Welcome to Globus Medical's First Quarter 2021 Earnings Call. I will now turn the call over to Brian Kearns, Senior Vice President of Business Development and Investor Relations. Mr. Kearns, please go ahead.

Thank you, Catherine, and thank you, everyone, for being with us today. Joining today's call from Globus Medical will be Dave Demski, President and CEO; Dan Scavilla, Executive Vice President and Chief Commercial Officer, President of Trauma, 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 2020 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 on 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 Dave Demski, our President and CEO.

Thank you, Brian, and good afternoon, everyone. We got off to a great start in Q1 continuing the momentum we established in 2020. All facets of the business performed well in the quarter as we continue to take meaningful market share. Revenue for the quarter was $227 million, up 21% on a day-adjusted basis over the first quarter of last year. Non-GAAP EPS was $0.49 per share, an increase of 67%. And adjusted EBITDA was 35%. Once again, INR and US Spine led the way. INR revenue for Q1 was $15 million, up 86% over the first quarter of last year. Q1 is typically a slow quarter for capital sales but our revenue in Q1 actually surpassed our revenue for the entire first half of 2020. The clinical superiority of our robotic technology continues to be recognized by surgeons as shown by back-to-back quarters of strong growth. US Spine continues to take significant market share growing by almost 22% on a day-adjusted basis. Pull-through from robotics, contributions from new product introductions, a resurgence in our biologics business, and competitive recruiting were all factors driving growth. Our international spinal implant business was essentially flat for the quarter. Strong growth in most markets was offset by declines in Japan as expected, primarily due to the transition of our sales force composition there. We expect both of these trends, strong growth in the rest of the world and headwinds in Japan to continue throughout 2021 and we remain very positive about the health of our international business. We had a number of exciting product introductions in the quarter, but I would like to highlight two because they demonstrate the synergies inherent between our capital and implant product development engines. The first is the Corba Lateral Aler system comprised of a novel retractor and an innovative interbody spacer designed for the L5-S1 disc space through a lateral patient position. Corba is the latest addition to the most comprehensive suite of lateral interbody solutions on the market today. Our lateral technology includes multiple expandable options, static spacers, and integrated plate spacer solutions that can address all levels of the lumbar spine to either a prone or lateral patient position. Furthermore, the Excelsius lateral 360 procedural solution allows surgeons to safely and efficiently treat multiple interbody levels and place MIS pedicle screws while the patient remains in a single position. The second is CREO ONE, the market's first pedicle screw designed specifically for robotic spine surgery with Excelsius GPS. CREO ONE simplifies pedicle preparation while maintaining navigational accuracy and increasing pull-out strength by 86% compared to traditional pedicle screws tab to size. The rigid robotic arm and navigational accuracy with Excelsius GPS, combined with 301 unique screw tips, are designed to save time and improve efficiency in the OR by eliminating procedural steps. Early feedback on both systems has been very positive. Shifting to trauma; revenues up over 100% in Q1 compared to the first quarter of 2020. We are focused on sales force expansion and have several exciting product launches planned for the second half of this year. While we expect continued sequential growth, year-over-year growth may slow a bit in the coming quarters as we face challenging comps. We have filed with the FDA for 510-K clearance on our imaging system and are ramping up manufacturing and operations for an anticipated Q3 launch. We also plan to launch the cranial module for EGPS later this quarter. Globus has emerged from the pandemic as a stronger company growing much faster than our larger peers with a strong balance sheet and healthy cash flows. As we look forward to the future, we see tremendous opportunities to accelerate our growth in INR, Spine, Trauma, and Total Joints. We have an exciting lineup of product introductions planned for 2021. But to take full advantage of our potential beyond this year, we are going to ramp up investments in R&D resources moving forward. We will also be aggressive in pursuing acquisition targets that enable us to further differentiate our portfolio. Globus had an outstanding first quarter producing excellent financial results delivering on several key strategic objectives. We are set up for an amazing year if we continue to execute. All parts of the company are performing well and we're working together as a team. I'm grateful for the dedication, ability, and effort of our worldwide Globus team members as they serve our customers and patients. I will now turn the call over to Keith.

