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Globus Medical Inc (NYSE:GMED)
Q1 2020 Earnings Call
May 8, 2020, 10:30 p.m. ET

Contents:

  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:

Operator

Ladies and gentlemen, thank you for standing by and welcome to Globus Medical's First Quarter 2020 Earnings conference call. At this time, all participants are in a listen-only mode and later we will conduct a question and answer session. [Operator Instructions]

Thank you, I'll now turn the call over to Mr. Brian Kearns, Senior VP of Investor Relations.

Brian J. Kearns -- Investor Relations

Thank you, Maria, and thank you, everyone, for being with us today. Joining us for 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 the 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 2019 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 discussions 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 on 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.

David M. Demski -- President and Chief Executive Officer

Thank you, Brian, and good afternoon everyone. I want to start off by thanking everyone on the call for your continued interested and support of Globus Medical in these challenging and uncertain times. I'm thankful that our company has remained relatively safe during this crisis as only a handful of our team members have contracted the virus and none have required hospital care.

I'm proud of the way our team has responded to this opportunity. We have made patient care and safety our top priority with a focus on how we can help. We have continued to drive technology innovation remarkably launching three new products in the last five weeks. While our current revenue has been substantially disrupted, our manufacturing and supply chain teams have built inventory at record levels in anticipation of a bounce back in elective procedures in the near future.

Our conservative financial philosophy has positioned us well to ride out this difficult time without having to reduce our commitment to any important long-term growth initiatives. In fact, given our strong liquidity position, we have taken the opportunity to repurchase over $100 million of our own stock and we are seriously evaluating several tucked-in acquisition opportunities. We will also use the downtime to strengthen our clinical and technical acumen of our salespeople, digitally introduce record numbers of surgeons to new products and techniques, carefully analyze all aspects of our business to increase efficiencies and aggressively look for opportunities to serve and support the communities that we are a part of. In short, I believe Globus will emerge from this time as a stronger and more cohesive company than we have ever been.

Our business was strong in the first quarter as we built on the momentum we had created in 2019. The revenue for the quarter was $190.6 million, an increase of 4% over the first quarter of last year. Musculoskeletal solutions increased 3.9% while Enabling technologies grew by 11.8%. The COVID-19 crisis significantly impacted revenue in March. With just over two weeks in March remaining, our internal projections indicated that we would finish with 15% growth for the quarter including double-digit growth in our U.S. spinal implant business. Strong recruiting, pull-through from our robotics and traction from new products all contributed to the U.S. spine performance.

While Enabling technologies did grow over last year, the impact of COVID was particularly significant in this segment as a disproportionate number of deals typically close in the last two to three weeks of every quarter. We launched three new spine products in Q1 and two more in April. We are seeing strong interest in several products from our HEDRON family, the most comprehensive portfolio of 3D printed interbody spacers in the industry.

During the quarter, we also launched SABLE, our fourth generation expandable MIS TLIF interbody spacer that was met with strong demand and great feedback. The International spine business declined by 6.5% in Q1, not only was the business significantly impacted by COVID-19, we were also up against very challenging comps from Q1 of 2019 as alluded to on our call last quarter.

Our trauma business continues to make steady progress, up by over 150% from Q1 2019 and up sequentially over Q4. We are on track to launch several new products this year and expect to double the size of our sales footprint in the second half of the year. While COVID caused some delays in INR development efforts, we made significant progress in the commercialization of several systems. We expect to roll out the interbody module in the second quarter. In the third quarter we plan to submit the imaging system to FDA and we anticipate FDA clearance of the cranial module for ExcelsiusGPS.

As we look forward to the remainder of the year, it's too early to assess when we might be back to normal but we are encouraged by the upward trend in procedural volumes over the last month. Our U.S. spine business bottomed in the first full week of April, off by about 70% from our pre-COVID pace. Since that point, weekly volumes have steadily risen as several states have begun to allow elective surgeries to commence again. Volumes for the current week are on pace to reach roughly two-thirds of our pre-COVID levels. At some point over the next two to three quarters, we expect to prolong spike in procedures as surgeons work to treat the growing backlog of patients in need of surgical intervention. Interest in robotics remains extremely strong even during the pandemic and we have had record attendance at virtual market development events in recent weeks.

