Earnings Call Transcript - GMED Q2 2021

Operator, Operator

Welcome to Globus Medical’s Second Quarter 2021 Earnings Call. I will now turn the call over to Kelly Huller, Senior Vice President of General Counsel. Ms. Huller, please go ahead.

Kelly Huller, Senior Vice President, General Counsel

Thank you for being with us today. Joining 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 our 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 in 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.

Dave Demski, President and CEO

Thank you, Kelly, and good afternoon, everyone. Globus had another outstanding quarter in Q2 building on the momentum we’ve established over the past two years as we continue to take market share. Given the impact of COVID-19, it’s difficult to draw meaningful insights about the business by comparing the results to Q2 2020. So, my comments will be primarily focused on comparisons to the second quarter of 2019. Revenue for the quarter was a record $251 million, up 29% over 2Q 2019. Non-GAAP EPS was $0.56 per share, a 38% increase. And adjusted EBITDA was a strong 35%. Once again, INR and U.S. Spine led the way. INR revenue was a record $21 million, up 73% over 2Q 2019 and our third consecutive quarter of strong growth. The clinical superiority of ExcelsiusGPS continues to be recognized by surgeons as reflected in our recent announcement of surpassing 20,000 procedures using Excelsius. More significantly, the average number of procedures per robot reached an all-time high in 2021, reflecting an acceleration in adoption. U.S. Spine continues to take significant market share, growing by 30% over Q2 2019. Pull through from robotics, contributions from new product introductions, a resurgence in our biologics business, and competitive recruiting were all factors driving growth. We’re beginning to see several virtuous cycles emerge, all emanating from the value created by the adoption of our robotic technology. We have surgeons who utilize Excelsius for the majority of their cases, mastering increasingly complex pathologies because of the technology and may even perform surgery in situations that would be considered inoperable without robotic assistance. These surgeons wholeheartedly endorse Excelsius to their peers, leading to additional robot sales. We have surgeons who have not previously used Globus implants, but due to Excelsius, gain exposure to our entire line of innovative spinal implants and have begun to utilize Globus for non-robotic cases as well. We have surgeons who may not have initially championed the purchase of the robot, but after seeing the success of their colleagues, also adopt the technology, which has driven Globus implant usage and led to the purchase of additional robots. Finally, we have attracted successful competitive representatives who, after losing a portion of the business to a robotic conversion, have decided to join the team with the best technology, bringing additional business with them. As these scenarios increasingly play out, we are seeing what amounts to a flywheel effect on our business. At the heart of it is the utilization and value created by the Excelsius technology. It’s not about merely placing robots; it’s focused on utilizing technology to improve spine surgery. The growth we have seen in our U.S. business over the past two years is a testament to the power of the transformation taking place. On the international front, our spinal implant business grew by 5% in the quarter. Strong growth in most markets was offset by declines in Japan, a trend we identified last quarter and expect to continue throughout 2021. Unfortunately, the transition in Japan, while necessary for the long-term health of our business, is masking a very strong performance by much of the rest of the world. We lost HEDRON L in Q2, adding a 3D printed spacer to raise ELSA, CORBEL, and TransContinental to create the most comprehensive suite of lateral interbody solutions on the market today. This broad product portfolio gives surgeons the ability to perform lateral access surgery, utilizing multiple expandable options, multiple static spacers, and integrated plate-spacer solutions to address all levels of the lumbar spine through 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. Moving to INR product development, we are waiting for 510(k) clearance for the Excelsius 3D imaging system and remain cautiously optimistic regarding clearance and launch of the system late in Q3. The full launch of the Excelsius cranial module is slated for later this quarter as well. Shifting to trauma, revenue was up over 250% compared to the second quarter of 2019, 29% over the second quarter of last year, and relatively flat sequentially. We are focused on sales force expansion and have several exciting product launches planned for the second half of this year and 2022. In summary, we’re off to a fantastic start in 2021. It promises to be an amazing year if we continue to execute the way we did in the first half. 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.