Thanks, Dave, and good afternoon, everyone. As Dave commented, our strong first quarter results demonstrate our continued momentum and points of continued market share gains. Our focus on driving execution, along with our long-standing commitment to innovation and technology have positioned us well as we work to fully emerge from the impacts of COVID-19. This is evidenced in our first quarter sales, profitability, and cash flow growth. Q1 revenue was $227.3 million growing 19.3% as reported, and 20.7% on a day adjusted basis, compared to the first quarter of 2020. Revenue grew 18.7% on a constant currency basis, as compared to the first quarter of 2020. Though we experienced COVID impacts in January and early February, revenue grew sequentially each month and accelerated as we moved further into February and March. Net income was $45.3 million and non-GAAP net income was $49.7 million driving $0.49 of fully diluted non-GAAP earnings per share. Adjusted EBITDA was 35.2% and our free cash flow was $49.9 million. Moving further into sales, US revenue was $193.3 million, or 22% higher than the first quarter of 2020 driven by the continued strength of our US Spine business, as well as higher INR revenue stemming from additional capital sales. International revenue for the quarter was $34 million, representing a 5.9% increase versus the first quarter of 2020. As Dave noted earlier, international implant sales were essentially flat. However, growth in robotics was the key contributing factor in our year-over-year improvement. We continue to see strong implant growth in most of our international markets. However, this is being partially offset by declines in Japan driven by our previously discussed sales force transition. First quarter gross profit was 75.8% compared to 74.4% in Q1 of 2020. The improvements to gross profit were driven mainly by improved manufacturing efficiencies and lower warehouse costs. The lower warehouse costs were primarily labor related as the result of a warehouse move, which occurred in the prior year quarter and did not repeat in the prior year quarter. Our research and development expenses for the quarter were $14.9 million or 6.6% of sales, compared to $15.4 million or 8.1% of sales in the first quarter of the prior year. The reduced spending was driven primarily by lower travel, lower meeting expenses, and lower consulting costs. This lower spending is partially offset by higher salary and benefit costs driven by increased headcount. Looking ahead, we plan to increase our investment in R&D as we progress through 2021. Those investments will continue to drive our class-leading capabilities across robotics and spines and will also position us to further penetrate the trauma and joint markets. SG&A expenses for the first quarter were $97.9 million, or 43.1% of sales compared to $93.5 million, or 49.1% of sales, driven primarily by higher sales compensation costs, partially offset by lower travel, entertainment and meeting expenses as well as leverage on our spending as a result of the higher sales volumes. The effective income tax rate for the quarter was 20.7% in line with expectations, though slightly higher than the 20.2% rate in the first quarter of 2020. As I mentioned earlier, adjusted EBITDA for the quarter was 35.2% as reflected in my earlier comments, specifically around revenue growth, gross profit improvement, and overall leverage. We ended our first quarter with $838.4 million of cash, cash equivalents, and marketable securities. Net cash provided by operating activities was $63.6 million, and free cash flow was $49.9 million as mentioned earlier. At this time, the company is revising its previously announced 2021 guidance of $880 million in net sales, and $1.83 in fully diluted non-GAAP EPS. We now expect full year net sales to be $925 million, and our non-GAAP EPS to be $1.89 representing 17.2% revenue growth, and 31.3% non-GAAP EPS growth versus 2020. Looking back on our strong Q1 results, and our expectations for the remainder of the year, we remain well positioned to aggressively execute across all fronts. We continue to be extremely positive about our business and its ability to take share across our entire portfolio, all while bringing new and exciting products to market. This coupled with our commitment to expanding R&D investments, while aggressively pursuing acquisitions that complement our portfolio will position us for continued growth over the long term, and drive exceptional shareholder value. I truly feel the best is yet to come. We will now open the call for questions.

Our first question comes from Matt Miksic with Credit Suisse.

You are breaking it up, Matt, we can't hear you.

Here. Let me try this. Hold on. Sorry. Is that better?

Yes, it is.

