Keith Pfeil: You’re welcome. I would tell you we certainly have ordered the long lead time components and we’ve expanded our capacity not only to handle the merger but also for this. So I feel like we’re set to do that way. We’ve been scaling up implant sets as well slowly right now because we need to get through and get the approvals before we go bigger with it. The truth is the strategy will come together a little bit more into the second quarter and early third quarter as we get through and understand when we can launch this and where we’ll go. I would tell you it’s an open strategy right now. Of course the need to be in ASCs is prominent given where those procedures take place. But by all means we’ll take advantage of hospitals as well.
So you’re going to be what we do as Globus covering all these areas versus being hyper-focused. And what we’ll do is we’ll start with concentric circles, establish ourselves, invest more and continue until we build up the momentum like we’ve done in spine over the years.
Operator: Our next question comes from the line of Matthew Miksic from Barclays.
Matthew Miksic: Hey, great. Thanks so much for taking the question. And congrats on the progress and all of the great color. Maybe Dan, just diving into one of the things that you just mentioned about the ASC as your potential ortho, curious if you could maybe talk a little bit about how that’s shaking out as an opportunity for the combined business, how big that was or is for Globus legacy or NuVasive or both in terms of the percentage of your business going through the ASC and what you’re doing to participate in that growth opportunity on the spine side? And then I’d want to follow up, if you could.
Daniel Scavilla: There you go, Matt. So we won’t disclose a certain business segment, obviously. So I’ll leave that one out. What we are looking at and what we recognize is, of course, there is a migration at a certain cadence of procedures that go out into the ASC. And so as appropriate, we’re looking to understand the best way to place enabling tech versus freehand navigation versus just freehand period. And we’re working through that as well. To date, we’re still putting together what we want to do as an ASC strategy in that particular area as the new combined organization. But again, it won’t be any significant deviation. I can’t imagine calling it out to any size in 2024. I think it’s one that as we fine tune and get better feel for the stabilized salesforce, we’ll bring this together and probably be stronger at that push later in the year into 2025.
Matthew Miksic: Okay. And then just maybe a follow-up on some of the integration and dynamics of the working through the combination of the field forces and everything that you’ve talked about. I mean, we were pretty happy with the way that the new basis numbers came in Q4. But I think if I could speak for investors that we talked to about the opportunity here is there’s still some apprehension about when do we start to feel like things are, we’re on the tail end or the downward slope of the risk of maybe dyssynergies getting bigger than we were expecting. Is Q1 that transitional period you think? Do we have to wait until Q2 or maybe another way what are some of the signals and data points that we can look for or think about that will help to finally put all that sort of concern from last year to bed? I appreciate it.
Daniel Scavilla: Yes, it’s a great question. And I’m guessing here, but I would think that we would see activity in the first quarter and be able to understand where that is and what it is. My thought would be exiting first quarter into second quarter, I would think it should be a touch more stable. But this is just me guessing based on really only having one month’s actual data for the year that way. But when we call out steady state by June, we’re doing that intentionally saying that we think that salesforce has settled in getting through the learning curve so you get the bumps out of your system implementations. And you work into a cadence, really what I think is through the first quarter into the second. But you exit the second quarter, going back to doing what you do best, which is innovate, take share, and grow.
Operator: And our next question will come from Matthew O’Brien from Piper Sandler & Co.
Matthew O’Brien: Great, thanks for taking the questions. I guess just for starters, as we think about, when you put the standalone NuVa, standalone GMED together, and I know there’s moving parts here, but if you do that, you take the dyssynergy out. I’m getting like, $50 million of cross-selling benefit here this year. Is that number about, right? And then the $150 million in dissynergies, that seems like a lot in one year of just wondering, what exactly that’s baking in? I know we’ve heard about Texas maybe turning over, but that just seems like a lot in one year. So what’s being baked in there? And then I do have a follow-up.