We have not lost any deals but do expect some delays in the purchasing process as hospitals work through the financial implications of this crisis. Our strong balance sheet enables us to be flexible in response to hospitals capital constraints and from a clinical standpoint, now more than ever, the promise of robotics is compelling. Whether that's the potential to shorten hospital stays for patients concerned about being in a hospital or the reduction of cognitive load on busy surgeons trying to treat their backlog of patients; robotics offers a tremendous value and clear payback.While this time has been challenging to navigate, we are thankful that the only impact to the Globus family has been economic and not health-related. We are also grateful that we have the financial strength and liquidity to maintain a healthy business infrastructure which will provide the platform for strong growth in the latter half of this year. We are well positioned to capitalize on our technology leading key sectors and I have the utmost confidence in our team to execute well in this unique time. I will now turn the call over to Keith

Keith Pfeil -- Senior Vice President, Chief Financial Officer

Thanks, Dave and good afternoon everyone. Globus was impacted by COVID-19, the company continued its trend of top-line growth driven by it's long-standing commitment to technology and innovation. Profitability was impacted primarily by sales losses stemming from COVID-19, however, free cash flow improved over the prior year quarter as a result of working capital improvements and lower capital expenditures.

Our Q1 revenue was $190.6 million, growing 4.2% as reported or 4.4% in constant currency compared to the first quarter of 2019. As Dave mentioned earlier, our March revenue was significantly impacted by COVID-19. We estimate the sales impact of COVID-19 to be approximately $20 million for the quarter. Net income was $25.9 million and non-GAAP net income was $29.7 million, delivering $0.29 of fully diluted non-GAAP earnings per share. Adjusted EBITDA was 26.5% and our free cash flow was $20 million.

Shifting our attention to sales, U.S. revenue was $158.4 million or 7.4% higher than the first quarter of 2019; a result of the continued strength of our U.S. spine business driven by the combination of impacts from recruiting, implant pull-through and the launch of new products. International revenue for the quarter was $32.1 million, down 9.3% as reported or lower by 8.3% in constant currency. As Dave mentioned earlier, in addition to the impact of COVID-19, we were faced with difficult year-over-year comps internationally driven by large distributor orders placed in the first half of last year that were not expected to repeat in 2020.

Our first quarter gross profit was 74.4% compared to 77.1% in Q1 of 2019. The decline in gross profit was driven primarily by higher planned depreciation expense within our spine and trauma businesses from instruments and sets, additional labor costs stemming from a warehouse transition and higher product costs; the results of product mix within our musculoskeletal business. Research and development expenses for the quarter were $15.4 million or 8.1% of sales compared to $14.3 million or 7.8% of sales in the first quarter of the prior year driven primarily by increased investments within our INR platform. SG&A expenses for the first quarter were $93.5 million or 49.1% compared to $85.8 million or 46.9% in the first quarter of 2019 driven primarily by continued investments within our spine and robotic sales infrastructures. The effective income tax rate for the quarter was 20.2% in line with the 20.3% rate in the first quarter of the prior year.

Adjusted EBITDA margin for Q1 was 26.5%. This was driven primarily by the impacts of COVID-19 which we estimate to have negatively impacted revenue by approximately $20 million across our business as previously noted. That coupled with the previously mentioned impacts to gross margin and increased investments within the spine and robotics infrastructures resulted in an unusually low adjusted EBITDA margin for the quarter. To help address the impact of COVID-19, the company has taken proactive steps to institute cost containment measures across the business as it relate to discretionary spending. Some of the actions taken include elimination of non-essential travel, cancellation of surgery and related education events, hiring freezes of all non-sales related functions and reduction of our temporary labor spending.

In addition, we will further scrutinize our capex spending while remaining opportunistic as we move ahead. We remain committed to investment in all areas that will drive strategic long-term growth particularly in the area of research and development. We ended the quarter with $657 million of cash, cash equivalents and marketable securities. Net cash provided by operating activities was $42.3 million and free cash flow was $20 million.

During the quarter, the company spent $73.9 million to repurchase it's Class A common shares in connection with the previously authorized and announced share repurchase program. Since the conclusion of Q1, the company has spent an additional $30.8 million to repurchase shares and currently has approximately $95 million remaining on its original $200 million authorization. The company will fund the share repurchases with its operating cash flows and excess cash. As we previously announced on April 16, the company has withdrawn its fiscal year 2020 guidance. At this time, the company cannot reasonably predict the specific extent or duration of the COVID-19 impact on its financial and operating results.

We will now open the call for questions.

Questions and Answers:

Operator

[Operator Instructions] Our first question comes from the line of Matt Miksic of Credit Suisse.

