Participants

Brian Kearns; Investor Relations; Globus Medical Inc

Daniel Scavilla; President, Chief Executive Officer, Director; Globus Medical Inc

Keith Pfeil; Chief Financial Officer, Chief Operating Officer; Globus Medical Inc

Matthew Miksic; Analyst; Barclays

Vikramjeet Chopra; Analyst; Wells Fargo

Richard Newitter; Analyst; Truist Securities

Mathew Blackman; Analyst; Stifel

Shagun Singh; Analyst; RBC

Caitlin Cronin; Analyst; Canaccord Genuity

David Saxon; Analyst; Needham & Company

Craig Bell; Analyst; BFA Securities

Matt Taylor; Anlayst; Jefferies

Presentation

Operator

Welcome to the Globus Medical's first quarter 2025 earnings call. (Operator Instructions)
I will now turn the call over to Brian Kearns, Senior Vice President of Business Development and Investor Relations.

Brian Kearns

Thank you, Brianna, and thank you everyone for being with us today. Joining today's call from Globus Medical will be Dan Scavilla, President and CEO, and Keith Pfeil, Chief Operating Officer and Chief Financial Officer.
This review is being made available via webcast, accessible through the investor relations section of the Globus Medical website at 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 2024 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'll now turn the call over to Dan Scavilla, our President and CEO.

Daniel Scavilla

Thanks, Brian, and good afternoon, everyone. Globe has had a flat quarter in Q1, finishing slightly down in sales with negative 0.8% growth versus prior year on a constant currency basis.
Drivers were softer, enabling tech sales against difficult comp. Temporary integration-related supply chain disruption and timing of international distributor orders partially offset by continued strengthening momentum of the US spying business.
Revenue for the quarter was $598 million, non-BPS was $0.68, increasing 9% versus prior year against higher diluted shares and a $0.06 onetime 2024 EPS gain not repeated in 2025.
Free cash flow was $141 million increasing $117 million or 493% versus prior year. We returned to debt-free status in Q1, paying off the remainder of the nearly $900 million debt inherited from the invasive merger and generating enough cash to pay for the Q2 never acquisition while investing in the ongoing business without interruption. In addition, We launched 2 new products in Cuba that will aid in driving market penetration.
Since the NuVasive deal closed in September of 2023, we've cumulatively added over $1 billion in incremental sales, generated $650 million in free cash flow, and executed over $500 million of share repurchases, reducing deal dilution more than 20%.
While Q1 sales are flat, we're already seeing stronger results in Q2 throughout the business as we remediate supply chain disruptions, fill open distributor orders, and close robot deals. We will continue to focus on the long game, investing in sustained, profitable growth, and using our financial strength and discipline to accelerate the top line results while continuing to deliver strong EPS and free cash flow.
Moving into the performance of our business areas, US spying grew 2% in Q1, with gains across our product portfolio in expendables, MIS screws, lateral and ACDF platforms. The core find growth is driven by several factors, including a high retention rate at all levels of our field sales team, the strength of our combined product offering, increased product cross selling, and implant pull through from robotic procedures.
US Q1 results were impacted by temporary integration-related supply chain disruption, and a planned reduction in third party biologic sales resulting from expected changes in the reimbursement landscape for wound care products, including some of our tissue products.
The reduction in third party biologics was included in our annual guidance, and the supply chain continues to strengthen in Q2. Exiting April, we delivered above market growth in our US spy business and feel positive about the quarters ahead. Competitive rep recruiting was strong in Q1, and the overall recruiting pipeline remains active as we enter our Q2, positioning us for another meaningful recruiting year.
As mentioned earlier, we launched two new products in Q1. The Cohere ALIF spacer with integrated screw fixation builds on the clinical success of our Cohere line, now offering surgeons a porous peak solution for anterior lumbar inner body fusion procedures. Our cohere proprietary porous architecture supports bone ingrowth and reduces fibrous encapsulation while maintaining the radiolucency needed for precise interoperative placement and postoperative fusion visualization.
The cohere ALIF spacer meets surging demands for improved [oste] integration without sacrificing imaging clarity or mechanical performance. This expansion further establishes our leadership in advanced material science.
The reline EGPS fixation system delivers solutions for open, minimally invasive, and hybrid procedures with pre-assembled and modular implants paired with versatile instruments to address both degenerative conditions and complex deformities effortlessly and efficiently.
The integration of the reline fixation system with the Excelsius enabling technology suite creates a powerful synergy of trusted reliability and innovation, delivering a comprehensive solution for surgeons while advancing our mission to help improve patient lives.
The following reline systems are now compatible with Excelsius technologies. Reline open, modular, mass reduction, small stature, mass midline, and reline cervical. The R&D pipeline remains rich, and I look forward to another year of meaningful launches improving outcomes as we strive to develop solutions to address unmet clinical needs.
Moving to enabling technology, sales for the quarter were $22 million a decrease of 31% against the record prior year comp. Capital sales tend to fluctuate among quarters, with Q1 historically being slower, but we didn't close the deals we planned on in Q1 in the face of market uncertainty.
To our knowledge, we did not lose any pipeline deals to competition and expect to close active deals in the upcoming quarters. The deal pipeline is robust, and Q2 is off to a good start with several robot and imaging system deals closed in April and May. Robotic procedures performed since launch surpassed 100,000 procedures globally in Q1 and continued to accelerate, growing 6% versus prior year, continuing to create increased implant pull through.
Our international spine implant business grew 1% in Q1 on a constant currency basis, impacted by the timing of distributor orders and temporary supply chain disruptions. We are accelerating growth in Q2 as we reduce the back orders in several key markets.
The combined trauma and NSO business declined 8% in Q1, driven by immigration-related supply chain disruption related to facility validations. This was partially offset by continued strength in the core trauma, which did deliver 34% growth for the quarter. The supply chain disruptions have been remedied, and product is being released for sale to the markets. We're seeing the overall trauma in NSO growth return to high levels in Q2.
In April, we completed the purchase of all shares of the Nevro Corporation for an all-cash transaction of $250 million. The acquisition of never further expands our reach into the musculoskeletal market, adding an additional $3 billion dollar market space for us to compete in and grow.
We believe that paresthesia-free pain relief enabled by high frequency technology offers a clinically superior solution that is altering the standard of care for patients suffering from chronic pain. Never technology has potential beyond its current application to benefit our cranial enabling technology, next generation spinal implants, adaptive AI, painful diabetic neuropathy, and other areas of our business.
The Nero patent portfolio strengthens our already best in class musculoskeletal innovation suite, while Globus's scale and customer base will accelerate market penetration of the differentiated high frequency technology.
We see this move as an expansion of our continuum of care and complementary to our current spinal portfolio offering. The strong and dedicated neuromodulation sales force will be able to leverage our existing spine team to drive uptake and penetration, while our spine team can offer more solutions to their surgeons. Globus's financial strength will accelerate investments in neuromodulation to expand the existing product reach and future product development.
Combining Nevro into Globus' existing infrastructure will improve the profitability and cash flow of the Nevro business, generating more cash for future investments and growth.
I believe the potential for Globus has never been greater. It's up to us to harness our resources and shape the future of our markets. We have at our fingertips everything we need to realize this. I want to thank the GLOIS team worldwide for your dedication and support, building the pathway to becoming the preeminent musculoskeletal technology company in the world. I will now turn the call over to Keith.