Okay, sorry about that. So congrats on a really strong quarter. Just I don't even know what to say. So these numbers are really impressive. But one question on robots and a follow up on implants. So we have seen just really strong growth across the robot category, I guess you could say since the middle of last year, I feel like we ask the same question every quarter. But, if you could maybe describe where some of this 80%, 90%, 90% growth that you're seeing is coming from maybe the types of centers or if it's a competitive regional, there's a robot in our city and a center across town feels like it needs to have a robot and also maybe describe what feels like an inflection point. And then what sort of timing we can think about in terms of pull-through on these robots. So if you're seeing this strength here, is it taken a quarter or two to sort of start driving the implants that follow? And I mentioned one quick follow up on implants.

Sure, Matt, I think we're witnessing growth across the board. We have centers that are purchasing their second or even third robot. In communities or universities, we see the technology gaining traction, and it seems we might be at that crucial moment where it becomes mainstream. Regarding your second question, when we see an impact from it, it typically appears in the following quarter. The initial quarter focuses on installation, training staff, and gaining speed, and once they start utilizing it, we observe the implant uptake in the next quarter.

That's great. And then on implants, maybe get some sense of where in the category of implants that you're seeing the most strength and where if anything, you saw some slowness in the beginning of the quarter as some of the other companies have talked about meaning sort of cervical or interventional spine or types of centers. Any color would be very helpful as to the pattern that you saw in Q1. Thanks.

There is no clear pattern from our perspective. We are experiencing significant growth from some of the products we launched last year, particularly our 3D line of spacers, which remain stable. Additionally, as I mentioned earlier, CREO ONE has had a strong start for us. Aside from that, I don't observe a particular pattern, as you or others may have noted during the call.

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

Great, thanks, guys. I'll echo the congratulatory comments. Just on the enabling tech business. I mean, also in the performance, with $14 million in sales, what do you say that's now sort of a baseline for quarterly performance going forward? And can you help us understand how you're assuming that this business will grow into the second part of this year with further contribution from imaging?

Yes, Kayla, capital is really challenging to project how you're going to do because each sale is unique. It's much easier for us to predict where we're going in the implant business, because that's recurring. Certainly, we expect to grow from here. We think this business has a lot of runway to it both for Globus as well as the industry. So all of those factors are pulling in the right direction. And we're going to be rolling out some additional technology, hopefully, as planned in Q3. So I do believe we'll see higher sales, but we're not going to put a number to that at this point.

Okay, that's fair. And then you mentioned you plan to be aggressive from an M&A perspective, I guess, what does that mean, relative to how you guys have acted historically? I think historically, you've chosen to look at either earlier stage assets or less expensive, more mature assets. I mean, should we expect to see more of the same in terms of that strategy, or are you considering some higher-priced assets or grow the assets at this point? Thank you for taking the questions.

Sure, yes, we are looking to be more aggressive there in terms of the amount we're going to invest. So we're looking a little bit bigger. But the emphasis is really on expanding the differentiation within our portfolio. So we're looking for technology, not necessarily scale. And that's how we're looking at things at this point.

Your next question comes from the line of Steven Lichtman with Oppenheimer.

Thank you, hi, guys. On the solid sequential performance of US Spine, which was even better than it was I guess in 2019. Just wondering if you could delve a little bit more into what you were seeing, if there was anything in the quarter that particularly snapback. I know you mentioned Dave, the biologics business, was that as sort of an outsized contributor to the strong sequential that you saw from 4Q to 1Q.

I don't really know what our sequential growth was. I thought it decreased from the fourth quarter to the first quarter.

It was down overall, but the US Spine business was performing really well. Our US Spinal implant business is doing extremely well, and while biologics did recover, it doesn't diminish the overall performance.

We've been seen as a leader in biologics for the past six months or so, and that trend is continuing. Typically, Q4 is stronger than Q1, but I don’t have the exact numbers right now. I want to remind you that COVID impacted us significantly in January and affected February as well. March, however, was a strong month for us. There were still some COVID restrictions in certain markets in March, but they were relatively mild. The four aspects I mentioned are still key areas where we are performing well, primarily due to advancements in robotics and the new products we launched. Biologics has shown a resurgence, and as we noted over the last few quarters, this trend has carried into Q1. Lastly, competitive recruiting is consistently a part of our growth strategy.