Keith Pfeil, Senior Vice President, Chief Financial Officer

Thanks, Dave, and good afternoon, everyone. Globus is coming off a fantastic second quarter and continues to build momentum through ongoing market penetration from our implant business and further adoption of our robotics technology. Q2 continues the trend of strong revenue, profit, and free cash flow growth. Before I jump into my discussions on the quarter, I want to highlight that it will focus the majority of my comparative comments in the second quarter of 2019. However, there are a few areas where I will provide comparisons against both Q2 of 2019 and Q2 of 2020. This will provide the most meaningful insights into our business. Our second quarter revenue was $251 million, growing 29% as reported versus Q2 of 2019 and 28.9% on a constant currency basis. On a day-adjusted basis, sales were higher again by 28.9%, the same number of selling days in the U.S. and two more selling days in Japan when compared to Q2 of 2019. Q2 net income was $41.5 million and non-GAAP net income was $57.9 million, driving $0.56 a fully diluted non-GAAP earnings per share. Adjusted EBITDA was 35%, and we generated $50.8 million of free cash flow. Our second quarter U.S. revenue was $215.1 million, or 34.5% higher versus the second quarter of 2019, reflecting those continued share growth across our implant business and the increasing adoption of robotics technology within INR, which is inclusive of Dave’s earlier comments. International revenue for the second quarter was $35.9 million, growing 3.9% compared to Q2 of 2019. We experienced strong growth in most international markets, which was dampened by lower sales in Japan based on our previously discussed sales transition. As mentioned in Q1, we expect Japan to be a headwind as we progress through 2021. However, this will strengthen our position in Japan over the longer term. Q2 gross profit was 74.6% compared to 77.4% in Q2 of 2019. The primary drivers of the decline were higher planned depreciation expenses related to instruments and cases, slightly higher product costs driven by the mix of sales, and additional inventory reserve expenses associated with a non-recurring write-off of raw materials. Research and development expenses for the quarter were $15.5 million or 6.2% of sales, essentially in line with Q2 of 2019, but lower as a percentage of revenue driven by the impact of higher sales. The planned increases in spend we outlined last quarter have not materialized yet as labor markets remain tight. However, we remain committed to expanding our R&D team as we continue to develop new and innovative products across our portfolio. SG&A expenses for the second quarter were $107.3 million or 42.7% of sales compared to $88.4 million or 45.4% of sales in the second quarter of 2019. The higher spending in Q2 of 2021 was mainly a result of higher sales compensation costs. However, SG&A has decreased as a percentage of revenue due to the leverage impact of higher sales. The effective income tax rate for the quarter was 15.1% as compared to 19% in the second quarter of 2019. The lower tax rate was driven primarily by tax benefits associated with stock option exercises. As a reminder, Q2 of 2020 results include the large charge to R&D expenses associated with the Synoste acquisition, which also impacted our effective tax rate. We concluded Q2 with $914.2 million of cash, cash equivalents, and marketable securities. Net cash provided by operating activities was $59.2 million, and free cash flow was $50.8 million. Year-to-date free cash flow is $100.7 million. And on a rolling four-quarter basis, the company has generated a record $202.7 million of free cash flow, reflective of higher earnings in the business, lower capital expenditures, as well as working capital improvements. At this time, the company is increasing its 2021 guidance to $950 million in net sales and $2 in fully diluted non-GAAP earnings per share. The industry is experiencing a declining case volume early in the third quarter as surgeons take extended vacations and regional shutdowns of elective procedures emerge due to the Delta variant of COVID-19. We expect the impact from vacations to reverse in September and October once kids go back to school. While it is hard to predict the impact of the recent increases in COVID cases, I’ll remind everyone that the spine market has shown great resilience in dealing with COVID-19, and Globus specifically has been able to take market share through the previous outbreaks. While we expect the situation to be transitory, we do project a sequential decline in revenue in Q3 associated with the procedural slowdown. Our second quarter results continue the strong start to 2021. Year-to-date we’ve generated $478.4 million in revenue, 35.1% in adjusted EBITDA and $1.05 in non-GAAP diluted earnings per share. I’ll be looking ahead to the back half of the year. We’re focused on our continued push to take implant share and drive the adoption of our robotics technology while continuing to launch new and exciting products. We will do all of this while maintaining our strong operational focus on execution and discipline in our approach to managing the business. We are committed to expanding our investment and we’ll continue to pursue complementary acquisitions, all of which will drive long-term shareholder value. I’m thankful to our Globus team and their pursuit of excellence as we continue to serve our customers and patients. We will now open the call for questions.

