Globus Medical (GMED) Q1 2021 Earnings Call Transcript

Globus Medical (GMED -0.20%)
Q1 2021 Earnings Call
May 04, 2021, 4:30 p.m. ET

Contents:

• Prepared Remarks
• Questions and Answers
• Call Participants

Prepared Remarks:

Operator

Welcome to Globus Medical's first-quarter 2021 earnings call. [Operator instructions] I will now turn the call over to Brian Kearns, senior vice president of business development and investor relations. Mr. Kearns, please go ahead.

Brian Kearns -- Senior Vice President of Business Development and Investor Relations

Thank you, Catherine. And thank you, everyone, for being with us today. Joining today's call from Globus Medical will be Dave Demski, president and CEO; Dan Scavilla, executive vice president, chief commercial officer, president of trauma; 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 2020 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 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.

Dave Demski -- President and Chief Executive Officer

Thank you, Brian. And good afternoon, everyone. We got off to a great start in Q1, continuing the momentum we established in 2020. All facets of the business performed well in the quarter as we continue to take meaningful market share.

Revenue for the quarter was $227 million, up 21% on a day-adjusted basis over the first quarter of last year. Non-GAAP EPS was $0.49 per share, an increase of 67%, and adjusted EBITDA was 35%. Once again, INR and U.S. spine led the way.

INR revenue for Q1 was $15 million, up 86% over the first quarter of last year. Q1 is typically a slow quarter for capital sales, but our revenue in Q1 actually surpassed our revenue for the entire first half of 2020. The clinical superiority of our robotic technology continues to be recognized by surgeons, as shown by back-to-back quarters of strong growth. U.S.

spine continues to take significant market share, growing by almost 22% on a day-adjusted basis. Pull-through from robotics, contributions from new product introductions, a resurgence in our biologics business and competitive recruiting were all factors driving growth. Our international spinal implant business was essentially flat for the quarter. Strong growth in most markets was offset by declines in Japan, as expected primarily due to the transition of our sales force composition there.

We expect both of these trends, strong growth in the rest of the world and headwinds in Japan to continue throughout 2021, and we remain very positive about the health of our international business. We had a number of exciting product introductions in the quarter, but I would like to highlight two because they demonstrate the synergies inherent between our capital and implant product development engines. The first is the CORBEL Lateral ALIF system comprised of a novel retractor and an innovative interbody spacer designed for the L5-S1 disc space through a lateral patient position. CORBEL is the latest addition to the most comprehensive suite of lateral interbody solutions on the market today.

Our lateral technology includes multiple expandable options, static spacers and integrated plate-spacer solutions that can address all levels of the lumbar spine through either a prone or lateral patient position. Furthermore, the Excelsius Lateral 360 procedural solution allows surgeons to safely and efficiently treat multiple interbody levels and place MIS pedicle screws, while the patient remains in a single position. The second is CREO ONE, the market's first pedicle screw designed specifically for robotic spine surgery with ExcelsiusGPS. CREO ONE simplifies pedicle preparation while maintaining navigational accuracy and increasing pullout strength by 86% compared to traditional pedicle screws tapped to size.

The rigid robotic arm and navigational accuracy of ExcelsiusGPS, combined with 301's unique screw tip, are designed to save time and improve efficiency in the OR by eliminating procedural steps. Early feedback on both systems has been very positive. Shifting to trauma. Revenue was up over 100% in Q1 compared to the first quarter of 2020.

We are focused on sales force expansion and have several exciting product launches planned for the second half of this year. While we expect continued sequential growth, year-over-year growth may slow a bit in the coming quarters as we face challenging comps. We have filed with the FDA for 510(k) clearance on our imaging system and are ramping up manufacturing and operations for an anticipated Q3 launch. We also plan to launch the cranial module for EGPS later this quarter.

Globus has emerged from the pandemic as a stronger company, growing much faster than our larger peers with a strong balance sheet and healthy cash flows. As we look forward to the future, we see tremendous opportunities to accelerate our growth in INR, spine, trauma and total joints. We have an exciting lineup of product introductions plan for 2021. But to take full advantage of our potential beyond this year, we are going to ramp up investments in R&D resources moving forward.

We will also be aggressive in pursuing acquisition targets that enable us to further differentiate our portfolio. Globus had an outstanding first quarter, producing excellent financial results and delivering on several key strategic objectives. We're set up for an amazing year if we continue to execute. All parts of the company are performing well, and we're working together as a team.