Story Continues

Keith Pfeil

Thanks, Dan, and good afternoon, everyone. Reflecting on Q1, our quarter delivered a mixed set of results. While revenue was down slightly to the prior year quarter, we saw a meaningful expansion in profitability and cash flow. We continued to make disciplined progress across our strategic and operational pillars which will fuel our long-term growth.
This afternoon, my comments will focus on Q1 performance, operational updates and impacts, discuss the never acquisition, highlight tariffs and potential impacts, and comment on insights as to our performance for the remainder of 2025.
We view many of the Q1 impacts as short term and are encouraged by the good start we've seen across our business in Q2. Now, let's start our discussion to the first quarter.
First quarter revenue was $598.1 million declining 1.4% as reported and down 8% on a constant currency basis over the prior year quarter. As Dan mentioned earlier, the main driver was softer, enabling technology sales, as well as temporary integration-related supply chain disruption and the timing of international distributor orders which are partially offset by growth in US spying.
Our Q1 GAAP net income was $75.5 million translating into fully diluted GAAP earnings of $0.54 per share, growing $0.59 versus the prior year quarter due mainly to lower merger related costs. Q1 non-GAAP net income was $94.8 million resulting in $0.68 of fully diluted earnings per share, or an 8.5% as reported improvement versus the prior year quarter.
In the prior year quarter, I highlighted a one-time $0.06 favourable non-cash adjustment related to the useful lives of assets acquired from the invasive merger, excluding this one-time favourable adjustment in the prior year quarter, operationally, our Q125 non-GAAP EPS improved $0.11, or 19.5% versus Q124. The earnings improvement is driven by synergy capture, partially offset by lower revenue.
Q1 free cash flow was a record $141.2 million. Musculoskeletal sales in the first quarter of 2025 were $575.9 million essentially flat to the prior year quarter. Though US spine grew 2.2%, it was offset by declines in other areas of musculoskeletal, including neuro monitoring, wound care, and the timing of international distributor orders. In addition, temporary supply chain issues related to manufacturing integration impacted core spine and trauma.
The neuro monitoring impact was driven by a change in reimbursement approach by a large insurance provider. Though case volumes are growing, the decline in reimbursements is negatively impacting revenue. Our biologics business was impacted by expected changes in the reimbursement landscape for wound care products, specifically the placental tissue used in diabetic foot ulcers.
In response to this shift in market dynamics, we are proactively realigning our biologic strategy. We are positioning our tissue manufacturing capabilities to support direct business opportunities that provide more stable reimbursement and greater long-term business opportunities.
Moving into the supply chain impacts, we experienced temporary issues driven by the timing of in-house manufacturing scale up. This disruption mainly impacted legacy and the base of products and was driven by finalizing validation activities associated with production. These issues resolved themselves late in our first quarter, and production has since come online for the impact of products.
Our on international distributor revenue was impacted by the timing of stocking orders as well as integration impacts driven by supply chain disruption mentioned above or earlier, as well as some limited distributor consolidation.
As we move through 2025, this disruption will subside as integration supply chain challenges ease and restocking orders are placed to replenish orders filled at the end of 2024. Overall, we estimate the impact of these business issues to total approximately $20 million to our musculoskeletal revenue in the quarter.
Q1 enabling technologies revenue was $22.2 million declining 30.6% as compared to the prior year quarter. We do note a tough Q1 comp as we did not see the usual sequential drop off between Q423 and Q124, where revenue only declined 2.3% sequentially.
Despite the tough comp, Q1 enabling tech revenue was clearly soft, mainly in robotics, driven by extended timelines to close deals. This further underscores the lumpy patterns we see we see in revenue from time to time. We do not see softness as a sign of demand destruction. We remain bullish on this business and are encouraged by our good start to the 2nd quarter.
First quarter US revenue was $483.9 million essentially flat to the prior year quarter, driven by my earlier comments as cross musculoskeletal enabling technologies. Q1 International revenue was $114.3 million lowered by 7.7% as reported, and lower by 4.6% on a constant currency basis. The driver of lower international revenue ties back to my earlier comments, mainly distributor orders, supply chain disruptions, and lower robotic sales.
GAAP gross profit in the quarter was 63.6% compared to 55.3% in the prior quarter, with the resulting improvement driven primarily by lower inventory step-up amortization and synergy capture, partially offset by sales mix.
Adjusted gross profit was 67.3% compared to 69% in the prior year quarter. The prior quarter gross profit includes the one-time favourable non-cash adjustment that I mentioned in my earlier comments. This non-operational adjustment was worth $9.5 million and 1.5%.
Thus normalized Q1 2024 gross profit was 67.5%. Adjusting for this quarter over quarter, 20 basis point decline was driven by the mixed impact of lower enabling technology sales and lower nerve monitoring reimbursements, primarily offset by synergy actions.
Research and development expenses in Q1 2025 were $33.1 million or 5.5% of sales compared to $57.3 million or 9.4% of sales in the prior year quarter. Included in the prior year quarter was a $12.6 million charge related to the acquisition of in-process research and development, which did not occur in the current quarter. Adjusting for that, Q1 2024 R&D would have been $44.7 million or 7.4% of sales.