Daniel Scavilla: Thanks, Matt. Well, again, remember, we’re Globus, so we’re conservative in what we look at and what we estimate. We’re putting numbers out that we would look to, control or beat where possible. I’m not saying it’s a slam dunk. We’re just being realistic that we have created a market disruption as we become number one in the market, and so we expect folks to react to that. And I think it would be unrealistic not to think you would lose stuff. So it’s an estimate, but not really based on any factors. You’re calling out certain geographies that I wouldn’t comment on, just because they could say we did it more from a top-sided number as an area to build from and look to go to from that way.
Matthew O’Brien: Okay, Dan, but even with the low overlap, I mean, that $150 million seems like a big number.
Keith Pfeil: I mean, I’d say that it is a large number, but when I step back and look at sales, when you look at the combined sales from 2022, that’s about 7%. But to Dan’s point earlier, it’s a gross number before you consider cross-selling opportunities to offset that, bringing the portfolios together, again, you’re going to be looking at the legacy NuVasive team is going to be looking at Globus expandable cages. They’re going to be looking at Globus enabling technologies. When you look at the NuVasive products, the legacy Globus streps are going to be looking at NuVasive lateral procedures. So there’s cross-selling in there. There’s cross-selling that’s not in that $150 million. And at the end of the day, it’s an imprecise size, but we’re basing this on what we see.
Daniel Scavilla: Yes, if you have so good things, you say between 5% to 10% of sales could be disrupted, we’re right in the middle when we came up with that number. And then we say, okay, that’s, again, the gross number. Then how do you beat that through cost selling, through growth, through natural account, through competitive hiring? That’s where we’re saying, but we’re just putting out saying based on our formulas, if you picked a historical norm, that would be the number we’d put out and then go to beat by outgrowing it.
Matthew O’Brien: Got it. Okay, I appreciate that. And then Keith, as far as, back to Matt Blackman’s question on EBITDA, I think you guys said when you did the deal, year three post the closing, you’d be back in kind of the mid-30s as far as EBITDA goes. I mean, this guidance is more like kind of low 30s. It’s a lot of leverage that we’re expecting over the next, I guess, three years, even to get to 33%. So just talk about, the confidence in getting back to that mid-30s and kind of where that comes from up and down the P&L. Thanks.
Keith Pfeil: So we’re confident in that. When you think about the 170 that we called out, 40% this year is about $68 million. You’re going to get 70% and then 100%. As you think about the cadence, it’s important to think about some of my prepared comments, talked about manufacturing and operations. Those are the longer lead time items. Things in SG&A and R&D, those will happen more quickly. So when you think about the $68 million, I would say give or take, 20% of that’s going to be in COGS. The other 80% is going to come through R&D and SG &A in 2024. But we have to plant the seeds for the future manufacturing improvements to drive improved P&L profitability. So what does that mean? What does that mean is that thing I’m going to pay attention to this year, especially as it’s getting in the back half of the year, the cash flow.
Because if I’m renegotiating contracts, I just see improvements in working capital because of inventory. I’m buying raw materials cheaper. I’m buying things. I’m bringing them in-house. 2025, the equipment that I’m investing in is coming online and I’m producing inventory. I’m building an inventory for which I will sell later in 2025 and 2026. That’s where you’re going to see a lot of that benefit and that’s going to be really in 2025 and 2026. So from my perspective, our view of getting back to mid-30s, right now I feel good about that.
Operator: And our next question will come from Matthew Taylor from Jefferies.
Matthew Taylor: Hi, guys. Thanks for taking the question. So I just wanted to ask about two kind of side items. One was I thought it was interesting that you bought back stock in Q4. So maybe you could talk about your decision to do that, whether that was opportunistic because I know you said talking M&A was the priority. And then we’re just at AAOS and you were talking about the ortho robot. I know we could see some of that more later this year. And I guess my question would be, do you expect the contributions from that to be material, not this year, but maybe next year?