I'm grateful for the dedication, ability and effort of our worldwide Globus team members as they serve our customers and patients. I will now turn the call over to Keith.

Keith Pfeil -- Senior Vice President and Chief Financial Officer

Thanks, Dave. And good afternoon, everyone. As Dave commented, our strong first-quarter results demonstrate our continued momentum and points to continued market share gains. Our focus on driving execution, along with our long-standing commitment to innovation and technology, have positioned us well as we work to fully emerge from the impact of COVID-19.

This is evidenced in our first-quarter sales, profitability and cash flow growth. Q1 revenue was $227.3 million, growing 19.3% as reported and 20.7% on a day-adjusted basis compared to the first quarter of 2020. Revenue grew 18.7% on a constant-currency basis as compared to the first quarter of 2020. Though we experienced COVID impacts in January and early February, revenue grew sequentially each month and accelerated as we moved further into February and March.

Net income was $45.3 million and non-GAAP net income was $49.7 million, driving $0.49 of fully diluted non-GAAP earnings per share. Adjusted EBITDA was 35.2%, and our free cash flow was $49.9 million. Moving further into sales. U.S.

revenue was $193.3 million or 22% higher than the first quarter of 2020, driven by the continued strength of our U.S. spine business, as well as higher INR revenue stemming from additional capital sales. International revenue for the quarter was $34 million, representing a 5.9% increase versus the first quarter of 2020. As Dave noted earlier, international implant sales were essentially flat.

However, growth in robotics was the key contributing factor in our year-over-year improvement. We continue to see strong implant growth in most of our international markets. However, this is being partially offset by declines in Japan, driven by our previously discussed sales force transition. First-quarter gross profit was 75.8%, compared to 74.4% in Q1 of 2020.

The improvements to gross profit were driven mainly by improved manufacturing efficiencies and lower warehouse costs. The lower warehouse costs were primarily labor related as the result of the warehouse move, which occurred in the prior-year quarter and did not repeat in the current-year quarter. Our research and development expenses for the quarter were $14.9 million or 6.6% of sales, compared to $15.4 million or 8.1% of sales in the first quarter of the prior year. The reduced spending was driven primarily by lower travel, lower meeting expenses and lower consulting costs.

This lower spending is partially offset by higher salary and benefit costs, driven by increased head count. Looking ahead, we plan to increase our investment in R&D as we progress through 2021. Those investments will continue to drive our class-leading capabilities across robotics and spine, while also positioning us to further penetrate the trauma and joint markets. SG&A expenses for the first quarter were $97.9 million or 43.1% of sales, compared to $93.5 million or 49.1% of sales, driven primarily by higher sales compensation costs, partially offset by lower travel, entertainment and meeting expenses, as well as leverage on our spending as a result of the higher sales volumes.

The effective income tax rate for the quarter was 20.7%, in line with expectations though slightly higher than the 20.2% rate in the first quarter of 2020. As I've mentioned earlier, adjusted EBITDA for the quarter was 35.2%, as reflected in my earlier comments, specifically around revenue growth gross profit improvement and overall leverage. We ended our first quarter with $838.4 million of cash, cash equivalents and marketable securities. Net cash provided by operating activities was $63.6 million and free cash flow was $49.9 million, as mentioned earlier.

At this time, the company is revising its previously announced 2021 guidance of $880 million in net sales and $1.83 in fully diluted non-GAAP EPS. We now expect full-year net sales to be $925 million, and our non-GAAP EPS to be $1.89, representing 17.2% revenue growth and 31.3% non-GAAP EPS growth versus 2020. Looking back on our strong Q1 results and our expectations for the remainder of the year, we remain well-positioned to aggressively execute across all fronts. We continue to be extremely positive about our business and its ability to take share across our entire portfolio, all while bringing new and exciting products to market.

This, coupled with our commitment to expanding R&D investments while aggressively pursuing acquisitions that complement our portfolio, will position us for continued growth over the long term and drive exceptional shareholder value. I truly feel the best is yet to come. We will now open the call for questions.

Questions & Answers:

Operator

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

Dave Demski -- President and Chief Executive Officer

You're breaking up, Matt. We can't hear you.

Matt Miksic -- Credit Suisse -- Analyst

Yeah, let me try this. Hold on, sorry. Is that better?

Dave Demski -- President and Chief Executive Officer

Yes, it is.