The resulting decline both in dollars and as a percentage of sales is attributable to synergy capture, resulting in lower headcount and third party spending SG&A expenses in the first quarter of 2025 were $242.8 million or 40.6% of sales compared to $248.7 million or 41% of sales in the prior year quarter.
The decline in spend is attributable to synergy capture, mainly from lower back office spending, partially offset by higher sales and marketing costs driven by the mixed impact of lower international revenue, which carries a higher fixed component to compensation costs.
Q1 net interest income was $1.7 million compared to $1.9 million of interest expense in the prior year quarter. The $3.6 million dollar favourable change is being driven by lower interest expense on convertible debt. The GAAP tax rate for Q1 2025 was 27.2% compared to 16.8% in the prior year quarter.
The Q1 2024 rate was abnormally low, driven by the discrete nature of the IP R&D acquisition in the prior year quarter, higher GAAP pre-tax profits in the current year quarter, and lower valuation allowances on foreign derived income. Our non-GAAP tax rate for the quarter was 24.1% in line with the prior year non-GAAP rate of 24.5%. cash equivalents and marketable securities were $461.3 million on March 31, 2025, compared to $956.2 million on December 31, 2024.
The decline in cash is driven by two main factors. One, in March, we fully repaid in cash the remaining $450 million outstanding convertible debt assumed from the evasive merger. With the repayment of this debt instrument, Globus has now returned to being debt free. In addition, during the quarter, we spent $190.3 million to repurchase approximately 2.4 million shares. With this action, we've completed our current share repurchase program.
Since closing the merger in September 2023, we have paid off the remainder of the $871 million of debt inherited from the merger and invested $500.8 million to repurchase 8.4 million shares at an average price of $59.62 per share.
These actions over the past 16 months call attention to our focus on operational cash flow discipline to maintain a strong balance sheet while exhibiting conviction in the merger as our share repurchase activities resulted in us buying back over 20% of the dilution created in the stock for stock merger with Nuvasive.
Q1 net cash provided by operating activities was $177.3 million and free cash flow was $141.2 million both of which are records for our first quarter. The increase is attributable to higher cash profits from the business driven by synergy capture and working capital improvements within accounts receivable, partially offset by higher capital spending, predominantly machinery and set investments to in-source production and drive sales growth.
Operationally, we remain focused on insourcing key products across our manufacturing facilities. Machinery ordered in 2024 has been landing in our facilities. It's coming online throughout the year while we continue to assess and reduce third party spending.
Despite the softness in our top line, our Q1 results showed a meaningful expansion in profitability, with Q1 adjusted even finishing at 29.7% versus 25.4% in the prior year quarter as a result of synergy actions achieved. The expansion of profitability of profitability. Occurred despite the neuro monitoring reimbursement challenges mentioned earlier, which is negatively impacting consolidated adjusted EBITDA by a full 2% points in the first quarter. Thus, excluding neuro monitoring, adjusted EBITDA would have been 31.7% in Q1 2025.
Looking ahead, we remain confident in our approach to grow profitably while addressing specific areas of investment and business improvement. We remain on track to delivering synergy savings, which will be reflected in the P&L as we move ahead.
Subsequent to the quarter on April 3, 2025, we close our acquisition of Nevro Incorporated after Nevro shareholder and regulatory approval. We pay $250 million using existing cash reserves to fund the acquisition. We are actively rolling out action plans to get this business right sized to drive profitable sales growth while reducing excess spending to quickly adopt a globus mindset as we seek to improve cash generated from this business.
We've been actively reviewing and assessing tariff impacts for the Legacy Globus business, as well as the newly acquired Nero business. Overall, we do not see tariffs as materially impacting our business through supply chain disruptions or from a cost increase perspective. Much of the globus business is vertically integrated and predominantly US-based, thus minimizing tariff exposure.
Where we do see tariff impacts, we have launched a series of cost action offsets, including but not limited to targeted price increases, vendor resourcing, and vendor cost renegotiations. We have actively and aggressively engaged on this initiative to ensure minimal impact to our business.
Now I'd like to turn our attention to the financial guidance.
Upon announcing the N acquisition on February 6, we communicated 2025 net sales guidance in the range of $2.8 billion to $2.9 billion and fully diluted non-GAAP earnings per share between $3.10 to $3.40.
At the present time we are reaffirming the guidance for net sales in the range of $2.8 billion to $2.9 billion but we're decreasing our guidance for fully diluted non-GAAP earnings per share to a range between $3 to $3.30.
This $0.10 decrease on the top and low ends in EPS guidance is to account for the additional carrying costs of expenses related to closing the Nero deal earlier than planned. To summarize, although Q1 top line results were softer than anticipated, we delivered meaningful gains in profitability, deleveraging, and free cash flow, key priorities in our value creation strategy.
Q2 is off to a good start, highlighted by US lying and enabling technologies. We are well positioned to build on this momentum and remain focused on executing a seamless integration of the never acquisition to drive future growth. In closing, I'd like to thank the entire globalist team, including our newly integrated Nevro colleagues, for their focus and execution.
As we continue to strengthen our core portfolio and unlock new market opportunities, our priorities remain clear disciplined, profitable growth, operational excellence, and sustained shareholder value as we build the leading musculoskeletal company of the future. We will now open the call for questions.