Great. And then, just secondly, Keith, could you talk a little bit more about your updated margin goals for the year? I'm not sure have you talked about EBITDA for the full year and when you talk about R&D acceleration, can you put any numbers on that for us any ranges in terms of as a percentage of sales for the year?

Sure. So from an R&D perspective, we historically said that we run about 7% of sales, based on some of the comments around investment in spine, robotics, trauma, and joints. We'd expect that number of move a little north of that as we look ahead in 2021. As we think about, was that first part of your question, could you repeat that one more time?

Just EBITDA margin for the year.

Our EBITDA, I mean, we came into the year expecting that we're going to see margin expansion from 2019 and 2020; we still view ourselves as a mid-30 EBITDA business, even with this increased investment. We're really happy with how the year started when we came into 2021. The COVID impacts in the beginning of the year caused a little bit of concern. But when we look back and see how we finished, we feel really good about where we're sitting. And we feel comfortable saying we're still a mid-30 EBITDA business.

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

Oh, great. Thank you for taking the question and congratulations on a really outstanding quarter. So I was just wondering if you could talk about trends in April how that is tracking relative to March. And then how much of the sales growth in Q1 was backlog? And then just with respect to guidance, you have increased revenue outside by about 5%, but EPS just about by 1.5% at the midpoint. So could you just discuss the puts and takes there and how you thought about it? Thank you.

I'll take the first part, Shagun. March was a very strong month, and April continued that trend. I believe the economy, particularly the spine business, has returned to pre-COVID levels. I'm optimistic about that side of the business. I'll let Keith discuss the guidance.

Yes, we increased our revenue from $880 million to $925 million. However, our profits did not increase as much. When we take a closer look, the revenue growth is mainly driven by volume. I want to highlight a few things: we made some investments in our trauma, spine, robotics, and INR sectors, and our share count is slightly higher. When we compare our current guidance to 2019, we see a top-line growth of about 17.8%. Our bottom line, projected at $1.89, will grow by approximately 12.5%. It’s important to note that in these comparisons, there are about $0.19 of adjustments for non-operating factors such as interest income, taxes, stock compensation, and the increased share count. If you add that $0.19 to our $1.89, it brings us closer to $2.08, indicating around 24% growth on a more normalized basis. Overall, our revised guidance positions us well, particularly when looking back to where we were in 2019.

That's really helpful color and just with respect to the backlog. How much of the sales growth in Q1 was attributable to the backlog?

Yes, that's a little bit more of a tougher question. I mean, when you think about last year, we've been coming in our Q1 release last year, we call that about a $20 million impact driven by COVID. Surely this year, we are impacted in January. And we started to see that sequential improvement in February and March. But if I step back and look at it, I would say it's almost a push year-over-year. Dave, anything you'd add to that?

You're saying quarter one last year versus this year on an implant basis; it's kind of flat, yes. It's a little challenging to decipher because every different sections of the country had different COVID kind of reactions or restrictions. But as well as we can understand, I think there was probably a net zero impact between Q1 last year and Q1 this year from US implant standpoint.

Your next question comes from the line of Matt Henriksson with Citibank.

Hi, good afternoon, and congrats on a great quarter. Let's start with the Ortho Trauma results. You mentioned it was up 100%. And then kind of although it's going to improve sequentially, and will be at that growth rate. Can we just add a little more detail on kind of what's driving that growth? What are the strategies around the salesforce expansion and kind of how we expect that to play out throughout the rest of 2021 and then to 2022.