Matt Miksic -- Credit Suisse -- Analyst

OK. Sorry about that. So congrats on a really strong quarter. Just I don't even know what to say, some of these numbers are really impressive.

But one question on robots and a follow-up on implant. So we have seen just really strong growth across the robot category, I guess, you could say, since the middle of last year, I feel like we asked the same question every quarter. But if you could maybe describe where some of this 80%, 90% growth that you're seeing is coming from maybe the types of centers? Or is this a competitive regional? There's a robot in a city and a center across town, it feels like you need to have a robot now also? Maybe describe what feels like an inflection point? And then, what sort of timing we can think about in terms of pull-through on these robots? So if you're seeing this strength here, is it like a quarter or two to sort of start driving the implants that follow. And I mentioned one quick follow-up on implants.

Dave Demski -- President and Chief Executive Officer

Sure, Matt. I think we're seeing the growth is really everywhere. We've got centers that are buying their second or even third robot. We have the first robot in town kind of situations.

We're in community or in universities. I think you're really seeing the technology starting to take off, just generally, and we're starting to see that. But you may be right, I hope you're right that we're at that inflection point where it becomes mainstream. And to your second part of your question, when we see implant from it, it's usually the quarter after.

I mean, that first quarter is about getting it installed, getting folks trained on it, getting up speed. And then, once they start using it, we'll see the implants pull-through in the following quarter.

Matt Miksic -- Credit Suisse -- Analyst

That's great. And then, on implants, if you could maybe give some sense of where in the category of implants that you're seeing the most strength. And where, if anything, you saw some slowness in the beginning of the quarter as some of the other companies have talked about, meaning sort of cervical or interventional spine or types of centers, any color would be very helpful as to the pattern that you saw in Q1. Thanks.

Dave Demski -- President and Chief Executive Officer

Sure. No. No, no real discernible pattern in terms of mix from our standpoint. We are getting really strong growth from some of the products we introduced last year, our 3D line of spacers, as well as SABLE.

We've also, as I mentioned in my prepared remarks, CREO ONE has really gotten off to a quick start for us. So that -- other than that, I don't see a pattern, as you alluded to or maybe somebody else had mentioned on a call.

Matt Miksic -- Credit Suisse -- Analyst

Great. Thanks so much.

Dave Demski -- President and Chief Executive Officer

Thank you.

Operator

Your next question comes from the line of Kaila Krum with Truist Securities.

Kaila Krum -- Truist Securities -- Analyst

Great. Thanks, guys. And I'll echo the congratulatory comments. Just on the enabling tech business, I mean, awesome performance with $14 million in sales.

Would you say that's now sort of a baseline for quarterly performance going forward? And can you help us understand how you're assuming that this business will grow into the second part of this year with further contribution from imaging?

Dave Demski -- President and Chief Executive Officer

Yeah, Kaila, look, capital is really challenging to predict how you're going to do because each sale is unique. It's much easier for us to predict where we're going in the implant business because that's recurring. Certainly, we expect to grow from here. We think this business has a lot of runway to it, both for Globus, as well as the industry.

So all of those factors are pulling in the right direction, and we are going to be rolling out some additional technology, as you know, later this year, hopefully, as the plan in Q3. So I do believe we'll see higher sales, but we're not going to put a number to that at this point.

Kaila Krum -- Truist Securities -- Analyst

OK, that's fair. And then, you mentioned you plan to be aggressive from an M&A perspective. I guess, what does that mean relative to how you guys have acted historically? I think, historically, you've chosen to look at, at either earlier stage assets or less expensive, more mature assets? I mean, should we expect to see more of the same in terms of that strategy? Or are you considering some higher-priced assets or grow the assets at this point? Thank you for taking the questions.

Dave Demski -- President and Chief Executive Officer

Sure. Yeah. We are looking to be more aggressive there in terms of the amount we're going to invest. So we're looking at a little bit bigger.

But the emphasis is really on expanding the differentiation within our portfolio. So we're looking for technology, not necessarily scale. And that's how we're looking at things at this point.

Kaila Krum -- Truist Securities -- Analyst

Great. Thank you.

Operator

Your next question comes from the line of Steven Lichtman with Oppenheimer.

Steven Lichtman -- Oppenheimer & Co. Inc. -- Analyst

Thank you. Hi, guys. I'm on the solid sequential performance of U.S. spine, which was even better than it was, I guess, in 2019.

