Welcome to Globus Medical's Second Quarter 2020 Earnings conference call. I will now hand the call over to Brian Kearns, Senior Vice President of Business Development and Investor Relations. Mr. Kearns, please proceed.

Thank you, Katherine, and thank you everyone for being with us today. Joining us for today's call from Globus Medical will be Dave Demski, President and CEO; Dan Scavilla, Executive Vice President, Chief Commercial Officer; and Keith Pfeil, Senior Vice President and 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 2019 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 discussions 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 on the schedules accompanying the press release and on the Investor Relations section of the Globus Medical website. With that, I will now turn the call over to Dave Demski, our President and CEO.

Thank you, Brian, and good afternoon, everyone. I'm very excited to report an outstanding performance by the Globus team in Q2. While it was the most challenging external environment in our 17-year history, I could not be more proud of the way our team responded to the challenge. Revenue for the quarter was $149 million, down 23% from Q2 2019. Musculoskeletal Solutions was off by 21%, while enabling technologies was down by 55%. Non-GAAP EPS was $0.07 per share, and adjusted EBITDA was 15% for the quarter. While the growth and earnings metrics are low compared to our typical results, in light of the circumstances and relative to our peers, they are outstanding accomplishments. Our US final implant business was down by 21% for the quarter, but the trends we saw within the quarter and continuing into July are encouraging. The business bottomed in mid-April and continued a steady climb upward through the quarter. April revenue was down by roughly two-thirds. May improved dramatically to finish off by 25%, and June rebounded into double-digit growth compared to June of 2019. Growth in July accelerated into the mid-teens, even as certain areas began restricting elective surgery again. Our growth is a function of a number of factors: new product launches, competitive recruiting, and robotic pull-through. Our spine product development team built on their strong performance in 2019 by launching six new products in 2020. We have seen tremendous uptake in HEDRON line of our 3D printed inner body spacers, as well as our fourth-generation expandable MIS TLIF device. Adoption has been so successful that we are doubling our 3D manufacturing capacity, which should come online in Q4. Robotic usage continues to grow, mirroring the trends we experienced in the overall business during the quarter. Competitive recruiting and onboarding remained strong during the second quarter. Our pace for the first half of this year matched that of the first half of 2019, a record recruiting year for us. Now more than ever, Globus is the destination of choice for the best in the industry. I want to take a moment to recognize the dedication and commitment of our manufacturing and operations team members who have steadfastly supported our customers, patients, and sales reps during this difficult time. As essential workers, they have continued to deliver the product in record amounts in anticipation of the bounce back in procedures we have expected and are now beginning to see. Our international spinal implant business was down by 30% for the quarter. Most markets are beginning to come back, but generally speaking, the bounce back in procedures began later and have not been as pronounced as the US. Similar to the U.S. trends, our international spine business had a strong June and improved further in July. Our trauma business was a bright spot in Q2, nearly tripling sales over the second quarter of 2019, posting 179% growth. We are continuing to invest in this business, expanding our geographic footprint by adding sales reps, launching new products, and making improvements to systems already launched. During the second quarter, we completed the purchase of a developmental stage Finnish company called SYNOSTE. SYNOSTE engineers have developed a limb lengthening system that utilizes mangle technology to facilitate incremental nail expansion that can be accomplished outside of the clinical setting. They have studied patients implanted with the system in a limited clinical trial in Europe. We are excited about the potential to apply this technology to treat orthopedic trauma and deformity patients, as well as the potential to develop growing rods for pediatric spine deformity patients in the future. We are working to commercialize the limb lengthening system with a targeted market launch of 2022. Revenue from Enabling Technologies was $5.4 million in the quarter. While the economic impact of COVID-19 to hospitals has created some uncertainty around capital budgets, we are encouraged by the fact that we continue to close deals in June and July. During the quarter, we saw a continued strong surge in interest in our robotic technology, hosting several webinars that focused on the advantages of Excelsius GPS and the capabilities of our inner body module. Now more than ever, the benefits that robotic surgery promises in terms of minimally invasive procedures, shorter hospital stays, less time in the operating room, and reduced cognitive load on busy surgeons are demonstrating value in the technology. We are seeing that hospitals can and will invest in capital that improves patient care and benefits surgeons. Close time has been challenging to navigate. We have used the opportunity to critically evaluate all aspects of the business and make adjustments to position ourselves well for the future. Our strong liquidity position and lean organizational structure have enabled us to financially support all of our people during this crisis. We've not laid off or furloughed anyone. Since the start of the year, we have made several strategic moves to strengthen our company for the future: one, we purchased a building that will double our manufacturing footprint; two, we continued to hire competitive recruits at a record pace; three, we completed the acquisition of SYNOSTE; and four, we bought back over $100 million of our stock at depressed prices. In addition, we have been able to donate millions of dollars to support communities and front-line workers who have been impacted by COVID-19. While no one knows what the second half of this year will bring regarding the coronavirus, I can say with certainty that Globus is stronger now than we have ever been and looking forward to the future whatever that might be. I will now turn the call over to Keith.