Operator, Operator

Our first question comes from Shagun Singh from Wells Fargo. Your line is open.

Shagun Singh, Analyst

Thank you so much for taking the question. I guess just two from me. The first one on capital, obviously it was a very strong quarter and it appears that you approached an inflection probably exiting 2020. So, if you can just touch on the outlook of the business in the second half, just given seasonality and then, even beyond that in 2022 and beyond, that would be helpful. And then I have a follow-up.

Keith Pfeil, Senior Vice President, Chief Financial Officer

Yes. Shagun this is Keith. Thanks for the question. Generally speaking, I mean, we feel extremely positive about our business. As we look to the back half of the year, everything that we’ve done in the first half has shown that we’ve executed well and we’re taking share. As we look to the back half, we remain positive across our entire business. As it relates to 2022, I think it’s a little early to give comments on 2022, but as we look at our last several quarters, we feel that we’re well positioned to drive future sales growth.

Shagun Singh, Analyst

I got it. The question was just a little bit focused on capital. So just the ExcelsiusGPS, can you talk to us a little bit about the outlook of that business, just given that, it seems like it’s at an inflection point, so how should we think about it in the back half, just given seasonality and then beyond that, so just specific to capital?

Dave Demski, President and CEO

Thanks, Shagun. I think the third quarter is typically a slower quarter relative to some of the other ones in capital. Usually, the fourth quarter is at the end of the budget cycle for a lot of accounts. So that tends to be the strongest. And then there’s a little second wave at the second quarter, so that you might see a little dip there, but generally speaking, we’re very bullish about the adoption of Excelsius. And I think that’s creating additional demand. So our pipeline continues to be very strong and we’re very bullish about technology for the rest of this year and into next year as well.

Shagun Singh, Analyst

I got it. And then, just with respect to your guidance, if you look at it over 2019, can you just help us understand what you’ve included in there for backlog? We are hearing that the spine backlog was substantially realized during the first half. So, what are you including in the back half for backlog and then, anything when the impact of the coronavirus variants? That would be helpful. Thank you.

Keith Pfeil, Senior Vice President, Chief Financial Officer

I think as we look to the back half of the year, again, we remain positive when I go back to 2019 and I look at our business. Our current guidance in 950 implies 10% compounded annual growth from 2019 to 2020 to 2021. As we look at and I would also comment that, that growth is organic. That growth is coming across all factors of our business and to drive that level of organic growth shows that we feel very positive about where we’re going.

Operator, Operator

Our next question comes from the line of Matt Miksic from Credit Suisse. Your line is open.

Matt Miksic, Analyst

Hey, thanks. Thanks so much for taking the questions and congrats on another really strong quarter. I’m sure everyone on the line would love to hear if you’re willing to share that average procedures per robot number that you mentioned hitting a high mark this quarter, but I’m guessing that you would have said it if you’re going to share it, but we’d love to hear it, but two questions for me, I guess if I could follow-up on your comment on vacations. I suspect that’ll get some folks attention, just because that had been kind of a hypothesis heading into Q3, potentially that we may see something like that. If you could just if possible, maybe sketch out what has the historical, yes Dave, you mentioned the historical revenue trend in Q3 is down, how much more of an impact, are you expecting if it’s down three historically, should we expect down five, just some sense of what the increment is. And then I have one follow-up if I could?

Dave Demski, President and CEO

Thank you, Matt. As we expected, we’re not going to disclose that average number of procedures for a robot, but really, really excited about that. I think that’s just validation of what we’ve been doing and to see the technology being utilized is really a bellwether for what’s for the future, so super excited about that trend. In terms of vacations, I think that the situation this year is, we really didn’t have much in the spring. I would say we started to see a little bit after school was over in June. But they just seem more pronounced and prolonged at this point. Obviously, I mean there’s a pent-up demand among our society for travel. We’re seeing the surgeons take that, but I fully expect that they’ll be back in once school starts again in September. So, we’re expecting a strong September, October clearly given no dramatic change in the COVID situation, but I think there’ll be transitory, but from a sequential standpoint, it’s going to cause us to dip a little bit here in the third quarter.

