GMED Q1 Earnings Call: Integration Challenges, New Acquisition, and Market Uncertainties Shape Outlook

Medical device company Globus Medical (NYSE:GMED) fell short of the market’s revenue expectations in Q1 CY2025, with sales falling 1.4% year on year to $598.1 million. On the other hand, the company’s full-year revenue guidance of $2.85 billion at the midpoint came in 4.2% above analysts’ estimates. Its non-GAAP profit of $0.68 per share was 8.6% below analysts’ consensus estimates.

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StockStory’s Take

Globus Medical’s first quarter results highlighted several operational challenges, with CEO Dan Scavilla attributing flat sales to “softer enabling tech sales against difficult comp, temporary integration related supply chain disruption and timing of international distributor orders.” The U.S. Spine segment posted modest growth, supported by high retention among sales teams and increased cross-selling, but this was offset by supply chain issues and reduced third-party biologics sales tied to changes in reimbursement for wound care. Management acknowledged the impact of these headwinds, emphasizing that issues such as back orders and delayed distributor activity have already begun to improve in the second quarter. Despite these setbacks, new product launches like the Cohere ALIF spacer and Reline eGPS fixation system were introduced, aiming to strengthen the company’s portfolio and drive future growth.

Looking ahead, management’s updated full-year guidance reflects optimism about resolving operational disruptions and integrating recent acquisitions. Scavilla highlighted, “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.” The Nevro acquisition, completed in April, is expected to expand Globus Medical’s reach in the musculoskeletal market, with management focused on driving profitable growth through operational efficiencies and leveraging the combined sales force. CFO Keith Pfeil cautioned that near-term profitability will be influenced by integration costs, stating, “The key focus is going to be figuring out their operational expenses and working to reduce those.” Management remains focused on achieving synergy savings and restoring momentum across core business areas.

Key Insights from Management’s Remarks

Management identified temporary supply chain disruptions, delayed enabling technology sales, and integration complexities as the primary drivers of first quarter performance. The leadership team also pointed to positive early signs in Q2 business activity and the strategic potential of the Nevro acquisition.

• Supply chain disruptions impact: Temporary manufacturing integration issues and back orders, especially from legacy NuVasive products, constrained product availability across spine and trauma segments. Management stated these disruptions were largely resolved late in the quarter, with production resuming to normal rates.
• Enabling technology sales decline: Enabling technology, including robotic systems, saw a notable year-over-year decline due to elongated selling cycles and delayed deal closures amid market uncertainty. Management stressed that the underlying demand remains robust, with the pipeline described as “robust” and several deals closing early in Q2.
• U.S. Spine steady, biologics pressured: While U.S. Spine posted modest growth driven by product strength and salesforce retention, the biologics business faced headwinds from anticipated changes in reimbursement for wound care products. This led to a planned reduction in third-party biologics sales.
• Integration of NuVasive and Nevro: Leadership emphasized ongoing efforts to realize cost synergies from the NuVasive merger and the recently closed Nevro acquisition. Expense reduction, especially in SG&A (selling, general, and administrative expenses), is a priority for improving profitability and offsetting dilution from these deals.
• New product launches and innovation: Two new products—the Cohere ALIF spacer and Reline eGPS fixation system—were launched, aiming to expand market penetration and address unmet clinical needs. Management cited these as evidence of a strong R&D pipeline.

Drivers of Future Performance

Globus Medical’s outlook is shaped by the pace of supply chain recovery, integration of acquisitions, and shifts in reimbursement for certain product lines.

• Nevro integration and cost control: Management expects the Nevro acquisition to expand addressable markets and drive long-term growth, but near-term profitability will depend on reducing operational expenses and integrating the business efficiently. The company aims to streamline SG&A to align costs with expected revenue.
• Reimbursement landscape changes: Reductions in reimbursement for wound care and neuromonitoring have impacted revenue streams. Management is pivoting the biologics strategy toward more stable, direct business opportunities to mitigate volatility from external reimbursement shifts.
• Enabling technology sales cycles: While enabling technology sales were delayed in Q1 due to elongated customer purchasing decisions, management expects a recovery in subsequent quarters as backlogs clear and hospital decision-making stabilizes. Risks remain if broader market uncertainty persists or if competitive dynamics intensify.

Catalysts in Upcoming Quarters

In the coming quarters, the StockStory team will be monitoring (1) the pace at which supply chain issues and distributor back orders are resolved, (2) progress in integrating the Nevro business and realizing cost synergies, and (3) the recovery of enabling technology sales as hospital purchasing cycles normalize. Additionally, we’ll track any further changes in reimbursement policies affecting core business lines.

Globus Medical currently trades at a forward P/E ratio of 17.1×. In the wake of earnings, is it a buy or sell? Find out in our full research report (it’s free).

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