Thanks, Dave, and good afternoon, everyone. While the macro environment was impacted by COVID-19, I am extremely pleased with the way Globus has weathered the storm and am encouraged by how we finished Q2. Though the impacts of COVID-19 negatively affected sales and profitability, we improved upon our free cash flow compared to the prior year driven by continued working capital improvements and decreased capital expenditures. In addition, as Dave mentioned earlier, we were able to complete the acquisition of SYNOSTE, a developmental stage Finnish company. Our Q2 revenue was $148.9 million, a decrease of 23.4% as reported or down 23.3% in constant currency compared to the second quarter of 2019. On a day-adjusted basis, sales were lower by 23.5% with the same number of selling days in the US but one more selling day in Japan. Our Q2 net loss was $20.8 million and includes $24.4 million pre-tax charges related to the acquisition of SYNOSTE which is reflected within our research and development expense. The total consideration for SYNOSTE was $25.3 million and included $22.8 million of cash paid at closing plus a $2.5 million contractual holdback. Non-GAAP net income was $6.9 million delivering $0.07 of fully diluted non-GAAP earnings per share. Adjusted EBITDA was 14.7% and our free cash flow was $13.1 million. Moving into sales, our second quarter U.S revenue was $125.2 million or 21.8% lower than the second quarter of 2019 driven by the impacts of COVID-19 across our business. The COVID-19 impacts were greatest in the earlier part of the quarter. As we progressed in Q2, overall sales improved sequentially led by our US spine business. As Dave noted, we concluded June with double-digit growth in our US spinal implant business compared to June 2019. International revenue for the second quarter was $23.8 million, down 31.2% as reported or lower by 30.5% in constant currency. Again, the primary driver of lower sales was the impact of COVID-19. Additionally, as expected, we did not repeat the large distributor orders placed in the first half of last year, thus driving difficult year-over-year comparisons internationally. Our second quarter gross profit was 66% compared to 77.4% in the second quarter of 2019. The decline in gross profit was driven by a combination of factors. One, the deleveraging of fixed costs due to lower revenues as a result of COVID-19. Two, higher inventory reserve expenses focusing primarily on our trauma and spine businesses. Three, higher depreciation expenses, and four, the write-off of fixed manufacturing expenses. It is important to note that the deleveraging impact will affect other areas of our P&L including R&D and SG&A. Consistent with our first quarter and as expected for 2020, the higher depreciation expense was the result of additional instruments and sets within our spine and trauma businesses. When revenues return to pre-COVID levels, we would expect a mid-70s gross margin in line with historical results. Research and development expenses for the quarter were $39.5 million or 26.5% of sales and include the impact of the SYNOSTE acquisition which I commented on earlier. Adjusting for the acquisition, research and development expenses were $15.1 million or 10.1% of sales compared to $15.7 million or 8.1% of sales in the second quarter of the prior year, with the decreased spending driven primarily within our INR and Toronto businesses. SG&A expenses for the second quarter were $80 million or 53.7% compared to $88.4 million or 45.4% in the second quarter of 2019. The decreased SG&A spending was driven by lower sales compensation expense and lower expenses within travel and training. These were partially offset by increases to bad debt expense as well as COVID-19 related expenses primarily donations and costs associated with PPE which were approximately $2 million in the quarter. The affected income tax rate for the quarter was 5% compared to 19% in the second quarter of 2019. The lower effective tax rate was driven by the SYNOSTE acquisition and its discrete treatment resulting in no GAAP tax impact for the quarter, as well as additional stock comp windfalls compared to the prior year. Adjusted EBITDA margin for Q2 was 14.7%, which reflects my earlier comments including the deleveraging impact driven by lower sales as a result of COVID-19. The company has continued its review of its business performance and cost structures to identify cost savings opportunities. Looking ahead to 2021 and beyond, assuming a more normalized non-COVID environment, we would expect a return to a mid-30s adjusted EBITDA range. We ended the quarter with $636.2 million of cash, cash equivalents, and marketable securities. Net cash provided by operating activities was $23.1 million, and free cash flow was $13.1 million, both improvements over the prior year driven by lower capital expenditures, as well as working capital improvements primarily AR, and the timing impact of a delayed federal tax payment resulting from the CARES ACT. During the quarter, the company spent $30.8 million to repurchase its Class A common shares in connection with the previously authorized and announced share repurchase program. We have not purchased any additional shares since the conclusion of Q2 and currently have $95.3 million remaining on its original $200 million authorization. Thus, we have spent $104.7 million year-to-date on repurchases. As noted last quarter, the company will fund the share purchases with its operating cash flows and excess cash. Looking back on the quarter, Globus performed exceptionally well in the COVID environment, a testament to our underlying business strength. We will continue to meet the challenges faced by the market and will take the prudent steps necessary to further improve our business while maintaining focus and discipline around cash flows, liquidity, and profitability. We will now open the call for questions.