Matthew Stephan Miksic -- Credit Suisse -- Analyst

Hey, thanks for taking the questions. So, I'd love to get your sense, you mentioned the encouraging trends kind of since the first week of April and the trends tracking this week. Can you talk, Dave, or Dan at all about where you're seeing that kind of progress, what areas of the country, what types of centers, potentially, and then I have one follow-up.

David M. Demski -- President and Chief Executive Officer

Thanks, Matt. Well, it's following where the economy is being opened back up so Texas was early on, California from an elective standpoint is back on and I think it's just Georgia is another one following the pattern that the governors are using to open up states.

Matthew Stephan Miksic -- Credit Suisse -- Analyst

Got it. And the types of centers, in sort of large academic centers or you know, the question keeps circling around ASC's. Are you seeing any traction there or is that a less important barrier of the recovery, you know, just because of maybe the lack of I don't know if there's a lack of lumbar cases. Any cover any color around the ASC channel or other types of alternative sites?

David M. Demski -- President and Chief Executive Officer

Well, I think there's a lot less bureaucracy to go through to open up an ASC. So that can open up quicker. But we're seeing opening up of full service hospitals. It's really just in the areas where the hospital itself is still under a significant COVID pressure that they're where they're not doing it and they probably won't for a while but it's across the board and just medical centers as well as ASC'

Matthew Stephan Miksic -- Credit Suisse -- Analyst

Okay. And then just a follow-up on robot trends and got your comment about these deals often happen in the last two or three weeks. Is and also your comments on the interest there still being high. But, do you have a sense of are these things being pushed out, you know, weeks, are they being pushed out months or are budgets being reexamined? Just how what kind of color or sense do you have for how the demand or budget for these, for robot projects, is holding up for the rest of the year?

David M. Demski -- President and Chief Executive Officer

Yeah, I it's really just kind of on hold right now until we get through the crisis and then we start to see the elective surgeries coming back. I think that's been the focus of the administrators and even the surgeons are really itching to get back. So, there's not a definite time period but I don't think it will be, you know, many months. I think it will be in or between weeks and a month or two before they start to go back and evaluate it. And then we're going to have to understand just where their balance sheets are and how much flexibility they think they have.

Matthew Stephan Miksic -- Credit Suisse -- Analyst

Fair enough. Thank you for the color.

Operator

Our next question comes from Shagun Singh of Wells Fargo.

Shagun Singh -- Wells Fargo -- Analyst

Thank you so much for taking the question. I guess I was hoping to get more color on May. Could you discuss the trends that you're seeing in spinal implants and enabling technologies, you know, specifically in May?

David M. Demski -- President and Chief Executive Officer

Sure, as I alluded to on, in, my remarks. We bottomed out really the first full week and every week since then we've seen an increase but we've seen a particularly strong increase this week over last week. So I think as new states are coming on and opening up, we're seeing the immediate impact on that. So, we're at roughly two-thirds of the level we were pre-COVID for this week.

In terms of emerging technologies, I we are running out some deals for the quarter. I do think we will close some. It will be down significantly from where we had expected early in the year before the crisis but there's still some activity going on emerging.

Shagun Singh -- Wells Fargo -- Analyst

I got it. And then, you know, just as a follow-up as we think about the cadence of recovery, you know, by our math it looks like the second half of March was down about 50%, April down 70%, May has been rebounding nicely. You know, as we think about Q2, you know, do you think it's fair to assume that sales could be somewhere in line to slightly better than what we saw in the second half of March, you know, Q3 will probably still be down year-over-year, you know, but sequential improvement and do you expect we could reach normalized levels in Q4 just based on the trends you're seeing thus far? Thank you for taking the questions.

Keith Pfeil -- Senior Vice President, Chief Financial Officer

This is Keith, thanks for the question. I would say that Q2 is expected to be our low point. As we move into Q3 we did, we would expect to see some improvement over Q2 and by Q4 we would hope that things get back to normal as we work to close our year.

Shagun Singh -- Wells Fargo -- Analyst

Thank you.

Operator

Our next question comes from the line of David Lewis of Morgan Stanley.

Mason E. Austen -- Morgan Stanley -- Analyst

Hi, this is Mason on for David today. Thanks for taking the question. So just on robotics as a related follow-up to Matt's question here, I was wondering if you could provide additional color on some of the conversations you're having with centers? Understandably the interest is there, but are you considering or are customers more interested in augmenting the selling strategy with robotics more usage based agreements or leases as opposed to outright sales?