Question and Answer Session

Operator

(Operator Instructions)
Matt Miksic, Barclays.

Matthew Miksic

Hey, good evening. So, not, goes without saying I think this isn't the quarter anyone was expecting, maybe if you could talk a little bit about your confidence here, coming into April I think you mentioned operating on, that above your metrics, but. How much of what happened in Q1 maybe spilled into Q2, what amount of what happened in Q1, do you think could recover somewhat in Q2 in rapid fashion? What's going to take a little more heavy lifting and then I have one follow up if I could?

Daniel Scavilla

Yeah, so Matt, I'll go first. At the end of the day there's a couple of things as we transition facilities into new ones and validate them, or as we continue to scale up our in-house manufacturing, right, there are some things that took longer than planned that created some back orders.
I think that coupled with timing of distributor orders, again, heavy in Q4, lighting Q1. Probably coming back and then ultimately the real thing here is the elongated selling process that we experienced in Q1 with all of the market uncertainty that really is the impact there. What I think is, without getting deep into the Q2, we've seen positive effects in our US spying business that really is solid. We are remedying and supplying the products from the back orders. I see that as a temporary issue that will recover in 2nd quarter.
And that will have an impact throughout international and trauma as well as US and we are seeing deals occur at a decent pace within the robots, so it's going well in all of those aspects. So, if you ask me, I have confidence that this feels like a blip, and we're moving back to who we need to be. And look, we own a bad quarter. We're going to go fix it and drive it forward and come out with the right results here.