Your first question comes from Matt Miksic with Credit Suisse.

Good evening. Thank you for taking my questions. Can you hear me? Great, thanks. I wanted to follow up on a few points. There's been a notable amount of activity in the second quarter regarding robotic surgery, reported by you and other companies. I'd like to get your thoughts on this. Dave, you mentioned the interest among surgeons, but it appears some other companies closed larger numbers of deals during the quarter. Can you discuss the timing of those deals and how you anticipate they will progress? I also have one follow-up question.

Sure. Well, it's been challenging to get in front of the executives given the environment and to get their attention considering the other things on their minds. But as we noted, we were able to close some deals. Activity is opening up now just even as we speak; we're seeing more and more access. There's certainly interest on the part of surgeons, and I think executives as well, to get the technology. It's just a matter of grabbing their attention and making it happen in the interim.

That's helpful. So my follow-up is about the volumes. You were one of the teams that experienced a faster rise in activity right after the first quarter when companies began discussing recovery. It seems you're providing some insights for June and July that might be a bit above what some peers are reporting, particularly in orthopedics and spine. I'd like to understand what you think is driving that. It's hard to picture a market share factor influencing this, although there is a lot of new technology being introduced. What do you think makes you stronger than some of your peers in terms of regaining momentum? Any insights you could share would be appreciated.

Yes. I think our results are a function of the market coming back, but we're clearly taking share in this environment. If you look at the results of our peers in the spine space, and if you recall before COVID hit in the first quarter, we were on pace for about 15% growth. So we are continuing to take share even though we lost ground versus last year, but versus our competition, we're growing. I think that's what it is.

Your next question comes from the line of Shagun Singh with Wells Fargo.