David M. Demski -- President and Chief Executive Officer

Yeah, Mason, the conversations haven't really progressed to that level of detail. Is at the administrative level it's it's kind of at the point where I can't really talk about this right now. I have other things that we have to deal with. We're going to come back to it when we're when we have a little more clarity on when the cases are going to come back from an elective standpoint because that's their cash flow. Now, as a spine company we're in the enviable position of being really close the front of online, if not the first procedures that will be coming back. And once they understand what their revenues are looking like and they get a little better picture on their capital as well as some of the government funding, I think then they can have, you know, serious conversations about how they're going to buy the robot.

Mason E. Austen -- Morgan Stanley -- Analyst

Okay, that's helpful. And on the imaging platform, I understand from prepared comments, the 510 submission is on track for 3Q but any changes to your thought process around the launch in this environment or is there a chance that this could get pushed into next year? Thanks so much.

David M. Demski -- President and Chief Executive Officer

Sure. No change at all. We're more excited than ever. We think this is a really competitive advantage for us in that particular segment, in the segment of navigation and imaging. So we're full speed ahead as much as we can be. The workforce, the development guys are a little bit constrained in terms of their ability to work at this time so it's slowed us down a bit but like I said, we fully expect to submit in Q3 and are hopeful to launch this year.

Operator

Thanks for taking the questions. Just for I think you called out $20 million COVID impact for the first quarter. Can you break out how that was allocated between the capital impact versus the, you know, the underlying spine business portions?

Keith Pfeil -- Senior Vice President, Chief Financial Officer

This is Keith, thanks for the question. I think what I would refer back to is some of David's early comments talking about our spine, our U.S. spine business was on pace for double-digit growth. I think that that is a key indicator of the driver of the $20 million sales that we felt that we missed as a result of COVID.

Richard S. Newitter -- SVB Leerink LLC -- Analyst

Okay, and similarly, when you gave the 70% and two-thirds in the current week, 30% at the bottom in April, that was more of the recurring revenue business, the spinal hardware or that was all inclusive?

David M. Demski -- President and Chief Executive Officer

No, Rich, that I'm just being specific there, I want to be specific, that's U.S. spinal implant business.

Richard S. Newitter -- SVB Leerink LLC -- Analyst

Okay, very helpful. And on the margin side, can you just break out for us how much of the pressure that brought your EBITDA margin below normalized levels, you know, into buckets, how much of that was maybe some stepped up spending on your core initiatives above and beyond previous your internal plan and how much of that was the COVID impact?

Keith Pfeil -- Senior Vice President, Chief Financial Officer

This is Keith, thanks for the question. I would say that most of the impact to EBITDA, if not all, was really related to COVID-19. If I go back and look at the $20 million of sales over our business, I would have expected us to land somewhere in the range of where we landed the prior year around 31%.

Richard S. Newitter, SVB Leerink LLC, Research Division-MD of Medical Supplies & Devices and Senior Research Analyst 27

Okay. And just to follow-up on that, when you do get back to normalized pre-COVID levels or something close to where you were in the early part of the first quarter, any reason why we shouldn't expect you able to get back to the mid-30% EBITDA margin level? I would hesitate to answer that at this point until we get further along into the year to see how we do respond.

David M. Demski -- President and Chief Executive Officer

Rich, this let me just make sure we understand your question. You you caveated by saying once volumes get back to the pre-COVID levels, then what's what would our EBITDA be?

Richard S. Newitter -- SVB Leerink LLC -- Analyst

Yeah, I just want to is there any you know, as we model out the trajectory of your

Recovery, whether it happens in the fourth quarter or the first quarter of next year, is there

Any reason to think

David M. Demski -- President and Chief Executive Officer

We're not saying when that yeah, we're not able to project when that's going to happen but when the when the volumes hit that level we will be in mid-30's.

Richard S. Newitter -- SVB Leerink LLC -- Analyst

Thank you.

Operator

Our next question comes from the line of Matt O'Brien of Piper Sandler.

Matthew Oliver OBrien -- Piper Sandler & Co. -- Analyst

Thanks. I'd love to expand a little bit on your prepared remarks on the trauma side of your business. You know, you've done a lot of work building out the sales force and the instruments sets for that business itself and it seems like everything's making good progress there but I'd love to hear more color as to what's been going on during this period of disruption for trauma and really what you're expecting for 2020 within that business from a high level. That would be really helpful, thank you.