Just wondering if you could delve a little bit more into what you were seeing, if there was anything in the quarter that particularly snapped back. I know you mentioned, Dave, the biologics business. Was that a sort of an outsized contributor to the strong sequential that you saw from 4Q to 1Q?

Dave Demski -- President and Chief Executive Officer

I don't really know what our sequential growth was. I thought it was down.

Keith Pfeil -- Senior Vice President and Chief Financial Officer

Sequential from Q4 to Q1.

Dave Demski -- President and Chief Executive Officer

From Q4? Yes.

Keith Pfeil -- Senior Vice President and Chief Financial Officer

It was down overall, but the U.S. spine business, I mean, overall, I wouldn't say, like our implant business, our U.S. Spinal Implant business is performing extremely well. And the biologics did bounce back, as you commented, but it doesn't take away.

Dave Demski -- President and Chief Executive Officer

We've been seeing that, Steve, in terms of biologics for the last six months or so, and that's a continuing trend. But typically, Q4 is stronger than Q1. And I don't -- I just don't have the numbers in front of me right now. And then, I'll just remind you that COVID hit January pretty hard, was -- had an impact in February as well.

And then, March was a strong month for us. So I'm not sure how much -- I know there were still some COVID restrictions in some markets in March, but it was pretty light. So it's just the four things I mentioned continue to be the things that we are executing well on. It's pull-through from robotics, it's the new products we launched.

Biologics has made it come back. I think we've commented on it the last couple of quarters, and it's continued into Q1. And then, finally, competitive recruiting is always part of our growth strategy.

Steven Lichtman -- Oppenheimer & Co. Inc. -- Analyst

Got it. Great. And then, just secondly, Keith, can you talk a little bit more about your updated margin goals for the year? I'm not sure if you talked about EBITDA for the full year. And when you talk about R&D acceleration, can you put any numbers on that for us, any ranges in terms of -- as a percent of sales for the year?

Keith Pfeil -- Senior Vice President and Chief Financial Officer

Sure. So from an R&D perspective, we historically said that we run about 7% of sales. Based on some of the comments around investment in spine, robotics, trauma and joints, we'd expect that number to move a little north of that as we look ahead in 2021. As we think about -- what was the very first part of your question.

Could you repeat that one more time?

Steven Lichtman -- Oppenheimer & Co. Inc. -- Analyst

Just EBITDA margin for the year.

Keith Pfeil -- Senior Vice President and Chief Financial Officer

OK. Our EBITDA, I mean, we came into the year expecting that we're going to see margin expansion from 2019 and 2020. We still view ourselves as a mid-30s EBITDA business, even with this increased investment. We're really happy with how the year started.

When we came into 2021, the COVID impact in the beginning of the year caused a little bit of concern. But when we look back and see how we finished, we feel really good about where we're sitting, and we feel comfortable in saying we're still in mid-30s EBITDA business.

Steven Lichtman -- Oppenheimer & Co. Inc. -- Analyst

Great. Congrats, guys.

Dave Demski -- President and Chief Executive Officer

Thank you.

Operator

Your next question comes from the line of Shagun Singh with Wells Fargo.

Shagun Singh -- Wells Fargo Securities -- Analyst

Great. Thank you for taking the question, and congratulations on a really outstanding quarter. So I was just wondering if you could talk about trends in April, how that is tracking relative to March? And then, how much of the sales growth in Q1 was backlog? And then, just with respect to guidance, you've increased revenue outlook by about 5%, but EPS just about -- by about 1.5% at the midpoint. So could you just discuss the puts and takes there and how you thought about it? Thank you.

Dave Demski -- President and Chief Executive Officer

So I'll take the first part, Shagun. March was a really strong month. April continued to be really strong as well. So I feel like the economy in the spine business at least is back and operating at really pre-COVID levels.

So feel really good about that aspect of the business. I'm going to let Keith handle the guidance.

Keith Pfeil -- Senior Vice President and Chief Financial Officer

Yeah. So the guidance. So we grew top line by -- from $880 million to $925 million, but our bottom line didn't grow quite as much. When you step back and look at that, obviously, the volume is driving an increase.

But the one -- the couple of things I want to call out is that we did talk about some investments in our trauma, spine, robotics and INR businesses. Also, our share count is a little bit higher. But when you step back and look at our overall guidance and you compare it to 2019, we are growing our top line by about 17.8%. Our bottom line at $1.89 will grow about 12.5%.