Thank you so much for taking the questions. So I wanted to touch on the cadence of growth that you saw in June, July. Thank you for sharing that. Could you help us understand how much of it was backlog versus a healthy and normalized mix of new patients returning into the funnel? And then how should we think of trends in the second half of the year just given the ebbs and flows in COVID cases? Are you a little bit more immune to that given your geographic mix? How should we think about that and then the last part of my question is, are you willing to share what percentage of the deferred procedures have already been performed? I think the number we heard was about 40% -50%, so it's high that we have about that much still remaining in the funnel. So any color there would be helpful. Thank you for taking the questions.

Sure, Shagun. We don't really have insight into whether the case was a deferred case or a new case; that's really the surgeons' call. But I think I can help you a little bit in terms of understanding the future. We've been talking to our surgeons; we did a little informal survey of our own throughout the country. We tried to grab about 30 surgeons from a diverse geographic mix and we asked them two questions. We asked them what is your clinic flow today versus pre-COVID, and then the second question is, if the clinic flow that you're seeing now continues through the end of the year will you have a full OR schedule? The average in terms of the clinic flow versus pre-COVID is about 85%, that ranged from 50% to 100% with a few outliers at 50%. So it came in around 85%, which is very strong in my opinion given where we are with the pandemic. And then the answer to the second question, will they maintain a full operating schedule if they continue at that clinic rate, was about 78% of them said yes, they would be busy through the end of the year. So I find both of those data points very encouraging in terms of where we are. Certainly, if the COVID environment improves, I think you'll see that go back to 100% in the clinic, and it does leave some room for a little bit of a drop back as well. I think the other thing you see there is spine is a profitable procedure for the hospital. So even if there is some restriction on electives, I think spine goes to the front of the line in terms of getting procedures done. So I think all of those factors bode well for our segment.

Your next question comes from the line of Richard Newitter with SVB Leerink.

Hi. Thanks guys. Thanks for taking the questions. Just to piggyback off of the kind of June, July, it's pretty strong growth that you're talking about there. As we look to the back half, I mean appreciating that maybe double digits in June and July reflects some backlog work down, some of that recovery isn't extrapolatable purely into the back half, but are we thinking about kind of growth in the second half for your business? Is that reasonable in your view based on what you see today?

I think it's definitely a possibility for us. It's really challenging to predict the external environment, Rich, but with the way that we're taking share and the trends we're seeing, I think it's certainly possible.

Okay, very encouraging to hear. And then on trauma, it sounds like that launch is going pretty well. I guess Dave, are you surprised by the performance of that business even during the COVID period? Was that kind of in line with where you had hoped you would be previously? And if you could just update us a little bit on where you are on kind of the full commercialization there? Several limitations you have on manufacturing and the outlook into the back half? Thanks.

Hey, Rich. It's Dan. I'll jump in for that one. So thanks for the question. We're certainly pleased with the progress and the inroads we're making with sales growth. I think there's a long way to go. Certainly, COVID is impacting us while there are still trauma surgeries occurring. Getting together with pricing committees or getting those type things approved through the hospitals that are inundated right now is certainly something hindering us. So I think there's actually more growth we had, and we could have beaten that I believe if we weren't pulled back by COVID with that. So we'll continue to go. I would say it's on track for what we predicted for this year, but again, I think the potential is even stronger. You had asked about manufacturing. We had overcome those hurdles last year. We continue to have a very strong manufacturing facility that's capable of putting this out without hindrance. And to date, we have 12 of the product family launched. We have a few follow-ups with the FDA with the potential of getting two to three more out by the end of this year, if all works well.

Your next question comes from the line of Kaila Krum with Truist Securities.

Hey, guys. Thanks for taking our questions. So can you just give a little bit more detail on this recent acquisition? Just any sense for potential contribution from this new area and just what prompted the timing of that purchase now. And then I guess tied to those questions, are you still evaluating other deals today?