Daniel T. Scavilla -- Executive Vice President and Chief Commercial Officer

Hi Matt, it's Dan Scavilla. Thanks for your question. We're pleased with the progress, as Dave called out, we've made significant growth year-on-year and even sequentially versus Q4 with where we're going. That's really going to be driven by three factors. The first is continued market access into accounts followed by rep recruiting and into new product launches. We've been progressing with our next wave of product launches and build outs that are probably at where I would anticipate. We had a strong recruiting quarter with where we want to be although we certainly have a long way to go. And I had some great access plays into more of the ASC's or community-type hospitals right now. Still working on some other GPO's but pleased with the quarter. On the right trajectory as we exit Q1 and, you know, we haven't really realized a number for 2020 and especially with all of this activity I'm going to refrain from that. But I certainly see the plans in place and the action in place to say we're on track with the growth that we want to get to.

Matthew Oliver OBrien -- Piper Sandler & Co. -- Analyst

That's really helpful. Thank you for the color, I appreciate that. And I had one follow-up, if you don't mind. You know, you're in a really good position being a well capitalized spine company but there's other smaller players that are less capitalized and so there may be some form of market consolidation at play here. So, how are you thinking about that dynamic? You know, is this an opportunity for you to get aggressive with new rep additions or taking some market share gain? Any color there would be really helpful during the recovery.

David M. Demski -- President and Chief Executive Officer

Yeah, I'm already hearing about some opportunities on both of those fronts as the hospitals look to how to react. There's they're actually looking to pair back vendors and they're considering cutting some of the smaller players. And then the reps that are working for companies that don't have the capital structure that some of the larger ones do are thinking about their future and where they want to be as we navigate through this time. So, yeah, there are opportunities already being created out there. It's a good question.

Operator

Our next question comes from the line of Kaila Krum of SunTrust.

Kaila Paige Krum -- SunTrust Robinson Humphrey -- Analyst

Great, thanks guys for taking the questions. So just to clarify on that last question on spending. So, with your cash on hand, you mentioned a hiring freeze of all roles except for the sales function. So, are you guys are you guys just sort of backfilling reps or do you think that you'll be spending to hire kind of in track with prior plans or are you out sort of actively potentially hiring more than maybe you would have sort of pre-COVID? I would like to get your thoughts there.

David M. Demski -- President and Chief Executive Officer

We are hiring as many reps as we think are qualified to drive business for us. There's no limit on that. We fully expect to come back. We have a great portfolio and if we can add to our team with quality people we're going to do it.

Kaila Paige Krum -- SunTrust Robinson Humphrey -- Analyst

Awesome. Thank you. And then just on M&A, I'm curious how you guys were thinking about M&A in the context of this environment? Thank you.

Keith Pfeil -- Senior Vice President, Chief Financial Officer

From the standpoint of M&A, again, I'll refer back to some of the comments we had in our prepared remarks. You know, we remain opportunistic. When we think about where we're at, we believe these are unprecedented times but we're in a position where we have a very strong balance sheet and we have the ability to act upon opportunities that are put in front of us.

So as we look ahead, M&A opportunities that are out there, we'll review them and act if we believe that they are in the best interest of us from a strategic long-term perspective.

Kaila Paige Krum -- SunTrust Robinson Humphrey -- Analyst

Thanks, guys.

Operator

Our next question comes from the line of Mike Matson of Needham & Company.

Michael Stephen Matson -- Needham & Company -- Analyst

Thanks. Just want to follow-up on Kaila's question there on M&A. So you mentioned you're looking at a couple of potential tuck-in deals. Is there anything additional you could tell us about those and, you know, given that you're looking at several and you may be doing something here in the near-term, do you think you're able to get a better kind of price in this current environment that we're in?

Keith Pfeil -- Senior Vice President, Chief Financial Officer

This is Keith. I would just really refer back to what Dave said in his prepared remarks. We are we're reviewing opportunities and we'll continue to review them and should they fit our criteria, we will move ahead. But I don't really want to go further into that at this point.

Matthew Stephan Miksic -- Credit Suisse -- Analyst

All right, that's fine. And then just with regard to the gross margins, as you're manufacturing volumes potentially slow in the second and third quarter, how is that going to affect gross margins both in those quarters and then, you know, Q4 and into 21, would there be any lingering impact from the slower production?

Keith Pfeil -- Senior Vice President, Chief Financial Officer

This is Keith, what I would say to that is coming into this we did not slow down production. We actually kept producing because it is our view that this demand will come back. So as we look ahead you know, as we look ahead, I don't really see there being any impacts from the slowdown hitting us later in the year.