Matthew Miksic

Okay, that's helpful color and then maybe, on the synergy side for Nevro, maybe talk a little bit about, now that the deal is closed, any additional color or confidence you can express about the pace and the areas of opportunity for. For driving efficiencies or aligning the organization in a way that that that gets to you at or above your delusion expectations for this year thanks.

Keith Pfeil

Hey Matt, this is Keith. Thanks for the question. That's a great question as you think about bringing never online, the place we're really going to focus on coming out of the gate is really operational expenses.
If you walk down the P&L Nevro's gross margins in the high 60s, we think that over time we can work to expand that, but I would say in the near term, near and medium term, the key focus is going to be figuring out their op operational expenses and working to reduce those. Because we look at the P&L, the SG&A expenses candidly are too high for that business to operate profitably long term. So those are the things that we're going to focus on right out of the gate.

Matthew Miksic

All right. Appreciate the color. Thank you.

Operator

Vikramjeet Chopra, Wells Fargo.

Vikramjeet Chopra

Hey, good afternoon and thanks for taking the questions two for me, I appreciate your comments on the elongated selling cycle for robots, but I'm just curious if you've seen any impact from recently launched, spying robots from your larger competitors, and whether, people are asking for more alternative forms of, financing or an increase in your rental program. I had a quick follow-up, please, Keith.

Keith Pfeil

Thanks for the question. In terms of the elongated selling cycle, I haven't seen situations where other competitors are slowing down the process. In terms of looking at the mix of how we're selling robots, rentals, leases, I would say still our mix this quarter is still heavily focused on outright sales, but options of what we're quoting, I would say are increasing, whether it be third party financing or rentals, but I would say that that may have slowed some things down.
It really contributes to some of the elongated selling cycles, but I don't see competitor robots thus far as driving a delay in us closing deals.

Vikramjeet Chopra

Okay, thank you. That's super helpful. And my follow up question is, I know you don't like the EBITDA margins, but just maybe directionally help us think about EBITDA margins in 2025 as you, fold in the Nevro deal.

Keith Pfeil

Yeah, we don't guide the EBITDA margins, but as I think about kind of where we're going, I would say that, our goal is to achieve the 30s, but adding on never on the timing of bringing it on earlier will have a slight impact. So, I would say that we should be in the high 20s this year.

Operator

Matthew O'Brien, Piper Sandler.

Hey, this is [Philip] from Matt. Thanks for taking our questions. Understood that there are a lot of moving parts between some of these headwinds, enabling techurs supply chain, but wanted to hear, you may be more specifically how your rep count has been holding up? Maybe just confirm that you aren't seeing any uptick in in legacy NuVasive sales rep leaving at this point and thanks for the color on the pipeline looking good, but just any further color on that.

Daniel Scavilla

Yeah, Philip, I'll answer that. We're not seeing any unusual or high-volume departures occur from any of our sales reps regardless of where they used to work.
We're actually seeing them dig in and do well. The US is really strength outside of the back orders and they're doing well. The momentum is increasing there, and so not only are the teams staying together. But they have sequentially report to five months significantly moved the average daily sales up and so they're digging in, doing well, they're staying together as a team.
We've not seen any interruption that would cause concern and certainly there are no departures that would have impacted our results in the first quarter.

That's helpful. And then shifting gears on the positive one to focus on the cash flow that you consistently deliver, thinking past the Nar deal, what are your expectations for, cash use? Might we see more M&A or maybe some more shared purchases, that sort of thing.

Keith Pfeil

That's a great question. So, as I think about cap structure moving forward, obviously we want to continue to generate strong cash flow. We still view ourselves as a growth company. So, the first priority is going to be internal investment. We've done several deals here over the last couple of years. M&A is still part of our cap structure.
As I think about that moving forward, I would say that anything we do in the near term would be more of a tuck in nature. And then thirdly, share repurchases. They have been part of our cap structure. We see them continuing as part of our cap structure, but it's not the primary driver.

Daniel Scavilla

And I would just add if we were to experience any overreactions in the market, we would take advantage of that and probably go back and buy stock opportunistically applied towards future acquisitions. We know the strength of this business long term, and so we're going to stay focused on delivering that take the month.

Operator

Richard Newitter, Truist Securities.

Richard Newitter

Alright, thanks for taking the questions. I think I know the answer, and I think it's yes, but can you just confirm that all of Nevro is in the guidance, deletion and revenue, and if it is, what's your organic growth guidance?

Keith Pfeil

So Rich, this is Keith. I will tell you that yes, it is included in our business. We haven't broken out the parts and pieces of it though as we move forward when we report, we are going to show based business Globus versus prior year versus acquisitions.

