from Please

you okay? me Can Great. hear

Yes.

I’m with on more Perfect. more you’re broad? closing Okay. still it to conversations just in having You driving deal for some QX, Are they confident conversations, just requesting sound to get the Is updated did wondering of specific what’s the questions. I a sense and in more you you Thank was FTC. if the the commitment that? shed trying any can documentation? taking light or that

before mean, wide I Shagun. I’ve eyes walked this we open. Thanks said into

businesses. of two in confident combination very We’re the these

has to team great request. job Our responses done a second our the preparing

The make the is comment that and everything doing second that feverishly earlier, fulfill request sure that is close for not everything we’re we doing make so we clearly out of which can the in our working we to something made the to can FTC, is the sure to ordinary confidence that deal. we’re deliver I do

both outcomes. on I dynamic can come. are meet together. very teams to Obviously, has confident feel a It’s In close. and QX team working make make and The situation, to one planning very they that There’s continue resolve. sure closely potential Globus but hard extent of progress meantime, a we the remain dynamic requests like are work. we we the with a the continue of we said the lot the to FTC integration we working as the situation done to We’ll but in range a is optimistic

just Great. you correct. on in it one a implies half, driving just the confidence in Thank And to if the step-up the back believe I then I’m back talk half, what’s Can that? you. guidance;

Yes. Matt. it’s Shagun,

quarter, strongest As be It quarter in I talking be world. we November-December time tends to Matt, tends the normalized particularly our with when to were a frame. fourth mentioned our earlier in

up, particularly that in So yes, it pick will quarter. fourth

Thank you.

You bet.

from JP Allen Please with ahead. comes question Next Morgan. go Gong

actually Biologics support; digging you deeper remarks and Maybe Alan. so for called your NCS. just in out for headwinds the a little much Hi. Lily from into This is Thanks surgical taking on question. prepared

what about and a be the the happened of drove if there dig you maybe we back little in how should could back bouncing year? bit And thinking what that weakness? deeper into So just the half

Yes. a pronounced quarter. It bit was second in the

we have I normalize we the to last to digits had in it quarters future for that Lily. the in expect some of to would is expect second pricing NCS. pressure Thanks had of would year. But side. strong a say we year negative I more as the quarter lower Part single back would pretty and in get So on it soften we half

helpful. as as to I the but Hardware, about. been we’ve given quick then maybe maybe that expect, tailwinds a follow-up. That’s strong not just just Great. And good, one as Spinal procedures hearing was might think

specific So market call to spine that? anything the Thanks. is there that to or you’d that drove NuVasive out

Just continued growth, the happy continue with we’re Cervical. see in we growth to

strategy PXXX there. We’re results good standing saw and up obviously our some

a we where would of rebound a business coming bit Hardware speaking, So of it on year but is U.S. be. you’re thought off this Spinal and track generally

earlier, of still Matt in the the capital system. customer generally the coupled the would the obviously, kind where business we and speaking, spoke level some level pause, we area looking base probably period managing is of But the are created But about The happy. talked one be. in system is using pullback merger of of thought very it track with Pulse we that’s sign close we’re As that on to some market the U.S. at. is

Great. Thank you.

comes question ahead. Cowen. Josh from Please go Jennings Next with

is in I U.S. going could say Spine deliver Josh. for Simplify’s Thanks continuing me, Thank bit excuse about then This you rate, and your run on on forward? And business share to XX%-plus taking the for one able to would Cervical more a Simplify? broadly, are little the squeeze question there, of then the durability And was to what more for question. growth Eric you. quarters. last if you hear I recent success commercial adoption hoping

Listen, of as those I can. we’re as very Eric. happy. Thanks answer I’ll many

in the is got strongest the We with We continue of a very see believe sub-segment cervical the growth. technology We area that with we and ramp-up leading to Simplify. to market. we’ve see growth Simplify of large market the that continue think portion cTDR

the really growth XX%-plus in growth seen over overall consistent Cervical the think several I quarters. last led we’ve business. That’s to

the session would segment, $X.X it a far cannibalize capability of characterize I I the think procedure. the segment continue our segment. was lot ACDF $XXX as Cervical this Analyst at I just a billion If at in we still Day, our As with cTDR of did durability, strategy point segment $X.X to October, think and overall I back had did to a market, of back market to upwards billion a the million I

I position, durable forward. For market those a low think some engine reasons relatively our time and period for for share looking of it’s and position do us growth

to see on but it, to growth. a date going not happy put I’m I’m continue to the

to a as continue use We and it reach customers. opener door new for

a so And as force company, multiplier us a it’s for obviously.