Matt Miksic, Analyst

Fair enough. And then the follow-up is a question I get often about some of the growth rates you’ve been putting up over the past several quarters is sort of how to parse the various kind of growth drivers that are causing it to grow so much faster than the market. And I know there are many, but if you could zero in on a couple, like how much of a factor is the movement of 3D printed implants and how much of a factor at this point do you feel like the robot is, and sort of closing the distance between call it, I don’t know, 2% underlying growth and 30% to your stack growth that you’ve put up?

Dave Demski, President and CEO

Yes, I’m not going to drill down into the real granular numbers, but I will tell you that the robotic technology or the computer-assisted technology is transformational. So, we’ve always been an innovative company. That’s attracted new surgeons through great technologies, if we made implants technology. So, we’re still thinking that, but on top of that, we have this transformation in the way surgery is being done. And I think we’re leading the way in terms of robotics. So that’s got a big impact at the top level, but it also helps us bring in over reps; sales reps in this business want to sell what is going to be most effective for them. So, I tried to convey that a little bit with some of the situations that we described, but there’s a synergistic effect. So it’s really challenging to parse it out and say, which one’s more important, clearly from a long-term standpoint, the computer-assisted segment is something that we’re seeing a lot of growth from and the trend is up. So, we’re excited about where we’re going.

Matt Miksic, Analyst

That’s great. Thank you.

Operator, Operator

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

Richard Newitter, Analyst

Hi, thanks for taking the questions and congrats on another very strong performance. Wanted to maybe just start off on the imaging system that you guys have. I think, with the FDA right now, any updates on the timelines there, if I missed it, I apologize. And then I’d also just love to hear kind of your views of kind of a year one launch and contribution potential for that product, especially with some other imaging modalities, recently FDA approved and or turned and commercial from some of your competitors. So, thoughts there, and then I have a follow-up. Thanks.

Dave Demski, President and CEO

Sure, Rich, and thank you. We’re with the FDA now. We responded to some questions and it’s back with them, and we’re hopeful they’ll approve it this quarter. And then we will – we’re planning on a commercial launch. It’s going to be the end of the quarter or right early in the fourth quarter now as it looks. In terms of our projections, it’s really challenging to come up with a number, but I will tell you that every surgeon we show it to is excited about getting the technology. We obviously have to work through the contracting process with their hospitals, but just anecdotally, we’ve had several who have stopped the plan process of other competitive systems until ours is ready. So the benefits this technology is going to bring are significant versus what’s out there today. So, we’re excited about the impact and we just need to at this point, I think make enough of them next year to satisfy the demand.

Richard Newitter, Analyst

Okay. That’s helpful. Just on the cadence here. I appreciate the comments around 3Q seasonality, maybe being a little more pronounced vacations, but just on the capital side, what is implied in your guidance for the seasonal kind of cadence of enabling technologies, if 2Q the high watermark in your guidance and 4Q, which typically is seasonally stronger quarter higher than 3Q, but not necessarily as high as 2Q, or are you assuming a typical kind of, the 4Q is the strongest quarter in your updated guidance?

Keith Pfeil, Senior Vice President, Chief Financial Officer

Yes. Thanks for the question. I think, the way I look at that is, Q3 is typically a slowdown quarter followed by Q4 picking up. In terms of high watermark for Q2 versus Q4, I wouldn’t say that it’s necessarily going to be a whole lot different than history. Again, we remain positive about where we’re going, but we do see that slowdown coming sequentially in Q3 across the entire business. Some of which would include the slowdown in robotics as we enter the third quarter.

Richard Newitter, Analyst

Thanks a lot. Well, if I could squeeze one more in Dave, you mentioned, I think in your opening remarks, international spinal implants growing 5% year-over-year, was that a comment off of 2019 or 2020?