Richard Newitter

Okay, so I'm just, okay, got it. So can you maybe just tell us then because we had all been thinking of you stand alone and we built for those that covered up that that that covered never we had never forecast or you could use the consensus, but are the components of your organic guy dramatically different on a standalone?

Keith Pfeil

No, the components of our organic guide are not materially different on a standalone basis.

Richard Newitter

Okay, and then maybe just for my follow up on the capital outlook, it sounds like, you've seen something get better in April, maybe even into early May. I just trying to get an understanding of what the elongating selling cycle looks like and if that that's occurring, what gives you the confidence that that narrows again in in short order I guess you know it sounds like you expect somewhat of a snapback or through some sort of uncertainty period on some level.
What could you give us a sense of two kind of reconcile that dynamic with your comments that things are getting better?

Daniel Scavilla

Yeah, Rich, and I want to make sure we clarify we're happy with the progress in Q2 and we're seeing deals close. I don't know if an elongation will snap back. You have market uncertainty whether it be with tariffs or other things along the line with capital market disruption and different things that are going around.
So at the end of the day, our job is to make sure we've got a potential portfolio and we actively work with them and we close that and if that winds up shifting a month or two over the long term, that's fine, we'll neutralize and go.
The market is really not penetrated and the potential is great and as I rattled off more and more of our former new products are now available on a robot, so we're positioned to really go back to the initial reason of that acquisition, which is double our TAM and replace our robots with our customers and provide them those products. All of that remains on course, and that's okay if it takes a month or two. We're playing this game for the next 5 to 10 years with each one of them, not for the quarter.

Operator

Mathew Blackman, Stifel.

Mathew Blackman

Good afternoon, everybody. Thanks for taking my question. I have a couple, and my first one is, I think along similar lines as riches and maybe come out in a different way but wanted to just push a little bit on that reaffirmed top line guide and the assumptions backing it. This was a pretty substantial miss in the first quarter.
And so with the reaffirmed guide again, so much of what Rich was asking, does that mean you expect to claw back this lost 12 business throughout the year? Or again, I just want to make sure, did you change something and how you were layering in contribution or even dissynergies from N or NuVasiveand then one follow up?

Keith Pfeil

So I would say that there's not a material change in the guide, Dan made a comment that, and talked about the biologic impact that that was contemplated in our guide going into the air, and I would also call out that the neuro monitoring impact was also contemplated in our guide coming into the air. I talked about a $20 million impact on musculoskeletal, and it's fair to say that roughly $7 million to $10 million of that is the two things that I mentioned earlier related to. Related to the wound care as well as the neuro monitoring.
When you look at 11 and the thing that we remain positive and optimistic about is clawing back the enabling tech sales and seeing an uptick in our spying business as we move forward. We commented on the impacts of supply chain issues. We see those as behind us and as we move forward, we see people ordering again. We don't view that as a [lossale]. We see us getting that back as we move forward.

Mathew Blackman

Okay, I appreciate that. And obviously there are a lot of moving parts, and I don't know that you do this traditionally, but could you maybe give us a little bit of help, at least on the second quarter in terms of the cadence here with the down step or the step down here in the first quarter, but then layering and never just, any sort of sense of where we should be landing on the top or the bottom line relative to where consensus may be today or just some sort of help might be would be appreciated.

Daniel Scavilla

No, I appreciate the question. So we don't get down to that kind of granularity or even on the quarters, if there's an after-hour call and you have a few questions, we'll be glad to entertain that, but we're not in a position to break out the quarters or get into granularity within the sub-businesses.

Mathew Blackman

All right, fair enough, thank you.

Operator

Shagun Singh, RBC.

Shagun Singh

Thank you so much for taking the question. I guess I just wanted to take a step back and just hoping you can address one of the questions I've been receiving from investors that, is never the right acquisition just given that the NuVasiveacquisition integration is still ongoing.
And, it will open you up to, potential execution misses and you know we've seen a little bit of a of a choppy quarter in 11 so can you maybe talk to us about, Nevro, why it makes sense, and then you, where exactly are you in that integration. And how confident are you that, all this is behind us, and we want you know hit a snag down the road in '25?

Daniel Scavilla

Thanks, I'll try and address some of that. You could help me if I missed a few of the points you put out, but let's start with your investors and let's keep it fact-based never wasn't part of anything that we did in the first quarter. And so that question is more of a head scratcher there.
Well, timing is never great with some of the acquisitions. It was an opportunistic buy that I did go through in my prepared script. So, for $250 million, we enter into the [Noomod] business. And we're able to get a clinically superior solution out there that we feel we can scale up to expand our continuum of care and really help treat patients.
In addition, the patent portfolio strength is where we want to get to with future things we're working on, and their technologies applicable through multiple areas of our business that I laid out. So, this is a buy that has great long-term potential. We focus on the long term.
And while we have people working on it there, they are separate from anyone else doing robotics and anyone else doing US spying. They're not interfering with it, and there's nothing related to supply chain manufacturing from Nevro that would come into our robots or our spine, so they're very different that way.
If you want, you can pick some of the other parts of the question, but I think that's the major message out to the investors. Yeah.

