Executive Summary / Key Takeaways

• Robust Q2 Performance Signals Strong Momentum: Globus Medical delivered impressive Q2 2025 results with 18.4% revenue growth and 14.1% non-GAAP EPS growth, driven by a resilient U.S. Spine business and a sequential rebound in Enabling Technologies, indicating a strong trajectory for the second half of the year.
• Strategic Acquisitions Bolster Market Reach and Innovation: The transformative NuVasive merger and the recent Nevro acquisition have significantly expanded Globus's total addressable market and diversified its portfolio into high-growth areas like neuromodulation, with Nevro expected to be accretive to earnings in its second year of operation.
• Technological Leadership Drives Competitive Moat: The Excelsius ecosystem, encompassing advanced robotics, imaging, and navigation, alongside differentiated implant and neuromodulation technologies, provides a significant competitive advantage, enhancing surgical outcomes and driving implant pull-through.
• Financial Strength and Discipline Underpin Growth: Achieving debt-free status in Q1 2025 and generating robust free cash flow enable continued strategic investments in R&D, manufacturing in-sourcing, and opportunistic share repurchases, reinforcing a disciplined approach to profitable growth.
• Integration and Innovation as Core Pillars: Despite temporary Q1 operational challenges, the company's aggressive integration efforts, accelerated synergy capture, and prolific new product launches are foundational to its strategy of outperforming market growth and solidifying its position as a preeminent musculoskeletal technology leader.

The Globus Medical Vision: Engineering a Future in Musculoskeletal Health

Globus Medical, founded in 2003, has consistently pursued a mission to enhance the quality of life for patients with musculoskeletal disorders. The Audubon, Pennsylvania-based company distinguishes itself through an engineering-driven approach, rapidly developing and commercializing advanced products and procedures. This foundational strength has positioned Globus as a formidable player in the global musculoskeletal market, extending its reach across the Americas, Europe, Asia, Africa, and Australia.

The company's overarching strategy centers on accelerating innovation, achieving operational excellence, and driving organic growth. This strategy is particularly critical within the dynamic musculoskeletal industry, characterized by continuous technological advancements, evolving reimbursement landscapes, and a growing demand for less invasive, more accurate surgical solutions. While the broader spine market has historically grown in the low single digits, typically around 3-3.5%, Globus aims to significantly outpace this trend through its differentiated offerings and strategic market penetration.

Technological Edge: The Excelsius Ecosystem and Beyond

At the heart of Globus Medical's competitive advantage lies its commitment to technological differentiation, particularly evident in its Enabling Technologies segment. The Excelsius ecosystem is a prime example, integrating imaging, navigation, and robotics to revolutionize assisted surgery. This advanced computer-assisted intelligent system is designed to enhance surgeon capabilities, streamline procedures, and improve patient care by making surgeries safer, less invasive, and more accurate, while also reducing radiation exposure for surgical staff.

The flagship ExcelsiusGPS platform is a robotic guidance and navigation system for both minimally invasive and open procedures, boasting over 110,000 procedures performed globally since its launch. This system is complemented by the Excelsius3D imaging system, which provides intraoperative, image-guided robotic navigation. The synergy between these platforms is crucial, as the company notes that the market for these technologies in spine and orthopedic surgery is still in its infancy, with significant growth potential as adoption becomes more widespread.

Recent innovations further solidify this ecosystem. The Excelsius Navigation Hub, launched in Q3 2024, enters the freehand navigation market, offering three distinct imaging workflows: Excelsius 3D imaging with automatic registration, preoperative CT fluoroscopy merging, and intraoperative 2D fluoroscopy. This versatility positions the Hub as a comprehensive navigation offering. In Q2 2025, Globus received FDA clearance for Excelsius XR, a head-mounted augmented reality navigation headset. This technology provides real-time surgical visualization by projecting 2D data and 3D models, allowing surgeons to view virtual navigation data while maintaining direct line of sight on the patient. Its hand-tracking capabilities ensure sterility and surgeon control, and it is designed to pair with ExcelsiusHub and E3D, creating what management describes as "the best navigation package out there."