Thanks, Matt. It's Dan Scavilla. So a couple of things. I mean, certainly we're pleased with the products we have and get inroads in the markets that we have and we continue to see that occur not only in Q1, but we'll expect that to go through the year. At the same time, we have stepped up in our recruiting and we see that there's an activity that's helping us further bring reps on board. I don't really break it out by quarter. But again, I would think that again off of smaller numbers, the higher growth rate helps and getting more people in will matter rep by rep right now with that. Dave also mentioned that I would support, we have what I consider significant product launches coming into the second part of the year. And that will further help us drive in and grow that way. So we've always said trauma is going to be a longer-term growth year by year and not an explosion. And I think it's playing out that way. We just have to continue with our investments and our focus.

Okay, thanks for the color there, and then just moving to cervical that's starting to get more attention with the recent acquisitions and recent product launches. You've had your secured C with the two-level indication, but kind of what are your thoughts on the market overall, compared to kind of traditional fusion? And then any commentary that you have on any future development would be great. And thanks for taking the questions.

Sure, Matt, let me just gently correct you there. We don't have two levels on secure C. We only have one level. And I think that's a challenge for us. I think that segment has a lot of future potential. It's not huge right now. But I do think it's a good treatment for patients. So we're actively evaluating what our options are there. And we will be a strong competitor going forward in that segment. Matt, you cut out a little bit; we couldn't hear what you said.

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

Hi, thanks for taking the questions. First, could you clarify if the final month of the quarter saw an increase in volume input? Should we expect minimal COVID impact for the rest of the year? I'm trying to understand how COVID might influence the upcoming quarters.

The March was a good month because I think it was the best month in our history actually in overall revenue. So it was strong month. Like I alluded to earlier, there were still some regions of the country that were shut down and restricting electives, but there were others that I think included some bounce back. So on a net basis; I think March was a sort of a typical pre-COVID kind of quarter. Your guess is as good as anyone going forward. April is a good month. But and hopefully the vaccine is effective. And we're back to normal going forward. But that's our crystal ball. I don't think there's any more clear than anyone else's.

That's actually helpful. Can you explain what happens with the utilization of implants for accounts that acquire or place a robot? It appears there's a significant increase in usage. Can you provide some quantification or guidance on how an account is transformed after getting a robot installed?

It goes all over the map, there's some that the robot itself is much more efficient for services that utilize our screws, so that that in itself typically drives volumes for the cases where they use the robot. Now that we've added interbody solutions to it. Again, it works much more efficiently with our interbody devices. And we have a significant number of our sites that are either buying it with interbody solutions or upgrading their installed base with that. And then we also have the scenario where we will find a committed purchase agreement with a hospital. And the rebates from that implant deal will be used to pay off the capital over time, which is something a lot of our competitors do as well. So we have all of those scenarios. So it's hard to say what any particular account could be one of those three. So it varies, and we have not shared the actual quantitative impact, and we're going to keep that as competitive information.

Your next question comes from the line of Kyle Rose with Canaccord.

Great, thank you for taking the questions. Can you hear me all right? So I wanted to kind of take a more of a bigger picture question here. And just talk more about the competitive dynamics of the US Spine market that we're seeing. I mean obviously exceptional growth today, but also for really the last two to three quarters, since the third quarter we've seen a big step function in growth for Globus relative to the broader group. So maybe if you could just help us bucket where that's really coming from? How much is coming from competitive rep hiring, how much is coming from implant pull-through from the robot? And then how much is kind of coming from just new products, and the iterative new product flows the company's been able to generate just, we're seeing an exceptional growth here, it indicates some real share taking just really trying to understand where that's coming from.

Yes, well, thank you, Kyle. I agree with you, we've really, Q1 of last year masked the strong quarter. So we've been on this track for about a year and a half, I would say. But I am not going to help you out by telling you where it's coming from just from a competitive standpoint. We're pulling all those levers, and we're going to continue to pull them and I'm confident our team is going to keep executing. So that's all I can share with you right now.

That's fair, I had to try. Let me ask one more robotic question. Now, obviously, really strong quarter to start the year. But we're also seeing really good implant growth here. So help me maybe just help us understand how many, or what proportion of robots are being sold outright versus placed. I am just trying to understand how much of the unit placements are, or are really outpacing some of the revenue we're seeing on the enabling side.