Following CXXX TLIF our with is our PXXX to phase of business. growth reinvigorate the also really next

So laid so the good is we is it. that the about executing on, team out over several years the strategy we last – feel

well As think ahead back. years some we’ve of say deal past. above well for far run would I Simplify, the don’t given in as together our that put we and model that rate just the I we’re

Okay. you. Understood. Thank

Thanks Eric.

with comes ahead. question Please Jefferies. Next from Matt Taylor go

you I you that Hi us, potentially give talked QX? guys. in close some confidence the anything of would about response do or that guess in Thanks range Is happen? inside did taking QX of outcomes can you kind the what see the that the confidence if close. happening of there And give are you that Why you question. FTC? the with back-and-forth the not for you that

is this very up like we’ve asked working commentary. I’m any to us I specific everything said, situation. and The go effectively hard so that’s team point. to sure I Clearly, of that think to make we’re into done mean, a it’s I going it’s dynamic getting not

point. the FTC come said As range that frame feel ultimately I’ve time don’t I’m at this I’m QX everything and clearly, before, confident us of the anti-competitive. we far back outcomes, in to not because believe – the provided as the I reviewed some I like information is

of lots competitors. there’s think I

the our And I much I patient for think bar up and for and think combination ultimately which as reasons, entry is into is patients. of company. low of opportunity there’s focus better outcomes, a those a Globus, actually this innovate space. all competitors actually to coming the us It opens further for change

all executing opportunities doesn’t, change negate I’ve it executing is won’t, it and pursuing we all it we’re strengthening merger our on but which it. tech, it which The bottom along, on. line, not I’m some doesn’t our or speak. For reason enabling going our to market if but doesn’t speculate accelerates said – Core way of strategy, what we’re in strategy it as growth, any

see So by tech, strengthened, intact. things the line manage, growth, our execution you’re the those and market some bottom seeing in Matt discipline and building to expense stay the core the our focus on in in of with we enabling Globus the that opportunities merger strength talked about, things obviously

are we we’re feel So very, where in and we very whatever going. forward, confident happens going where

All right. Thank you very much.

Yes.

from go Wells ahead. comes Vik question Please Next Chopra with Fargo.

what for afternoon. you for wondering taking the are Matt, in And you. just thinking benefit pricing you of questions. talk inflationary for good able recapture from QX. in about rest for price Hey Thanks pricing this expectations to take are I’m how about the backlog earlier had in heard year. here; environment? much your the the the you then me year. I’m And And Thank Two I how just of wondering but rest call, you’re the

I the we’ve volume. been the it’s certain now. is then always all always any dictates think But strong last over that And the the the go and to volume between It’s looking Matt. the at a volume I way, questions, can blur. now. relationship go don’t back don’t I’ve there’s – think as I a significant right supply. and Either volume amount of can And anymore. for three three volume over don’t hand I’ll said, normal demand the I years amount I’ve And obviously flowed throughput. think for first years cover a backlog Thanks or difference there’s – don’t forgone and a know backlogs Vik. and and you of see significant about demand-supply I ebbed

what is backlog normal it’s is tell that could really discern I of So don’t more volume. at. volume, and sort looking you I worth what know wish I

benefiting last, will three, how actually some quarters, is I all tech any a and say, obviously, med think, normalize five rebound level sort of of backlog to over through let’s four, take from go the long scenario. it

will and bolus-type think that it to of not even be I event. cadence a an

at, me I if worth question, for answer hard much. looking know So to at don’t something it’s too but looked but that we’ve that

Yes, Vik, with X% company been And regard X% prepared pricing, kind the I just your a been number now to I’ll given generally, around the we’re in that remarks; U.S. the digits. in question for minus quarter. of of said market years, what having in to for low-single with us in the echo of minus it’s kind any in

play be As some may I question of have half quarters back a as out volatility relatively it, the seen far continue in will relates where the be many in to to the ballpark. it likely and the will back is as has more row year, been may the having pricing how It half in it that hopeful of your it around the same think so it but that consistent, I’m believe – year.

Next question?

back are would the to time, no for At to this CEO, Chris I turn closing further NuVasive There like floor comments. questions. Barry, over

QX Victoria, us today joining on for earnings call. thanks Thanks everyone, the and

mentioned on great planned As I we’re the Globus believe combination Medical. earlier, making progress with

a new that change we to patients’ leading will As I’ve many create the global positioned is lives. times, well company believe even musculoskeletal organization said more

have and joining, So day. great with all a for thank you that,