Beyond robotics and navigation, Globus continues to innovate in its Musculoskeletal Solutions. The DuraPro drill system, launched in 2024, features oscillating technology designed to be soft tissue sparing, a "game changer" that allows surgeons to operate adjacent to delicate tissues with enhanced safety. This product has seen accelerated growth, fueled by positive surgeon testimonials. The Cohere ALIF spacer with integrated screw fixation, introduced in Q1 2025, offers a porous PEEK solution for anterior lumbar interbody fusion, promoting bone ingrowth while preserving imaging clarity. For joint reconstruction, the Actify 3D Total Knee system and the ExcelsiusFlex robotic navigation platform for total knee arthroplasty, launched in Q4 2024, represent a new frontier. ExcelsiusFlex enables consistent, accurate cuts with surgeon flexibility, accommodating both imageless and CT-based workflows.

The acquisition of Nevro Corp. in April 2025 further expanded Globus's technological footprint into neuromodulation. Nevro's high-frequency spinal cord stimulation technology is differentiated by Level 1 clinical data demonstrating its superiority for treating chronic pain, including conditions unresponsive to previous spine surgery. This technology is not only a clinically superior solution for pain relief but also holds intellectual property value for potential applications in cranial enabling technology, next-generation spinal implants, and treating gait disorders in Parkinson's disease patients. These technological advancements collectively contribute to Globus's competitive moat, driving higher average selling prices, enabling lower costs through procedural efficiency, and ultimately enhancing market positioning and long-term growth.

Competitive Arena: Outpacing Rivals with Innovation

Globus Medical operates in a highly competitive medical device landscape, facing established giants and innovative challengers across its segments. In spinal robotics, Medtronic (MDT) is identified as the primary competitor. Globus directly competes with Medtronic, asserting the "superiority of our technology" in its ExcelsiusGPS platform. The company's strategy is not to lose deals to competition but to leverage its expanding ecosystem and integrated implant portfolio to drive adoption, particularly within its broadened surgeon base post-NuVasive merger.

In the broader spine implant market, key rivals include Johnson & Johnson (JNJ) (DePuy Synthes), Stryker (SYK), and Zimmer Biomet (ZBH). Globus differentiates itself through its comprehensive and innovative implant portfolio, including expandables, MIS screws, and 3D-printed spacers. The recent announcement of a large competitor selling its U.S. spinal implants business, with plans for international divestitures, presents a potential market disruption that Globus aims to capitalize on by staying focused on its long-term strategy of innovation and unmet clinical needs.

For trauma solutions, Globus competes with major players like Stryker, DePuy Synthes, and Zimmer Biomet. Its AUTOBAHN line of nails and ANTHEM plates offer differentiated product offerings that resonate with surgeons. The company's "density model" for trauma growth, focusing on high-potential accounts, is a strategic response to this competitive environment. In neuromodulation, following the Nevro acquisition, Globus enters a market with competitors such as Abbott (ABT), Medtronic, and Boston Scientific (BSX). Nevro's high-frequency technology, backed by Level 1 clinical data, provides a distinct advantage in this segment.

Globus's competitive strategy is multifaceted:

• Integrated Ecosystem: The seamless integration of its Excelsius robotics, imaging, and navigation platforms with its implant portfolio creates a powerful, comprehensive solution that rivals struggle to match.
• Prolific R&D Engine: A continuous stream of new product launches, with 21 products introduced since early 2024, ensures a fresh, differentiated offering.
• Sales Force Strength: High retention rates among its field sales team and successful competitive rep recruiting, particularly post-NuVasive merger, enhance market penetration. The company's direct sales model allows for deeper customer relationships and more effective product education.
• Financial Discipline: A strong balance sheet and robust cash flow enable strategic investments and provide flexibility in a capital-intensive industry.

The company's customer dynamics are shifting with the growth of ambulatory surgery centers (ASCs). While not expecting ASCs to fully replace hospitals, Globus is positioning itself to support these facilities, offering flexible solutions that cater to evolving surgical settings. Supplier dynamics are largely mitigated by Globus's vertical integration, with approximately 95% of its products being U.S.-based or sourced in the U.S., significantly limiting exposure to tariff impacts.