Yes. The mix of our robots in terms of how they're getting sold hasn't changed, the vast majority of our robotic sales are still outright sales that really haven't changed since we've started selling robots, and we can sell all the different ways that Dave mentioned earlier. But still, the majority of them are outright purchases.

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

Good afternoon, thanks for taking the questions. I'm going to ask Kyle's question in a little different manner, Dave, and see if you all take a bit. But the competitive environment, as we noted is not kept up with the pace that Globus has. And so to ask you that another way, I mean, what do you think or how would you characterize the competitors in the market, particularly the mid and larger ones? In terms of what they're not doing that you're seeing out there? Because it does seem like you've been at this for over a year now, with these types of share gains. And so clearly, they're not doing something that you've figured out. And I don't know if you have any thoughts on kind of your other competitors?

Yes, I would be remiss if I spoke ill of anyone in the market. But I will tell you, Ryan, that the fundamental driver is technology, right? So our implant technology is enabling technology. They're differentiated, they're stronger, and they're driving clinical value. So that enables us to just outright sell that, but it's also very attractive for other reps that are stuck at those other companies to come over there. They're good reps, they have good relationships, they want to come over and sell the best technology on the market, so that drives our competitive recruiting as well. It's really the thing underneath it. And then we continue to innovate. We've got a really strong group across the company, really, it's the spine, obviously, spinal implants, and we've been noted for a long time for the differentiation there. Our robotic and enabling technology is we're just scratching the surface with what we have you already that you know about it and what you actually don't know about yet. We have some really exciting things coming. And then in Dan's area, in the ortho area between trauma and joints, we have some things that you probably won't see that innovation until next year. But those are coming as well. So it all comes down to technology. We were founded as an engineering company, and that remains our core.

And there's one thing that I would add to that to Dave's comments that I would say that we've done exceptionally well as we've executed, I think we have, out of all the things Dave talked about when you think through the last year, year and a half, I think the company has executed extremely well, that's really helped drive a lot of the benefits that we're seeing.

Sure, that's very helpful and appreciate you've given some color there. Just one follow up for me. So I think in the fourth quarter, you guys built out some additional manufacturing capacity. And it was really expected, I think, to be up and running in the first quarter of '21. And correct me if I'm wrong there. But could you just comment on kind of what that does, if you weren't constrained on any product families or categories and kind of what that additional capacity does and when that comes online for whatever specific product there that you did expand in? Thank you.

Sure, yes, we are still a big capacity constraint in some of the segments of the company, particularly 3D, we've added that we're still, you've got to qualify the equipment, you've got to get the products made, you got to get them sterilized and put through the distribution cycle. So we're still not seeing the full impact of that. And actually, with the growth that we've seen here in the last nine months, where we continue to add capacity, it's a great problem to have. But it's a challenging problem in the environment that we're in right now, to keep up with the demand.

Your next question comes from the line of David Saxon with Needham.

Good afternoon, and really an incredible quarter. First question just on an enabling tech, you noticed some international robot placement. So I was just wondering if you could share where those were. And then as you're preparing for the imaging launch, I mean, at this point, you have some orders lined up that are going to be easy for the third quarter?

So I'll take the first part of your question enabling tech, we really don't disclose what countries that we're selling in, what I will say is that we are actively marketing the product in the countries that we can sell a product in. And there are a lot of laws about the product, and we're excited about what it can bring going forward.

And David in terms of the 3D system, we're not able to market it or take orders for it until it's approved. So that we don't have that, I will say there's been a lot of interest as surgeons have seen the product and given us input on it. So and the other thing I wouldn't get too far out over our skis as it's with the FDA, so we have to get their approval. And while we do anticipate a third quarter launch, it's subject to their approval. So I know the products going to sell really well. I don't know when we're going to start just yet. We're confident in our submission. And we would like love the technology and the interest that surgeons have. So from a long-term perspective, it's going to be a great product for us.

Okay, got it. And then my second question is just on trauma, you noted product launches, you're planning for the back half. So just wondering how long you think it'll take to get to a full trauma portfolio. Is that kind of like a 12 to 18 month process? Or is that a little longer term? Thanks so much for taking the questions.