Dave Demski, President and CEO

Yes, 2019.

Operator, Operator

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

Kyle Rose, Analyst

Great. Thank you very much. And I reiterate the comments on the strong quarter. I wonder if you could just talk if maybe from a bigger picture perspective, what you’re seeing as far as the capital demand, with respect to, how customers want to order or pay for the robotics and then kind of maybe your expectation on a go-forward basis, where you have robots placed. Are you seeing any difference in interest from the imaging modality, as far as, installing upgrades and things of that sort with the installed base that you have within the robotics field, as it stands now, and then I have one follow-up.

Dave Demski, President and CEO

Sure, Kyle, and then thank you. In terms of how customers will want to pay for it, I think there’s really no change in that over time, that everybody has their own capital constraints or willingness to make other arrangements. And we’re not seeing a big change there. I would say that people are familiar with our technology and how Excelsius works are probably more prone to have interest in an imaging system, just because they have experience with us and with our technology, and they know the value that it brings, but it really opens up for us a competitive segment that we’re currently challenged to address. So if someone has already adopted computer-assisted technology and they’re doing freehand navigation, they’ve achieved some benefit from the computer at that point. So it’s probably a little more challenging to get them to make the next step to robotics. So by having Excelsius 3D, we’re going to be able to have a comparable product to what exists today to compete for that business along with moving people up to robotics.

Kyle Rose, Analyst

Great. That’s very helpful. And then just from a bigger picture perspective. I mean, we’ve seen over the last several years, you go from spine and extend yourself into trauma. Obviously you’re launching more enabling technologies. You acquired StelKast or just kind of trying to understand where you are in the life cycle of going, merging into a broader orthopedic organization, when we think about hips and knees and potentially extremities and things of that sort from a long-term, what’s next?

Dave Demski, President and CEO

Well, I think we have a lot of work to do with the starts that we’ve made particularly in the total joint area. We really think the particular advantage we can bring there is again, the computer-assisted aspect. So, we’re still on development of our robotic solution there. And then as where we’re going to be able to differentiate ourselves from the competition. So it’s early innings there and then trauma is making great progress as we’ve walked you through over the last years. And we continue to expand that portfolio and expand our footprint. And as Keith has alluded to where we’re active and considering other ways to grow the business through acquisitions, but at this point, we don’t have much point to discuss on that area.

Operator, Operator

Our next question comes from the line of Matt Taylor from UBS. Your line is open.

John Lee, Analyst

Hi, everyone, this is John Lee for Matt. Thanks for taking my questions. I guess maybe just one to follow-up on, you mentioned you’re seeing some early impacts from Delta Q3. What are some of the areas in the U.S. or OUS that you’re seeing some of that impact and the areas that you’re paying more attention to given the increase in hospitalization?

Dave Demski, President and CEO

Yes, I think it just mirrors where the outbreaks are most significant, so Florida has had a lot of it. We’ve seen Arkansas and Louisiana at this point. Internationally, I don’t have, I’m not as close to that personally to comment on.

John Lee, Analyst

Okay, great. It’s helpful. I guess maybe one on trauma, it was flat sequentially you are focused on launching some new products and expanding the sales force was this wondering maybe some product portfolio perspective, where do you think you are relative to the competition, how much more product families and types do you include in the portfolio?

Dan Scavilla, Executive Vice President, Chief Commercial Officer

Thanks for the question. This is Dan Scavilla. So just a couple of things. We’ve always said, trauma is a long-term play, and we look at a real long-term horizon. So, while it’s relatively flat sequentially, that’s not something we’re hung up on so much as just along the journey. Q2 was compared to a record high with several of our territories actually breaking records in Q1. So, the fact that they’ve maintained that is a very good positive trend for us as we go forward to do this. That said, and as Dave mentioned, we’ve got several key launches that we planned to come out in the second half of the year. That will get us further up into the procedural coverage. We think at that point, we should have the ability to cover about 70% to 75% of the procedures with our expansion of our R&D resources that we have planned when hired will accelerate further into 2022 with the ability to actually cover off more of that gap. So, I feel very bullish on where we are, the traction we’ve made, and what the next steps are to really get out there and be a complete trauma portfolio.

