Globus Medical's Q3 2025 Earnings Call: Contradictions in Enabling Technologies Strategy, Nevro Integration, and Flexible Payment Models

Date of Call: November 6, 2025

Financials Results

• Revenue: $769.0M, up 22.9% YOY (22.3% constant currency)
• EPS: $1.18 non‑GAAP diluted EPS, up 42.6% YOY (GAAP diluted EPS $0.88)
• Gross Margin: Consolidated adjusted gross profit 68.1%, compared to 66.5% prior year (GAAP gross profit 64.2% vs 53% prior year)
• Operating Margin: Consolidated adjusted EBITDA margin 32.8%; legacy Globus adjusted EBITDA margin 35.3%, up 435 basis points YOY

Guidance:

• 2025 net sales revised to $2.86B–$2.90B (prior $2.8B–$2.9B), implying +13.5% to +15.1% vs 2024.
• 2025 non‑GAAP diluted EPS revised to $3.75–$3.85 (prior $3.00–$3.30), implying +23.2% to +26.5% vs 2024.
• Expect consolidated adjusted gross profit of 67%–68% for 2025.
• Expect R&D expense ~5.0%–5.5% of revenue and a non‑GAAP tax rate ~24%–25%.
• Nevro now expected to be accretive to non‑GAAP EPS in fiscal 2025.
• Share repurchase program active with $435M authorization remaining as of Sept 30, 2025.

Business Commentary:

* Revenue Growth and Market Penetration: - Globus Medical reported record revenue of $769 million for Q3 2025, growing 22.9% on an as-reported basis and 42.6% in non-GAAP diluted earnings per share. - The growth was driven by strong performance in the U.S. Spine business, which achieved 9.6% reported growth, and the recently acquired Nevro business, which contributed $99.3 million in revenue, marking its strongest quarter since the acquisition.

• U.S. Spine Business Expansion:
• Globus's U.S. Spine business led the growth with 9.6% reported and consecutive growth for 32 weeks.

• This performance was attributed to hiring top talent, competitive recruiting, and the launch of new products, which positioned the company to achieve high single-digit growth above market averages.

• Integrated Synergies and Operational Efficiency:

• The integration of Nevro into the Globus organization led to significant operational improvements, with stand-alone Nevro achieving an adjusted EBITDA margin of 16.2%, up from a negative 1.4% in the second quarter.

• The positive results were driven by organizational and procedural changes, as well as a focus on cost actions and operational efficiencies.

• Free Cash Flow and Financial Performance:

• Globus generated $213.9 million in free cash flow during Q3 2025, representing over 50% of all free cash generated in fiscal year 2024.
• This strong cash flow performance was supported by sales growth, synergy execution, and improved working capital management, particularly in accounts receivable.

Sentiment Analysis:

Overall Tone: Positive

• Management described Q3 as "exceptional" and "record" with "sales of $769 million," non‑GAAP EPS $1.18 (up 42.6%), and record free cash flow $213.9M; they raised full‑year revenue and EPS guidance and said Nevro is now accretive to earnings in 2025, supporting a Positive tone.

Q&A:

• Question from Richard Newitter (Truist Securities): Can you color the strength and acceleration in U.S. Core Spine, sustainability, and drivers (e.g., robotics pull‑through, rep recruiting)?
  Response: Growth is broad‑based across core implants and products, driven by new product uptake, competitive rep recruiting and robotic pull‑through; management views the momentum as sustainable.

• Question from Richard Newitter (Truist Securities): On enabling tech, you mentioned operating leases — should models dial down near‑term revenue recognition and shift cash into out years?
  Response: Hospitals increasingly request alternative acquisition structures (leases, pay‑per‑use), which defers upfront revenue recognition over multi‑year terms despite a healthy pipeline.

• Question from Vikramjeet Chopra (Wells Fargo Securities): Nevro delivered 16.2% EBITDA this quarter — expectations for margin progression over 12–18 months and drivers?
  Response: Management plans further SG&A and R&D synergies already initiated, will target COGS improvements to lift gross margin and drive sales via rep conversions to expand profitability.

• Question from Vikramjeet Chopra (Wells Fargo Securities): With Q4 typically strong for capital, how should we think about Q4 growth in enabling tech given flexible deal structures?
  Response: Pipeline and ability to close deals remain strong; flexible financing can shift timing of revenue but the company is confident in the updated full‑year guide and ability to close additional capital deals.

• Question from Matthew Miksic (Barclays): For Nevro, what adjacent products/indications might be added to reps' portfolios and timing?
  Response: Longer‑term opportunities include peripheral nerve and other neuromodulation indications (e.g., diabetic neuropathy, Parkinson's tremor), but development and commercialization will be multi‑year.

• Question from Matthew Miksic (Barclays): Have you seen a step‑up in leases in Q3 and could leases/rentals exceed ~50% over time?
  Response: Mix of rentals/leases is meaningfully higher in 2025 versus prior years but remains well below 50%; increased flexibility may slow some deals' timing but pipeline remains intact.

• Question from Matthew Taylor (Jefferies): Where have Nevro cost outs occurred and what remains?
  Response: Initial cost reductions focused on R&D rationalization and SG&A (back‑office headcount, software/consulting); next priorities are COGS improvements to raise gross margin and further SG&A efficiencies.

• Question from Matthew Taylor (Jefferies): Is gross margin expected to improve gradually with a bigger step into mid‑70s by late 2026?
  Response: Management expects sequential gross‑margin improvement toward the mid‑70s over time but will not provide explicit 2026 guidance.