He, David, it's Dan Scavilla. Thanks for the questions. So yes, the launches that we have planned for the second half of the year, while meaningful will still be filling the bag. What both Dave and Keith had mentioned is our increased investment that we're planning to do with Globus ortho both in the joints and the trauma will actually accelerate the development and placement of products in the market at a rate faster than our initial strategic plan. And so we're leaning in using the financial muscle of the company, to bring on more resources throughout the organization to actually fill out that bag faster. I don't have an exact date for you. I will tell you though, as we exit this year, we'll be in a really strong position to compete. I think within 12 to 18 months, we'll have more to actually start significantly supporting larger institutions and displacing competition. And that's really the goal of this increased investment is they make that happen faster.

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

Hey, guys, congrats on a great quarter. Thanks for taking the question. I was just trying to square your comments from the last call. Remember you said in January, there was like a 15% to 18% drag on the US business and just some improvement in February. There must have been a real rebound in March and I just wanted to make sure I am getting the math right is that drag relative to kind of the underlying double digits you had been growing last year, so if that's true, then I don’t know January was flattish. Then you saw some improvement in February that would allow us to back into the exit rate in March.

Yes, in terms of the fourth quarter or the October and November run rates we were experiencing, COVID started to impact us again in December. That commentary indicated a 15% to 18% decrease, but keep in mind that when comparing to last year, we faced COVID halfway through March of 2020. Therefore, as you look at the year-over-year comparison, January and February had negative impacts in 2021, alongside a negative impact in March of 2020. As one of the earlier callers noted, the overall impact was relatively neutral on the US between Q1 last year and Q1 this year. Throughout the quarter, we observed a trend where January was detrimental, February showed improvement, and March performed well.

Great. And could you take us through any thoughts or help on what you believe recovery will look like through the year in your international business, just given your exposure to Japan and some geographies doing better or worse? Help us parse that out a bit.

Yes, we're doing well, in almost every other market. And Japan is going to be a headwind, that's our biggest country. Again, we're confident in the team that we have in place there. The process of rebuilding, if you will, in those areas where we've gone away from certain distributors, it's just our robotic technology is going to roll out this year. So that'll be a leverage point as well. So I think it'll mirror what we saw this quarter, where the two are going to probably offset each other to a large extent, as we go through this year. And hopefully, by the end of the year, we'll see some of that growth in Japan start to pick up sequentially.

Our next question comes from the line of Rich Newitter.

Thanks for taking the questions and congrats on the performance this quarter. Two questions. The first is on what's assumed in guidance right now, I appreciate that you bumped the outlook on a very strong 1Q. But when you had last provided guidance, at the beginning of the year, you had suggested that you weren't baking in any assumptions for really much of a pickup in gross in the back half of the year relevant to a strong second half of 2020. I'm just curious with the commentary that March picked up big, April better than March. The guidance raised wasn't quite that much more than 1Q. Keith, I'm just curious what you're assuming for the back half.

Thanks for the question. As you think about going from the $880 million to $925 million, clearly we came out and finished with a strong Q1. As I think about or as we think about Q1 into Q2 we still expect good momentum into Q2, but I will say just to clarify that April, is a little bit of a slowdown from March, but we still feel strong about where Q2 is going to land. Stepping back and looking at the $925 million holistically I would still say there's still appropriate conservatism in there from a global perspective as we look, because when you get to Q3, and Q4, we know we had those strong bounce backs last year. And still, we're still in this environment where we're still not sure how Q3 and Q4 will turn out. But we're positioned right now, I really fall back in some of the earlier statements is that we feel positive about where we're at. We came out of a strong Q1, we're going into the Q2 that we feel is going to be a strong quarter, we still want to maintain that conservatism as we look to the back half of the year, just because it's April, a lot could happen between now and the end of the year.