Financial Performance: A Story of Resilience and Growth

Globus Medical's financial performance in Q2 2025 showcased significant resilience and growth, particularly after a challenging start to the year. The company reported Q2 2025 net sales of $745.3 million, marking an 18.4% increase over the prior year quarter. Non-GAAP diluted earnings per share (EPS) reached $0.86, a 14.1% increase year-over-year. Free cash flow also demonstrated strength, growing 18% to $31.3 million, despite the Nevro acquisition and higher capital expenditures.

The Musculoskeletal Solutions segment reported $710.2 million in Q2 2025 revenue, up 19.8% from Q2 2024. This growth was significantly bolstered by the Nevro acquisition, which contributed $94.6 million in revenue during the quarter, comprising $82.1 million domestically and $12.5 million internationally. The U.S. Spine business was a standout performer, growing 5.7% as reported, or 7.4% on a day-adjusted basis, and achieving 19 consecutive weeks of implant growth extending into July and August. The core trauma business also saw robust growth of 35% in Q2.

The Enabling Technologies segment, after a softer Q1, experienced a notable rebound in Q2, growing 58% sequentially to $35.2 million. While still down 4.4% year-over-year due to lower EGPS robotic system sales, this sequential improvement and a robust pipeline signal renewed momentum.

The first quarter of 2025 presented some headwinds, with overall revenue slightly down 0.8% on a constant currency basis. This was attributed to temporary integration-related supply chain disruptions impacting legacy NuVasive products, timing of international distributor orders, and changes in neuromonitoring and wound care biologics reimbursements, which collectively impacted musculoskeletal revenue by approximately $20 million. However, management confirmed that these supply chain issues largely subsided by Q2, with production coming back online.

Profitability metrics reflect strategic cost management and synergy capture. GAAP gross profit in Q2 2025 was 63.3%, up from 55.2% in the prior year, primarily due to lower inventory step-up amortization. Adjusted gross profit was 67.4%, slightly up from 67.2% in Q2 2024, driven by synergy capture. Research and development (R&D) expenses increased 6.0% to $39.95 million in Q2 2025, largely due to Nevro expenses, but as a percentage of sales, R&D declined to 5.4% from 6.0%. Selling, general, and administrative (SG&A) expenses rose 26.8% to $303.6 million, predominantly due to the Nevro merger.

A significant financial event in Q2 2025 was the recognition of a $110.6 million bargain purchase gain related to the Nevro acquisition. This gain primarily stemmed from the acquisition of $141.5 million in deferred tax assets (federal net operating loss carryforwards) from Nevro, which Globus can now utilize to generate cash tax savings over an estimated 40-50 years. This contributed to a favorable effective tax rate of 7.8% in Q2 2025.

Liquidity remains a core strength. Globus achieved debt-free status in Q1 2025 by repaying the remaining $450 million of senior convertible notes. While cash and cash equivalents decreased to $229.4 million at June 30, 2025, from $956.2 million at December 31, 2024, this was primarily due to the debt repayment, the $252.5 million Nevro acquisition, and $215.4 million in share repurchases.

The company's capital allocation priorities remain focused on internal investments, complementary M&A, and opportunistic share repurchases, with an additional $500 million authorized for buybacks in May 2025.

Strategic Imperatives: Integration, Expansion, and Capital Discipline

Globus Medical's strategic narrative is currently defined by the successful integration of its recent acquisitions and a relentless pursuit of operational excellence. The NuVasive merger, completed in September 2023, has been a central focus, with the company exceeding its 2024 synergy targets. Of the targeted $170 million in total synergies over three years, Globus realized approximately 55% ($94 million) in Year 1 (2024), with an additional 30% ($51 million) expected in Year 2 (2025) and the remaining 15% ($25 million) in Year 3 (2026). These synergies are driven by territory realignments, elimination of cost redundancies, facility consolidations, system integrations, and contract renegotiations, with Year 2 efforts focusing on international systems, warehouse efficiencies, and crucial product in-sourcing.