Sure, Kaila. Thanks. It's something we've been looking at for a while. I think it will be an exciting product for our trauma sales team to start using the technology. We see a definite opportunity to expand into the treatment of pediatric deformities with growing rods. However, it will take some time before we reach the market. We expect to introduce it in the U.S. by the end of 2022, and possibly a bit earlier in Europe. Regarding other deals, yes, we have been active and are exploring several opportunities, though nothing transformative at this stage—just smaller acquisitions that could enhance our business.

Great. Thank you. And I mean the fact that you guys still generated cash during this time is also kind of a rarity just looking across our space. So I love to hear your approach to spending new investments at this time and just how you're thinking again about capital allocation from here? Thank you.

Thanks for the question. This is Keith. We continue to look at our business and run it in normal course. So as it relates to some of the improvements that we generated in free cash flow this quarter, we took a hard look at AR coming into the quarter. No one knew what was going to happen with COVID, and we felt that the most important thing we could do was manage our balance sheet and cash flows. There was a concerted effort to really focus on bringing cash into the business. We've taken an approach to continue to build inventory in preparation for a bounceback, but really it's just active management of trying to identify what are the things you can control within your business. That's really the approach we took for the quarter.

Your next question comes from the line of Matt O'Brien with Piper Sandler.

Good afternoon. Thank you for your questions. Dave, can you explain the cautious outlook on growth for the second half, especially in light of what you're observing in July? Are there specific areas of concern? Why are you not experiencing more growth? Additionally, the market share gains in the U.S. are quite noticeable. Could you elaborate on where this share is coming from: is it large companies you're acquiring share from, small companies facing bankruptcy, or perhaps due to robotics? What factors are truly driving this standout performance?

Yes. Thanks, Matt. Well, I'll tell you my tentative answer is because of COVID. I mean, it just seems like day-to-day we have a different plan as a country, and I just want to not get over our skis here. But I'm excited about our business. Our business is really strong relative to our peers. So I don't want that to seem like I have any doubts about how we're going to perform relative to others. But it's really, we're clicking on a number of cylinders. It is competitive recruiting, which is mainly focused on; when I say competitive, I'm really looking at the larger competitors. We really have a lot of respect for those competitors, and that's to become a competitive recruit at Globus, you have to come from one of the bigger companies. We don't even count if it's from the smaller ones. So that's where it's coming from. And I think reps are really attracted to our technology, our leadership, and implants have been known for a while, but the enabling technologies have really differentiated us in their eyes over the last several years. And they can see that that's the future and they want to be part of that. I would add to that we've had some great launches this year on the implant side. So that's something that we had I think back in 2018, we probably didn't have as strong of a year as we did typically. We came back last year, and now we're really firing on multiple cylinders. And then it's not just the technology when it comes to enabling technology, there's the pull-through aspect of the robotic deployments that we have. And as that install base grows, you're going to see that pull-through grow kind of exponentially, if you will.

Okay. Thank you. And then as the follow-up on the robotic side of things, you talked about closing a lot of deals in June. I'm assuming everything you printed here today happened in June. You've done some more in July. Is there a willingness among hospitals to be buying capital equipment in this environment? Do you have to get aggressive on the economic side in terms of what you're going to give up on the front end to get more volume on the back end? And then one of your competitors announced the delay to their robotic system yesterday. Is that has been any kind of gating factor where people are kind of waiting to see that one versus going ahead and executing Excelsius purchase, and now that they're delayed, do you think there could be maybe a little bit more push to get access to your product?