Okay, got it, sounds like you still being conservative. But as you're encouraged, if I'm hearing you correctly, that and then just on the capital side can you remind us what the capital selling cycle, how long it has been historically, and what's changed, if anything kind of matter? Like how long it takes for you kind of the beginning of a conversation to when you close the deal. It's just an extremely strong 1Q placement quarter. And I'm just wondering if something structurally has changed either mindset, capital prioritization or the robotics or anything dramatically shifted there. Thanks.

Thank you, Rich. Our aim is to shorten the capital cycle and create a compelling technology and economic opportunity for hospitals to move beyond it. Last year was difficult since we couldn't meet with executives and surgeons, and that remains a challenge, though it's now more feasible. This highlights a key difference between last year and now. As I mentioned at the end of last year, our pipeline was very strong. Many of the deals we were pursuing at that time were finalized in the last quarter, and I can confidently say that we still have a robust pipeline with significant potential as we head into Q2.

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

Hi, this is Karen on for Matt. Thanks for taking the questions and congrats on the quarter. So first off, just following up on imaging, how much of that is baked into guidance for this year? Or will that be more of a 2020 Q impact that we should expect?

We are not going to sit and break out the parts and pieces. Because we know that coming from Q1, or coming from our $880 million to $925 million, we know that it was a nice move forward, we still want to maintain some conservatism in our number. But one thing I will say is that even though we're not breaking out the parts and pieces, we do hope to launch it later this year.

Great, thank you. And then one last one, can you just expand on some of your efforts in the ASC channel, there's a huge push in the ortho space to that shift to the ASC. How are you positioning yourself to new through that, but still stay competitive in the hospital setting?

That's a great question. I don't know that anybody's fully figured that out at this point. But more efficiency in terms of both capital and our implants sets is probably the way to go. They're constrained in terms of their capital budgets. They're constrained typically in terms of their operating budgets, and their space issues. So we're trying to look at products that address all of those constraints. While we will focus as well on the hospital environments, so it's a challenging, but high impact opportunity for us.

Your last question comes from the line of Craig Baggio with Bank of America.

Hi, thank you for taking my question. I wanted to start with some broad questions regarding the use of robotics in spine procedures. Could you share what percentage of your procedures currently involve a robot? Is it around 10%, or somewhere in that range? Additionally, I’d like to hear your thoughts on the future use of robotics in spine. What percentage of procedures do you anticipate will eventually utilize robotic systems? Also, what does the progression look like over the next few years?

I mean, thanks, Craig. In terms of our percentage right now, we don't share that information from a competitive standpoint, I will tell you that it's an internal focus of the company though; we're highly focused on driving adoption and utilization in the install base. Because ultimately, that's why it's going to continue to grow. As the value of computer-assisted technology is recognized, and we're able to measure it, more and more people are going to do it, utilize it. I actually think it's going to be standard of care. And I don't know when that'll be; I certainly think within 10 years, it could be sooner. It's hard to say. I do think that there's a growing acceptance by surgeons of the technology. And I see a lot of anecdotal evidence where guys are just shifting over to everything they're doing; they're really seeing those benefits. So we're pushing as hard as we can to drive that. And we're doing that both with our procedural focus in the field, as well as trying to make the technology just better, easier to use and more efficient in the OR. So I wish I had a better answer for you. But I'm super bullish on where it's going and our ability to compete there.

Appreciate that, and maybe just a follow up on some of your acquisition commentary. Your target areas, is it more the enabling technologies, the ortho, you've done a couple deals there or spine technologies. Anyway, I'm assuming you're looking at all of those areas. But is there any one of those areas and maybe more of a focus than the others?

Well, I think the answer is we're looking at all of them. But we have a very broad line of innovation in spine, so it's probably less likely that we would find something there as well. And the opposite of that is true on the ortho side. So those are probably going to be things that fit better into what we're doing and have a bigger impact. But we're open to any and all areas where we can improve the differentiation of our portfolio.

I'd like to turn the call back over for any closing comments.

Thanks very much for everybody. With no further questions, this ends the Globus Medical first quarter earnings call. Thanks for joining us. Have a good night.

Ladies and gentlemen, this concludes today's conference call. We thank you for your participation. You may now disconnect.