The Nevro acquisition, finalized on April 3, 2025, represents a strategic expansion into the $2 billion neuromodulation market. Management is aggressively integrating Nevro, aiming to "right size" the business to drive profitable sales growth by reducing excess spending. Nevro's adjusted EBITDA reached near breakeven in Q2 2025, even before the full impact of planned cost actions, and is expected to be accretive to Globus's earnings in its second year of operation. The strategic rationale extends beyond pain management, with plans to explore Nevro's intellectual property for applications in cranial enabling technology, next-generation spinal implants, and other unmet clinical needs.

Globus's international strategy is shifting from broad expansion to a "go deeper" approach in key markets, aiming for higher share positions. While this may temper near-term growth rates in some regions, it is viewed as essential for the long-term health and profitability of the international business. The trauma business is employing a "density model," focusing on high-value areas and institutions to drive market penetration and sustainable growth, supported by differentiated products like AUTOBAHN nails and ANTHEM plates.

The company's capital allocation strategy is clear and disciplined. Having achieved debt-free status in Q1 2025, Globus prioritizes internal investments in product development, surgical sets, and capital expenditures (projected at 5-6% of sales in 2025). This is followed by evaluating complementary M&A opportunities and opportunistically repurchasing shares. Since the NuVasive merger, Globus has paid off $871 million of inherited debt and invested over $525 million in share repurchases, effectively reducing deal dilution by over 20%.

Outlook and Risks: Charting the Course Ahead

Globus Medical has reaffirmed its 2025 net sales guidance in the range of $2.8 billion to $2.9 billion and fully diluted non-GAAP EPS between $3.00 and $3.30. This guidance reflects confidence in the resolution of Q1 operational challenges and the strong momentum observed in Q2, particularly in the U.S. Spine business and the sequential rebound in Enabling Technologies. The full-year non-GAAP tax rate is expected to be approximately 25%.

Underpinning this outlook are several key assumptions: continued strong performance in U.S. Spine, successful integration and synergy realization from both the NuVasive merger and Nevro acquisition, and a robust pipeline for Enabling Technologies, with management believing double-digit growth for this segment in 2025 is possible. Adjusted gross margin is projected to be 67.5% to 68.5% for 2025, with a long-term goal of mid-70s, driven by manufacturing in-sourcing benefits primarily expected in 2026. R&D expenses are guided to be 6-7% of net sales, reflecting sustained investment in innovation, while base GMED SG&A is expected to be 37.5-38.5%.

However, investors should consider several pertinent risks. The Nevro integration carries inherent risks, as changes to its cost structure could potentially impact sales, despite management's focus on profitable growth. Elongated selling cycles for Enabling Technologies, observed in Q1 and persisting in Q2, could affect capital equipment placements. Reimbursement changes continue to pose a risk, as evidenced by impacts on neuromonitoring and wound care biologics revenue. Ongoing litigation (e.g., Moskowitz, Pimenta) presents an uncertain outcome with potential material financial implications. While the FDA warning letter regarding internal complaint handling processes has been addressed, its formal resolution timeline remains subject to regulatory inspection. Lastly, while tariffs are not expected to materially impact Globus due to its U.S.-centric production, broader macroeconomic factors and market uncertainties could influence capital purchasing decisions.

Conclusion

Globus Medical stands at a pivotal juncture, having successfully integrated a major merger and executed a strategic acquisition, all while maintaining a strong financial position. The company's core investment thesis is firmly rooted in its relentless pursuit of technological leadership, exemplified by the comprehensive Excelsius ecosystem and the differentiated high-frequency neuromodulation technology from Nevro. This innovation engine, coupled with a disciplined operational strategy and a robust sales force, positions Globus to outpace market growth in musculoskeletal solutions.

The Q2 2025 results underscore the company's resilience and the effectiveness of its integration efforts, with a strong U.S. Spine performance and a promising rebound in Enabling Technologies. While challenges such as integration complexities and market dynamics persist, Globus's proactive management, commitment to synergy capture, and return to debt-free status provide a solid foundation. The strategic expansion into new market segments and the continuous stream of innovative product launches suggest a clear pathway towards sustained growth and enhanced profitability, reinforcing Globus Medical's ambition to become the preeminent musculoskeletal technology company.