Michael Stephen Matson -- Needham & Company -- Analyst

Okay, great. That's all I have. Thank you.

Operator

Our next question comes from the line of Steven Lichtman of Oppenheimer.

Steven Michael Lichtman -- Oppenheimer & Co -- Analyst

Thank you. Hi guys, your plan has obviously been an important driver for you guys over the last number of quarters. Just wondering if you could give maybe a little bit more description on what you're seeing on the ground [pertaining in] particular with as we reach to procedure volumes?

David M. Demski -- President and Chief Executive Officer

Tough connection Steven, maybe you could repeat it. You're breaking up.

Steven Michael Lichtman -- Oppenheimer & Co -- Analyst

Hey David, can you hear me a little bit better?

David M. Demski -- President and Chief Executive Officer

Yes, much better.

Steven Michael Lichtman -- Oppenheimer & Co -- Analyst

All right, sorry. Japan, obviously been an important driver for you guys over the last number of quarters. Wondering if you could just give us, in particular, in that country what you're seeing on the ground with respect to procedure volumes?

David M. Demski -- President and Chief Executive Officer

Yeah, they're a little bit behind us. I mean, they had a good April relative to the rest of the world and they they are getting some more severe restrictions right now so we'll have to see how May goes. But, relative to the rest of the business, they have been much healthier in terms of the impact of COVID there.

Steven Michael Lichtman -- Oppenheimer & Co -- Analyst

Okay, got it. And then just secondly on margins, again. You know, just given your comment about sort of continuing on the sales force hiring front, you know, how should we think about sort of the opex margin impact, you know, here in the very near-term. Maybe another way to ask it, you can you give us a sense of what percentage of your opex is variable or any sort of color you can give in terms of what the drop-through would be on the lower sales, that would be hopeful.

Keith Pfeil -- Senior Vice President, Chief Financial Officer

This is Keith. We like Dave said, we are going to continue to add reps that we feel are a fit for our company, can help us drive sales but I hesitate to break out the opex percentages as we look ahead. We think there's still too many unknowns.

Steven Michael Lichtman -- Oppenheimer & Co -- Analyst

Okay, fair enough. Thanks, guys.

Operator

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

Xuyang Li -- Barclays Bank PLC -- Analyst

Xuyang Li in for Matt. Thanks for taking our question. Maybe just to ask a little bit about the comments you made about centers that have opened up with some of the earlier states. I'm just kind of curious, can you talk a little bit about their initial ramp in capacity, are they operating as much as possible or is it more of a staggered and slower ramp?

David M. Demski -- President and Chief Executive Officer

I think that depends on the impact that they've experienced from COVID. So, where they've had a relatively challenging situation, they're stepping back into it more slowly but in those areas where they haven't seen such an impact they're full on back.

Xuyang Li -- Barclays Bank PLC -- Analyst

Okay, that's helpful. And then I guess in terms of any procedural changes in the facilities, have you picked up anything in terms of, you know, any additional burdens that the facilities or the staffers have to do in order to perform their cases? Are times in the OR longer because of it?

David M. Demski -- President and Chief Executive Officer

It's really too early to tell given it's a relatively small volume. Look, you know, some of the logistical challenges around outfitting our staff with PPE is one difference. At this point, we're still to new to the comeback to see if there's really going to be any other potential changes.

Xuyang Li -- Barclays Bank PLC -- Analyst

Okay, thank you very much.

Operator

There appears to be no further questions. I'd like to thank everyone for joining today's Globus Medical Quarterly Earnings call. Please disconnect your lines at this time and have a wonderful day.

Duration: 33 minutes

Call participants:

Brian J. Kearns -- Investor Relations

David M. Demski -- President and Chief Executive Officer

Keith Pfeil -- Senior Vice President, Chief Financial Officer

Daniel T. Scavilla -- Executive Vice President and Chief Commercial Officer

Matthew Stephan Miksic -- Credit Suisse -- Analyst

Shagun Singh -- Wells Fargo -- Analyst

Mason E. Austen -- Morgan Stanley -- Analyst

Richard S. Newitter -- SVB Leerink LLC -- Analyst

Matthew Oliver OBrien -- Piper Sandler & Co. -- Analyst

Kaila Paige Krum -- SunTrust Robinson Humphrey -- Analyst

Michael Stephen Matson -- Needham & Company -- Analyst

Steven Michael Lichtman -- Oppenheimer & Co -- Analyst

Xuyang Li -- Barclays Bank PLC -- Analyst

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