Yes. Let me see if I can keep track of the questions. In terms of pricing, we haven't done anything more aggressive than we normally would to get systems placed. It's difficult to categorize hospitals as willing or not, as there’s a broad range of attitudes. Some CEOs express that they can't consider this right now due to the many challenges posed by COVID, asking us to check back in a quarter. On the other hand, there are those less affected by the COVID situation who see a chance to differentiate their hospitals and attract more patients that may not be treated elsewhere. Overall, it's tougher to capture their attention now compared to six months ago. Regarding the competitor you mentioned, I don’t believe we’ve seen any impact from them yet, but due to ongoing delays, we’re uncertain about when those might materialize. This situation will be helpful for our sales team as they engage with potential clients who could be waiting.

Your next question comes from the line of Matt Taylor with UBS.

Hi. Thanks for taking the question and congrats. So I wanted to ask more about the recruiting. You continue to have record levels of recruiting, and you mentioned some of the reasons just now. I just was curious how you're able to maintain that during this time, and is the bigger difference in your performance going to make that continue and make it easier for you in some ways? And what are you seeing your competitors do on the recruiting side?

They do seem to have backed off a bit. That's nearly anecdotal, but our guys are 100% focused on that. And it's a credit to Greg Harris, our Executive VP of U.S. sales, and his team just to the focus they've had at this period to really accentuate the strength of our company in terms of our financial strengths, our technology strengths, and just the culture that we've built to bring people over. When things become uncertain, people are looking for security. And they've been able to convey that to folks and continue to generate that interest. And we've been willing to be aggressive and make a bet on ourselves that things are going to come back. And those bets are going to pay off in the future.

Yes, and then I was just hoping to get an update on the robotics program in large joints, if you can talk about that and the timelines at all. Anything on expectations for contribution from it?

Yes. That's a way out. We're probably not going to see that for a good bit at this point where we've been challenged in earlier stages of development there. The team is fairly dispersed, so it's been challenging to get into the labs and do the labs that we need to on those early stages to get the products finalized. So I think that has been a bit of a casualty of COVID. I don't have a timeline to tell you at this point, but we are further behind than we were, say, six months ago.

Your next question comes from the line of David Lewis with Morgan Stanley.

Hi. This is Mason on for David today. Thanks for taking the questions. Just a quick clarification. When you talk about June up double digits year-over-year, that's obviously very encouraging. I just wanted to check, is there any additional selling days clouding that comparability? Some device companies have called out differing days in June specifically year-over-year.

Yes, it's a good question. That's a day-adjusted rate I gave you. Even higher than that normally.

Got it. That's helpful. And then just as a quick follow-up, July accelerating off of this, obviously encouraging to see that growth rate continuing. Are you seeing a plateau as you look week to week as backlogs continue to be worked through, or are the growth rates still accelerating off of this in the back half of July and into August? Thanks so much.

Yes, another good question. Yes, it's plateaued in terms of our sequential week-to-week. We seem to be at a certain level. July is typically a month where we tail off for vacation, so we're sequentially plateauing, but we're up against maybe easier comps for July. So we'll enjoy those easy comps in August, and then September obviously that's when people would normally come back. So the comps will get harder for us come September.

Your next question comes from the line of Jason Wittes with Northland Capital.

Hi. Thanks, just two questions. One, a follow-up on recruitment which is obviously very important to the story. Did you say that your competitors for talent are pulling back? And at the same time, can you describe kind of the way you see the situation forming at the larger companies where you're poaching talent?

I’m not certain I mentioned pulling back. It seems that they are not as aggressive when we talk to them; it typically benefits them to explore their options a bit, and it doesn’t feel like we’re truly competing with many others at this time. They are narrowing their choices, which may be because we have set ourselves apart enough that they know their preferred destination, rather than something our competitors are doing. I’m sorry, but I didn’t catch that.

I guess related to that was, and I had a quick follow-up really to that was, what's the situation at the larger companies where you generally poach from? Is there a fair amount of uncertainty that's driving a lot of movement? Is that something you kind of anticipate to continue for the rest of this year and even into next?