John Lee, Analyst

All right. Thank you.

Operator, Operator

Your next question comes from the line of Drew Ranieri from Morgan Stanley. Your line is open.

Drew Ranieri, Analyst

Hi everyone. Thanks for taking the question. And just on the seasonality factor and the sequential decline in the third quarter, you came off the record sales in the second quarter. I think consensus has you at $230 million for the third quarter. Is that kind of the right way to think about the sequential decline, just given the momentum of the business? And it’s just kind of difficult to look back at history and see underlying trends just given that the portfolio has changed and robotics has entered the picture, but any help and kind of framing what the seasonality and sequential decline will look like in the third quarter.

Keith Pfeil, Senior Vice President, Chief Financial Officer

Yes. Thanks for the question. This is Keith. I think that you said roughly around 230. I think that makes sense. And when you look back at history, typically from Q2 to Q3, we’re kind of flattish but with our strong second quarter here and the comments that we raised about seeing a sequential decline, when I look at it, I feel like Q3 is going to look at and feel a little bit more like Q1. So, I think that your comment there is reasonable.

Drew Ranieri, Analyst

Okay, got it. Thank you. And just on the spend, not materializing as the labor market remains tight comments, was that solely directed at R&D or was that kind of broadly across SG&A also just kind of want to better understand that dynamic as we’re moving into the back half of the year and how your guidance is built around that comment? Thank you.

Keith Pfeil, Senior Vice President, Chief Financial Officer

Yes. My comment was really focused on R&D because as I look at the spending, spending is really flattish compared to 2019. I wanted to raise that because we had talked previously about being more aggressive in investing, and I wanted to point that out. Yes, the labor market’s tight, it doesn’t change our view. The one thing I do want to call out is with our Q2 number of about $15.5 million in R&D there is a higher people investment in there. One of the things that we’ve done is, we’ve gone back and looked at our R&D last year during COVID and identified previous acquisition costs that what I would call stranded. We’ve worked to take those costs out of the P&L, so there’s savings there, which is kind of mapping some of the growth. And the last thing I would add is from a – coming back from COVID, our spending is coming back and things like travel. You’ll still see a little bit of a tailwind in R&D as it relates to travel.

Drew Ranieri, Analyst

Great. Thank you for taking the questions.

Operator, Operator

Your next question comes from the line of David Saxon from Needham & Company. Your line is open.

David Saxon, Analyst

Yes. Good morning or good afternoon, and thanks for taking my questions. Just one on the imaging launch, I mean, correct me if I’m off, but I guess you’ve just passed 150 Excelsius placements. So with the imaging launch, do you feel like you can get into a majority of those accounts over the next 12 months to 18 months? And then I think you mentioned supply could be an issue. Did I hear that right? Or is that just kind of dependent on how the launch goes?

Dave Demski, President and CEO

Yes, thanks, David. The comment on supply was really more anecdotal in that there’s been a lot of interest expressed by surgeons as we’ve previewed the technology to them. It’s really challenging to translate their enthusiasm to what the hospitals would like to spend. So, I just – on your other point about where though selling it to current robotics users, that is a value for us, but I really think the more significant value for us is to go after other users of other technology today and not just to sell to our same customer. So, I really see this as again, our ability to take market share and the computer-assisted side.

Richard Newitter, Analyst

Okay. That’s helpful. Just on the cadence here. I appreciate the comments around 3Q seasonality, maybe being a little more pronounced vacations, but just on the capital side, what is implied in your guidance for the seasonal kind of cadence of enabling technologies, if 2Q the high watermark in your guidance and 4Q, which typically is seasonally stronger quarters higher than 3Q, but not necessarily as high as 2Q, or are you assuming a typical kind of, the 4Q is the strongest quarter in your updated guidance?

Keith Pfeil, Senior Vice President, Chief Financial Officer

Operator, Operator

With no further questions. This ends the Globus Medical second quarter earnings conference call. Thank you for participating. And have a good evening.