But I do want to call out, when you're doing that comp and you look at our overall growth, when you go back and look at 2019 and look now, there's a lot -- there's about $0.19 of add-backs for what I would call nonoperating items. That would include interest income, tax, higher stock comp and higher share count. When you take that $0.19 and add it to our $1.89, you get to something closer to $2.08, which would give us about 24% on a more normalized basis. So really, when you step back and look at our revised guidance, we really think we're well-positioned, especially looking at where we were in 2019.

Shagun Singh -- Wells Fargo Securities -- Analyst

That's really helpful color. And just with respect to the backlog, how much of the sales growth in Q1 was attributable to the backlog?

Keith Pfeil -- Senior Vice President and Chief Financial Officer

Yes. That's a little bit more of a tougher question. I mean, when you think about last year -- coming in our Q1 release last year, we called out about a $20 million impact driven by COVID. Surely this year, we were impacted in January, and we started to see that sequential improvement in February and March.

But if I step back and look at it, I would say it's almost a push year over year. Dave, anything you'd add to that?

Dave Demski -- President and Chief Executive Officer

You're saying Quarter 1 last year versus this year on an implant basis is kind of flat, yes. It's a little challenging to decipher because every -- different sections of the country are -- had different COVID kind of reactions or restrictions. But as well as we can understand, I think those -- there's probably a net zero impact between Q1 last year and Q1 this year from an U.S. implant standpoint.

Shagun Singh -- Wells Fargo Securities -- Analyst

Got it. Thanks so much.

Operator

Your next question comes from the line of Matt Henriksson with Citibank.

Matt Henriksson -- Citi -- Analyst

Hi. Good afternoon, and congrats on a great quarter. Let's start with the ortho trauma results. You mentioned it was up 100%.

And then, kind of -- although it's going to improve sequentially and we'll be at that growth rate, could we just add a little more detail on kind of what's driving that growth? What are the strategies around the sales force expansion and kind of how we would expect that to play out throughout the rest of 2021 and into 2022?

Dan Scavilla -- Executive Vice President, Chief Commercial Officer, President of Trauma

Thanks, Matt. It's Dan Scavilla. So a couple of things. I mean, certainly, we're pleased to [Inaudible] products we have and get inroads in the markets that we have, and we continue to see that occur, not only in Q1, but we'll expect that to go through the year.

At the same time, we have stepped up in our recruiting, and we see that there's an activity that's helping us further bring reps onboard. I don't really break it out by quarter. But again, I would think that again off of smaller numbers, the higher growth rate helps and getting more people in will matter rep by rep right now with that. Dave also mentioned that I would support -- we have what I consider significant product launches coming in the second part of the year.

And that will further help us drive in and grow that way. So we've always said trauma is going to be all longer term growth year by year and not an explosion. And I think it's playing out that way. We just have to continue with our investments and our focus.

Matt Henriksson -- Citi -- Analyst

OK, thanks for the color there. And then, just moving to cervical, that's starting to get more attention with some recent acquisitions and recent product launches. You had your SECURE-C with the two-level indication. But kind of what are your thoughts on the market overall compared to kind of traditional fusion? And then, any commentary that you have on any future development would be great.

And thanks for taking the questions.

Dave Demski -- President and Chief Executive Officer

Sure, Matt. Let me just generally correct you there. We don't have two levels on SECURE-C. We only have one level.

And I think that's a challenge for us. I think that segment has a lot of future potential. It's not huge right now, but I do think it's a good treatment for patients. So we're actively evaluating what our options are there, and we will be a strong competitor going forward in that segment.

Operator

Your next question [Audio gap]

Dave Demski -- President and Chief Executive Officer

Hello? Katherine, you cut out a little bit. We couldn't hear what you said.

Operator

I'm sorry. Your next question comes from the line of Jason Wittes with Northland.

Jason Wittes -- Northland Securities -- Analyst

Hi. Thanks for taking the questions. First, just a clarification, are you implying that the final month of the quarter pretty much saw an increase in volume? And should we anticipate pretty much de minimis COVID impact for the rest of the year? I'm just trying to figure out how -- what you're thinking is on COVID and how it might affect the quarters going forward.

Dave Demski -- President and Chief Executive Officer

March was a good month. I think it was the best month in our history actually in overall revenue. So it was a strong month. Like I alluded to earlier, there were still some regions -- some regions of the country that were shut down and restricting electives, but there were others that I think included some bounce back.