Daniel Scavilla: Hey Matt, this is Dan. I’ll actually answer then hand it off to Keith. So look, we think that the market as overreacted and the stock price is actually at a deal. And we’re going to take the opportunity to use our strong cash and buy that back to reduce dilution and actually set it up for other reasons. So yes, it’s opportunistic, but it’s also the plan of we’ll keep doing that because we believe strongly in where this is going to go. We play for the long term, but we’ll use it to our advantage now. That’d be the first one. For AAOS and the robot, we’re really happy with it. As I said, we haven’t filed yet. It hasn’t been approved. We think it’s going to be in the second half of the year. I would tell you; I would not expect material moves of that in 2024. I think that’s going to be more of a 2025 story. And Keith?
Keith Pfeil: I don’t really have a lot to add to Dan’s comment. I think he hit it head on there.
Operator: Our next question comes from Ryan Zimmerman from BTIG.
Ryan Zimmerman: Hey, guys. Thanks for taking the question. I want to follow up maybe on Matt’s question in a different way. If you take kind of the prior numbers, Keith, I think you called out $2.396 billion. When I look at where the guidance lands and, again, backing up those synergies, it come up to about 3% or so for FY24. And so I guess I’m curious kind of what your view of the market is relative to that number. Is the market growing at that rate? Is the market growing faster than the rate? It feels like coming out of AAOS in the early part of the year, the market’s been pretty healthy. And so are you suggesting that you guys are growing that market, growing maybe slightly below market? And then the second point to that question is, when you think about the guidance of the $2.45 billion to $2.475 billion, now we all have these old models from all the different segments, and I know that’s now one company.
But maybe help us piece together kind of where you see that growth coming from. Is it within cervical? Is it within support and neuro monitoring and international? Just some of those components beyond maybe musculoskeletal and enabling tech, if you’re willing to comment on those would be helpful.
Keith Pfeil: Yes, so thanks, Ryan, for the question. So as I think about the $2.45 billion to $2.75 billion from a gross perspective, like I commented earlier on a previous question about what each legacy sales team would be looking for, on the legacy NuVasive side, they’ll be excited to sell Globus Expandable Cages, Globus Enabling Technologies. Legacy Globus will be focused on lateral procedures, things of that nature. When I think about the where, internationally, I think if you go back and look at historical and the NuVasive and Globus numbers, I think we’ve both been on a pretty good glit of growing share internationally. I would expect to see spinal implants continue to see that growth moving forward. Trauma, our trauma legacy trauma business continues to perform well.
NuVasive has some products in that portfolio as well that we think together we’re going to be better together and drive share growth. As I think about enabling tech, again, that gets back to the cross-selling opportunity. That brings you back to US Spine and really your initial question. You talked a little bit about the growth that you’ve seen being 2% or 3% or where are we growing? So early on we’re going to have these dissynergies. We called out the $150 million gross dissynergies. Our growth rate clearly is slowing down here for the first portion of the year. But to Dan’s point, beginning into the first, second quarter, you’re really working to move towards a steady state, getting into the second half a year and moving this forward. We still fully believe that we can provide mid to high single digit growth, but we’re acknowledging that this first year there’s going to be dissynergies.
Daniel Scavilla: Yes, I think too, Ryan, the fun thing with this, back to your point, the growth, I’m going to say it’s everywhere, because you’re right, you’ve got a great cervical disc that we can leverage, you’ve got EGPS and E3D, you’re going to have the neuro monitoring systems that we can go apply to our business and the cross-selling. There’s a lot out there that we could go on and on. So I think what we’re looking to do is healthy growth throughout all of the portfolio and really showing it that way versus focused in on one or two areas of concentration.