I don't know if it's uncertainty. I think it's just evident from the larger companies that they are investing in technology. If they are making any moves, it seems there is a lack of clarity regarding the future. Our culture and the technology we possess, including the implants we offer combined with advancements in imaging, navigation, and the robotics platform we are developing, are significant factors. I believe it's more about what we are doing rather than what they are not doing or actively pursuing.

Your next question comes from the line of Ryan Zimmerman with BTIG.

Hey, guys. This is actually Max on for Ryan. I just wanted to go back to HEDRON and sable. I know you mentioned that you're really encouraged by the rollout of both products during the quarter, but just wondering if you could talk a little bit more about how those products contributed to the top line, and whether there was anything different you did with those rollouts given the COVID environment that might be able to take forward to additional product launches here in the back half of the year?

Thanks, Matt. Nothing we really, we did differently than our norm. I will say that I blew it on the projection of how much we'd sell, and I undershot that. So we've kind of exhausted our set capacity at this point. Those are producing a lot, but we need to make more, and for that we needed to expand our manufacturing capacity. So we've got the orders in, and those machines and that capacity are coming on board. We should see the impact of that in Q4. And again, nothing different than the normal. And we typically don't give you the granularity in terms of what the components of our growth are. I will tell you that new products are contributing significantly this year.

Got it. Thank you. That's very helpful. And then switching over to the emerging technology segment, given that the cranial module is now approved, can you just provide some more detail around your commercial strategy in the model itself? Is it a software upgrade and some hardware, or is it a separate unit entirely? Just kind of helps us think through that please?

Yes, it rides on the Excelsius platform. It does require some different hardware, but the core unit's the same, and it's obviously different software. They're putting the final touches on the rollout of the software. We're probably going to roll it out into the fourth quarter. I don't expect any meaningful revenue from it this year, and we're probably going to go initially to customers who have a unit to expand their capacity and buy the cranial module, but we will also be addressing neurosurgeons who just focus on bringing procedures. But that's a new area, a new call point for our folks. So I don't anticipate meaningful revenue from that segment until we really get out there and get some good clinical data on the system.

Your next question comes from Mike Matson with Needham.

Hi. This is David Saxon on for Mike. Thanks for taking the questions. I just had a follow-up on the imaging system, just wondering if you can give a timeline to commercialization. And then also, how are you thinking about the risks or opportunities in launching in the current environment?

Thanks, David. Yes, we'll be out in the first quarter with that along with the navigation that goes with that. Yes, are there other risks launching capital in the current environment? I think there are, but at the same time, I think that this is going to end at some point, and we're excited about what this technology can do. It's been an issue for us competitively not having this system as we go up against our number one competitor. So this is going to put us on equal or greater footing once it gets to the market. So we can't wait to get it out there.

Great. Thank you. And then as a follow-up just on gross margins, as revenue starts to recover, how should we think about the ramp back to kind of normal gross margins? Thanks so much for taking the questions.

It's Keith. Thanks for the question. I think on a normalized basis, again we have no reason to believe that we're not a mid-70s business. But I err on saying how quickly we return there given that we still don't know what the second half's going to bring. Yes, we do see some optimism with sales so far in July, but looking ahead, I err on providing a specific target for the back half of the year. I think what I would say is on a go-forward basis, in a non-COVID environment, we should be at mid-70s business.

Your last question comes from line of Steve Lichtman with Oppenheimer and Company.

Hey. Thanks for taking questions. It's actually David on for Steve. Just maybe one for me, any color you can provide on Japan during the second quarter? Have you begun selling Excelsius units, and if so, how much of an impact should we expect for that rollout in the second half? Thank you.

Yes. Thanks, David. We are marketing it there. We have not sold the unit yet in Japan. But we have a pretty nice pipeline of potential leads and are optimistic about the future with it there. Did you have a follow-up question? Okay, great, thank you.

And, ladies and gentlemen, there are no further questions. And this does conclude today's Globus Medical's second quarter earnings call. Thank you for your participation. And you may now disconnect.