So on a net basis, I think March was a sort of a typical pre-COVID kind of quarter. Your guess is as good as anyone going forward, April was a good month, but -- and hopefully, the vaccine is effective, and we're back to normal going forward, but that's our crystal ball. I don't think it's any more clearer than anyone else's.

Jason Wittes -- Northland Securities -- Analyst

OK, that's helpful. And also, just on the accounts that acquire or place a robot, can you kind of explain -- give us a little more color in terms of what happens in terms of their utilization of implants? It sounds like you do see a dramatic increase in usage. I don't know if you can quantitate or give us some guidance in terms of what -- how an account gets transformed once they get a robot installed.

Dave Demski -- President and Chief Executive Officer

It goes all over the map. There are some -- the robot itself is much more efficient for surgeons that utilize our screws. So that in itself typically drives volumes for the cases where they use the robot. Now that we've added interbody solutions to it, again, it works much more efficiently with our interbody devices.

And we have a significant number of our sites that are either buying it with interbody solutions or upgrading their installed base with that. And then, we also have the scenario where we will sign a committed purchase agreement with a hospital and the rebates from that implant deal will be used to pay off the capital over time, which is something a lot of our competitors do as well. So we have all of those scenarios. So it's hard to say what we -- any particular account could be one of those three.

So it varies. And we have not shared the actual quantitative impact, and we're going to keep that as competitive information.

Jason Wittes -- Northland Securities -- Analyst

OK, thanks for the question and strong quarter. Thanks.

Dave Demski -- President and Chief Executive Officer

Thank you.

Operator

Your next question comes from the line of Kyle Rose with Canaccord.

Kyle Rose -- Canaccord Genuity -- Analyst

Great. Thank you for taking the questions. Can you hear me all right?

Dave Demski -- President and Chief Executive Officer

Yes.

Kyle Rose -- Canaccord Genuity -- Analyst

So I wanted to kind of take more of a bigger picture question here. And just talk more about the competitive dynamics of the U.S. spine market that we are seeing. I mean, obviously, exceptional growth today, but also for really the last two to three quarters.

Since the third quarter, we're seeing a big step function in growth for Globus relative to the broader group. So maybe if you could just help us bucket where that's really coming from? How much is coming from competitive rep hiring? How much is coming from your implant pull-through from the robot? And then, how much is kind of coming from just new products in the iterative new product flow the company has been able to generate? It's just we're seeing exceptional growth here, it indicates the real share taking, just really trying to understand where that's coming from.

Dave Demski -- President and Chief Executive Officer

Well, thank you, Kyle. I agree with you. We've -- really, Q1 of last year masked a strong quarter. So we've been on this track for about a year and a half, I would say.

But I am not going to help you out by telling you where it's coming from. Just from a competitive standpoint, we're pulling all those levers, and we're going to continue to pull them. And I'm confident our team is going to keep executing. So that's all I can share with you right now.

Kyle Rose -- Canaccord Genuity -- Analyst

That's fair. I had to try. Let me ask one more robotic question. Obviously, really strong quarter to start the year, but we are also seeing really good implant growth here.

So help -- maybe just help us understand how many or what proportion of your robots are being sold outright versus placed? I'm just trying to understand how much of the unit placements is really outpacing some of the revenue we're seeing on the enabling side.

Keith Pfeil -- Senior Vice President and Chief Financial Officer

Yeah. The mix of our robots in terms of how they're getting sold hasn't changed. The vast majority of our robotic sales are still outright sales. That really hasn't changed since we've started selling robots.

We can sell all the different ways that Dave mentioned earlier, but still the majority of them are outright purchases.

Kyle Rose -- Canaccord Genuity -- Analyst

Thank you for taking the question.

Dave Demski -- President and Chief Executive Officer

Thank you.

Operator

Your next question comes from the line of Ryan Zimmerman with BTIG.

Ryan Zimmerman -- BTIG -- Analyst

Good afternoon. Thanks for taking the questions. I'm going to ask Kyle's question, maybe in a little different manner, Dave, and see if you'll take a bite. But the competitive environment, as we noted, has not kept up with the pace that Globus has.

And so to ask it in another way, I mean, what do you think -- or how would you characterize the competitors in the market, particularly the mid and larger ones in terms of what they're not doing that you're seeing out there because it does seem like you've been at this for over a year now with these types of share gains? And so clearly, they're not doing something that you figured out. And I don't know if you have any thoughts on kind of your other competitors.