Keith Pfeil

I think again, this is Keith, just to add on, you had a follow up in there that talked about, how do you know that these are behind you for what you experienced in the first quarter. But when I think about Q1, the two big things that jump out to me are the soft enabling tech sales and really some of the insourcing supply. Chain disruptions that we saw, a com coming out of the quarter, production is coming online and we're back to shipping. We've been sourced a good bit of product primarily on the side.
I view that as really as a onetime change bringing it in. I feel confident as we move forward that we have the worst of those issues behind us. Machinerys coming online. We have product flowing both from Our manufacturing facilities, as well as our third-party facilities, and we're getting product in the hands of our sales reps. Enabling tech.
I really fall back on the earlier comments. We see the lumpiss, we had lumpiness like this, I think three years ago coming into Q1 that in that time we said that the pipeline wasn't developing. The situation here is a little bit different. We have a robust pipeline. We're just seeing a bit of an elongated selling cycle.

Shagun Singh

Got it. And just I guess a quick follow up and, sorry, I was, I got disconnected earlier, but any update on the FDA warning letter and then should we expect you to continue to focus on M&A like you had mentioned?
Thank you for taking the question.

Daniel Scavilla

We don't really have anything, as far as the FDA warning letter. We made a lot of progress with that. We're really waiting for them to come back and inspect the facility and move this. We're actually excited for them to come back and inspect this facility and remove this. We're more than ready. We're more than ready 30 days after that. So, it's not a concern of ours. It's not an impact of ours. We just want to go get this cleaned up and put it behind us.

Keith Pfeil

And as it relates to your question on M&A, I would say that, given, we're finalizing invasive and working to bring that in along with Nero, I would say that we probably slow down a little bit in the near term on M&A and focus on finalizing integration activities before stepping forward.

Operator

Caitlin Cronin, Canaccord Genuity.

Caitlin Cronin

Hi, thanks for taking the question. So, just with the US performance of 2%, I mean, what did you see in terms of the market growth and just anything from an overall procedural health and market perspective to point out.

Daniel Scavilla

Yeah, Caitlin, I don't really have a lot of good data for the market growth to answer for you, so don't be a guess on my side.
Having talked to surgeons, one of the things that they had told us is they saw some slowdown occurring. They also felt like some of the approvals were taking longer from insurance companies as they were going through it, but that was more conversational. I don't really have a lot of data to say. I think it's X. I think there were some things going on that may have impacted it.
I think ours is more about just creating the cadence and feeding the product and clearing up back orders and launching new products and going. So, to me, I think it's just something we push through and get back on track to who we need to be.

Caitlin Cronin

Got it. And then just on the enabling tech I mean reline now approved was has modules been approved for Excelsius and how much of an uptake are you already starting to see with kind of the cross-selling with NuVasive surgeons?

Daniel Scavilla

Yeah, it's a great question. So, Modulus is not yet approved, but it's in the works. We'll get it there. You're right with three line we're seeing it, and we are placing robots into NuVasive accounts, so we're seeing that continue. So as thought with our plan, we're doing that, of course we'd like it faster.
In going through, but all of the instrumentation is done on reline, as you said, all the products are there modulus next, and then we'll look to really make sure that we have everyone trained. We've been working on that, and we'll continue down the path which is already to me decent impact into new accounts.

Caitlin Cronin

Great. Thanks so much.

Operator

David Saxon, Needham & Company.

David Saxon

Great, good afternoon. Thanks for taking my questions. So, I had a couple here, this afternoon, one on Nevro, and then one on Excel State Slack. So on Nevro, just can you talk about kind of the pace of the integration you're trying to kind of meet there and key milestones we should be aware of?
And when in a previous answer you talked about their ST&A being too high so. I guess the real question is like how quickly can you get that down to where you want it to be and where do you want it to be?

Keith Pfeil

This is Keith I'll take that. So, in terms of Nevro, I mean OpEx, like I said, is going to be an area of focus. We are in the early stages of integration focused and working on that. I'm not going to give a point number as to kind of what I say the future state is. The key takeaway is when you look at OpEx, it's not sustainable for that level of sales.
So it's really unpacking where is the spending at, and you know we've identified, there's areas of third party spending we've got to control. There’re areas of internal spending we have to control. We're going to aggressively go after that as we move through 2025. The key is to make sure that the business is driving profitable sales.

David Saxon

Okay, great. And then on E-Flex I guess just you know level of interest in the system, number of placements, how's that order book building date and what are you seeing in terms of tellcast implants pull through?