• Question from Shagun Singh Chadha (RBC Capital Markets): Directional color on 2026 — puts and takes across core Spine, Nevro, Trauma, and EBITDA outlook?
  Response: High‑level outlook is constructive — U.S. Spine momentum, international recovery to mid‑teens over time, trauma normalizing, Nevro early but improving; long‑term goal remains mid‑30s EBITDA for the base business, but no 2026 guidance given.

• Question from Caitlin Roberts (Canaccord Genuity): Why are hospitals slowing enabling‑tech decisions and will XR/navigation be a lower‑cost alternative to full robotics?
  Response: Hospitals are lengthening vendor reviews and reallocating capital to ASCs/facilities amid funding uncertainty, increasing demand for leasing; XR paired with ExcelsiusHub is positioned as a lower‑cost, complementary navigation option.

• Question from Caitlin Roberts (Canaccord Genuity): How much top‑line risk might Nevro changes introduce?
  Response: Management acknowledges integration risk but says much uncertainty has been reduced and they are focused on rep hiring and surgeon conversions; remain cautious about projecting near‑term top‑line impact.

• Question from Samantha Munoz (Piper Sandler): Profitability this quarter was strong — how sustainable is it and what's the runway for Nevro improvement?
  Response: Sustainability is underpinned by high‑margin U.S. Spine growth and realized synergies; Nevro showed quarter‑over‑quarter cash and margin improvement with additional upside from COGS and SG&A initiatives.

• Question from David Saxon (Needham): Legacy trauma is ~80% of competition's portfolio — is that critical mass or do you need parity, and timing to reach 100%?
  Response: Management considers ~80% critical mass to compete broadly and is now focused on density in Level 1/2 centers rather than chasing full parity immediately.

• Question from David Saxon (Needham): Thoughts on Simplify 2‑level approval and whether Simplify growth is share gain or market expansion?
  Response: Company confirmed it has 2‑level approval and indicated growth includes both share gains and expansion (e.g., ACDF), but offered no additional detail.

• Question from Thomas Stephan (Stifel): Nevro returned to sequential growth — is positive YoY growth now durable?
  Response: Too early to declare durable YoY growth; sequential improvement is encouraging but management withheld judgement on sustained YoY growth.

Contradiction Point 1

Enabling Technologies Sales Strategy

It directly impacts expectations regarding the company's revenue growth and market penetration strategy for Enabling Technologies.

Can you elaborate on the shift to flexible payment models for Enabling Technologies? - Matthew Miksic (Barclays Bank PLC, Research Division)

2025Q3: The shift to operating leases means really more flexibility in acquiring capital for our customers. It's not as much about us structuring these transactions versus trying to make it as appealing as possible for hospitals to try to do the deal. - Keith Pfeil(CEO)

What progress has been made on Nevro's cost and efficiency programs, especially on the sales side? - Matthew Stephan Miksic (Barclays)

2025Q2: On sales and marketing, we are very pleased with the progress we are making on the sales side of the business. We've been very clear that we've got a 3-point plan. We've got a plan to get the sales force back to a full sales force. We've got a plan to increase the size of territories, and we've got a plan to increase the intensity of our competitive sales efforts. - Keith Pfeil(CEO)

Contradiction Point 2

Nevro's Integration and Profitability

It involves differing expectations and strategies for the integration and profitability of Nevro, which is crucial for corporate strategy and revenue growth.

What risks do changes in Nevro's operations pose to top-line growth? - Caitlin Roberts (Canaccord Genuity Corp., Research Division)

2025Q3: While early signs are positive, comments on future growth are cautious. The focus remains on integrating Nevro and ensuring business continuity. - Keith Pfeil

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2025Q1: For Nevro, initial focus is on reducing operational expenses. SG&A expenses are too high for long-term profitability. Tackling this will be key to integrating and improving efficiency. - Keith Pfeil

Contradiction Point 3

Growth Expectations for Nevro and Integration Strategy

It involves differing expectations and strategies for the growth and integration of Nevro, impacting investor perceptions of the company's future performance and strategic focus.

What are your expectations for Nevro's margin progression and how will you drive future profitability? - Vikramjeet Chopra (Wells Fargo Securities, LLC, Research Division)

2025Q3: Nevro's Q3 EBITDA margin improved to 16.2%. Focus is on integrating into the Globus organization, reducing redundant spending, and increasing product development. Growth is anticipated through surgeon conversions and sales force expansion. - Keith Pfeil(CEO)

Why was the timing right for the Nevro acquisition, and why was Nevro a suitable target? Do you expect to benefit from the sale of a competitor's U.S. spinal implants business? - Vik Chopra (Wells Fargo)

2024Q4: Our rapid integration with NuVasive allowed us to take advantage of this opportunity. Nevro's technology offers potential beyond its current application. We believe it can go into our developmental portfolio. The move expands our reach into the musculoskeletal market. - Daniel Scavilla(CEO)

Contradiction Point 4

Shift to Flexible Payment Models for Enabling Technologies

It highlights a shift in the company's approach to revenue recognition and capital sales, which can impact financial forecasts and investor understanding of the company's financial performance.

Can you elaborate on the shift to flexible payment models for Enabling Technologies? - Matthew Miksic (Barclays Bank PLC, Research Division)

2025Q3: The mix of rentals and leases has increased, offering various acquisition options. While it may slow some deals, the overall pipeline remains strong. Flexible options are offered to customers without affecting the ability to close deals. - Keith Pfeil(CEO), Kyle Kline(CFO)

How does the Nevro investment level compare to other programs? How far along are you in robot deals? - Matt Miksic (Barclays)

2024Q4: Capital sales will follow the usual Q1 down, Q4 up cadence. - Keith Pfeil(CEO)