Ryan Zimmerman: Okay, I appreciate you answering that multi-part question. Then I’m going to squeeze in one more and I appreciate taking the questions here, but I was late to the party at AAOS, but I did see, I did have a chance to go by the booth, see some of the new components that you have. And it feels like you and your largest competitor within robotics are moving a little bit more in terms of cranial applicability, in terms of your ability to maybe move into things like bone cutting, right? I’m just curious kind of how you think about where robotics is going, particularly within spine. And do you feel like you’re hitting a ceiling within your applicability within maybe a core spinal robotics application and having the venture beyond into areas like cranial or joint reconstruction, et cetera. And that’s what we’re seeing in kind of the pipeline, if you will, of products that you’re offering now.
Keith Pfeil: So it’s a great question. Couple things, we’ve been in cranial for a long time with the robot and have great capabilities there. There’s absolutely room to expand. And I think as you’ve said, and one of the things I’ve called out that I’m most excited about, the array of power solutions that we’re bringing forward in the near term will also work well with all of that enabling technology and further enhance the surgeon experience by all means. But if you really talk about the spinal robots, they are in their infancy not only in penetration but capabilities. And so you can have a very long journey of increasing the entire procedural application from bone, soft tissue removal, interbody placement, on and on planning.
All of that’s there for years to come with a lot of space. And like I said, even combined, all of us combined are just really touching the robotics and there’s a lot of room for growth to come for many years. So I don’t think we’re anywhere near hitting the top or flattening out. I think this is the start of some amazing changing technology.
Operator: Our next question will come from a line of Jason Wittes from ROTH.
Jason Wittes: Hi, thanks for taking the questions. If I could just revisit the synergy number. Based on your earlier comments, it sounds like you kind of just took the midpoint of 5% to 10% dissynergies, and I think that’s partly due to the fact that based on what you see now, but also, you have to see what happens in the next two quarters. Is that the right way to think about it, or is that how you came to that number and just trying to understand, your thought process behind that? Okay. that’s fair. And then, in terms of quarterly cadence, can you help us out in terms of how we should be thinking about revenues and also just how expenditures kind of flow through for the year?
Keith Pfeil: We’re not going to break out and provide quarterly guidance at this point.
Jason Wittes: Okay, but then, just from a general standpoint, I think you kind of implied that, the first half is, it sounds, based on your comments that you made, I guess, throughout this call, it does sound like it’s somewhat backend loaded, meaning there’s going to be a fair amount of still reorganization in the first half. A lot of it, I guess, already occurred. And then, in terms of your ability to start picking up or gaining market share, it sounds like you kind of anticipate that by the end of the year, you’re going to be positioned to start, growing sort of above market and as the market leader. Is that a fair way to think about it?
Keith Pfeil: That’s a fair way to think about it. But as it relates to cost energy specifically, we would expect to see that improve sequentially as we get throughout the year.
Operator: Our next question comes from the line of Craig Bijou from Bank of America Securities.
Craig Bijou: Great. Thanks for taking the questions, guys. Wanted to ask first on the $150 million of revenue dissynergies. And appreciate that you gave us that number. But I think in the S4 you were expecting roughly $200 million and maybe 50% of that in year one. So I just wanted to kind of reconcile that $150 million for ‘24. And could there still be some incremental synergies in year two, year three post-deal?
Daniel Scavilla: So I would say yes, there could be some incremental synergies in year two, year three post -deal. The $150 million was really just taking a more refreshed look. I mean, when we commented on the S4 at that point in time, we thought it was a good number. And you still think generally speaking overall, the S4 is a good document. But as we looked at building our plan for 2024 with more current information, $150 million felt like it was a more reasonable number based on what we were seeing from a gross perspective.
Keith Pfeil: Craig, I would add too that one of the thoughts here is that type of activity occurs up front in the early years. And then as you cross-sell and you gain traction, you offset that more in year two and probably by the time you exit year three. So put the bad out in the S4 that way up front and the cross-selling and the growth and the offsets and the outer years coming out neutral by the time you enter into the fourth year. And timing also of when the deal actually closed is a little bit later. That’s also having a little bit of an impact.