Daniel Scavilla

Yeah, so we're still building out the book of capital placement, and it's actually going well. It's getting heavier, meaning it's getting fuller with where we're going.
We have not placed any yet out into the market, and what I would tell you is no pull through as of yet. But if you ask me, my thought would be we're probably going to enter the market within the second quarter based on what we're looking at now and push through and then to your point, we'll start seeing that ramp up as we get into the future quarters from there.

Brian Kearns

Great, thank you.

Operator

Steven Lichtman, Oppenheimer.

Hi, guys. This is Air on for Steve. Thanks for taking the question. I just had a question regarding, tariffs. Can you guys talk about what impact, that denounced tariffs may have on your margins?

Keith Pfeil

Yeah, great question. We don't see any real material impact here on margins. Like I said, we are predominantly vertically integrated.
When I think about the countries where we do source from, the impacts to us are minimal because there's lots of other actions we've taken, whether it's vendor cost renegotiation or offsets such as targeted price increases. I do not, to be clear, I do not see that having an impact on our earnings or margins this year or going into next year.

Daniel Scavilla

Yeah, and I would say when Keith says vertically integrated, about 95% of our production is US-based, and our sourcing of materials to produce is actually US-based. We've been on that. That actually plays to our favor in this case. And so, with what we've calculated, we don't see any need to pivot or change our strategy as we work through these tariff challenges.

Great. Thank you.

Operator

Craig Bell of BFA Securities.

Craig Bell

Good afternoon, guys. Thanks for taking the questions. Dan, wanted to ask on US spy growth, the 2%, you guys have been talking about, how the US core spine has kind of held in there and that was the strength, but, was there an impact from any of these supply disruptions on that number? And if so, what was the growth X, the one time?

Daniel Scavilla

Yeah, it's a good question, Craig, and the answer is yes. We're not going to split it out. Some of that is kind of estimates. Did you get the surgery? Did you not, would it go? So, I'm not really feeling comfortable enough to put something out there, but the answer is yes with that. There was an impact that occurred within the back orders that we know are behind us and we're improving on a daily basis here with that type of move.
Also, listen, robotics sales and prolonged sales, they also tend to have an impact in your pull through and different things that will play into those numbers as well. So, both of those are a factor that would impact US spying.

Craig Bell

Yeah, and, I'm going to try another quantification question if I'm not sure if you're going to give me an answer or not, but so on the enabling tech, maybe, I guess, would you be willing to quantify what the impact was in Q1 and then maybe just what those deals, if what those deals were that closed in early Q2?

Daniel Scavilla

Well, and I apologize I'm not sure I'm fully following, right, because they said it was down 31%. It was a $22 million sale. So, are you asking what carried forward to deals, is that what you're saying?

Craig Bell

Yeah. I guess if you would quantify what the impact was from the delayed sales that may have been pushed into the Q2?

Daniel Scavilla

And again, I'm not being funny with this, but why don't we talk that in August when we get into Q2 just because it's in play now and you're in the beginning of May. And so, while we're seeing some lifts occurring, you're right, the things that we're talking about some of those rollovers, but some of them are new. I'd have to sort through it, but one out of the three months it's tough for me to make a call right now and just tell you that the sales are really related to both carryovers and new ones that we had in our portfolio.

Craig Bell

Got it. Thanks.

Operator

Matt Taylor, Jefferies.

Matt Taylor

All right, thank.
You for taking the question, guys. Apologies. This is really just a clarification. I am a little confused on the top line guide still because previously it was with the close of Nevro at the end of Q2.
Now we got the same number, but you closed it kind of a quarter early. So, it implies something changed, and I was just wondering, if you could at a high-level talk about whether it's a different never expectation or a different. Base expectation or facts like what, what's different about those two scenarios?

Keith Pfeil

Hey Matt, that's a great question. This is Keith. I really would fall back on what I said earlier is that we're focused on driving profitable growth as it relates to Nevro.
So even though the deal closed earlier, we're being conservative on the revenue view as we move the business forward because we want to get the spending right.

Matt Taylor

Okay, and then maybe just one follow up, in terms of your, enabling tech, the delays that you saw in in one of the closing, is there some factor in terms of the type of customer or the type of deal or the environment that you would attribute that to? I just wanted to get more texture as to why you thought that that was happening?

Daniel Scavilla

I'll take that. No, it wasn't a particular thing or a particular customer or anything like that. I think it was really just a lot of interest, and most of it was red lines back and forth to seeming to take longer than normal as I think hospitals or other caregivers worked through some of the more macro challenges, but again, it was really kind of across the board, not specific to one group or one customer.

Matt Taylor

Okay. Great. Thank you so much.

Operator

Thank you. With no further questions, that concludes the Globus Medical's earning call. Thank you for participating. You may now disconnect.

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