Dave Demski -- President and Chief Executive Officer

Yeah, I would be remiss if I spoke ill of anyone in the market. But I will tell you, Ryan, that the fundamental driver is technology, right? So our implant technology, our enabling technology, they're differentiated, they're stronger, they're driving clinical value. So that enables us to just outright sell that, but it's also very attractive for other reps who are stuck at those other companies to come over, they're good reps, they have good relationships. They want to come over and sell the best -- the best technology on the market.

So that drives our competitive recruiting as well. It's really the thing underneath it. And then, we continue to innovate. We've got a really strong group across the company really.

It's spine -- obviously, spinal implants. We've been noted for a long time for the differentiation there. Our robotic and enabling technology is -- we're just scratching the surface with what we have -- that you know about and what you actually don't know about yet. We have some really exciting things coming.

And then, in Dan's area, in the ortho area between trauma and joints, we have some things. You probably won't see that innovation until next year. But those are coming as well. So it all comes down to technology.

We were founded as an engineering company, and that remains our core.

Keith Pfeil -- Senior Vice President and Chief Financial Officer

And there's one thing that I would add to that -- to Dave's comments that I would say that we've done exceptionally well as we've executed. I think we've -- out of all the things Dave talked about, when you think through the last year, year and a half, I think the company has executed extremely well. That's really helped drive a lot of the benefits that we're seeing.

Ryan Zimmerman -- BTIG -- Analyst

Sure. That's very helpful. And I appreciate you giving some color there. Just one follow-up for me.

So I think in the fourth quarter, you guys built out some additional manufacturing capacity. And it was really expected, I think, to be up and running in the first quarter of '21. And correct me if I'm wrong there. But could you just comment on kind of what that does? If you weren't constrained on any product families or categories? And kind of what that additional capacity does and when that comes online for whatever specific product areas that you did expand in? Thank you.

Dave Demski -- President and Chief Executive Officer

Sure. Yeah, we are still a bit capacity constrained in some of the segments of the company, particularly 3D. We've added that. We're still -- you've got to qualify the equipment, you've got to get the products made, you got to get them sterilized and put through the distribution cycle.

So we are still not seeing the full impact of that. And actually, with the growth that we've seen here in the last nine months, we continue to add capacity. And it's a great problem to have, but it's a challenging problem in the environment that we're in right now to keep up with the demand.

Operator

Your next question comes from the line of David Saxon with Needham.

David Saxon -- Needham & Company -- Analyst

Good afternoon. And really, an incredible quarter. First question is just on enabling tech. You noted some international robot placements.

So I was just wondering if you could share where those were. And then, as you're preparing for the imaging launch, I mean, at this point, you have some orders lined up that are going to be easy for the third quarter.

Keith Pfeil -- Senior Vice President and Chief Financial Officer

I'll take the first part of your question on enabling tech. We really don't disclose what countries that we're selling in. What I will say is that we are actively marketing the product in the countries that we can sell a product in. And there's a lot of -- lot about the product, and we're excited about what it can bring going forward.

Dave Demski -- President and Chief Executive Officer

David, in terms of the 3D system, we're not able to market it or take orders for it until it's approved. So that's -- we don't have that. I will say there's been a lot of interest as surgeons have seen the product and giving us input on it. So -- and the other thing I wouldn't get too far ahead of -- out over our skis, it's with the FDA.

So we have to get their approval. And while we do anticipate a third-quarter launch, it's subject to their approval. So I know the product is going to sell really well. I don't know when we are going to start just yet.

We're confident in our submission, and we love the technology and the interest that surgeons have. So from a long-term perspective, it's going to be a great product for us.

David Saxon -- Needham & Company -- Analyst

OK, got it. And then, my second question is just on trauma. You noted some product launches you're planning for the back half. So just wondering how long you think it will take to get to a full trauma portfolio? Is that kind of like a 12- to 18-month process? Or is that a little longer term? Thanks so much for taking the questions.

Dan Scavilla -- Executive Vice President, Chief Commercial Officer, President of Trauma

David, it's Dan Scavilla. Thanks for the question. So yes, the launches that we have planned for the second half of the year, while meaningful will still be filling the bag. What both Dave and Keith had mentioned is our increased investment that we're planning to do with Globus Ortho, both in the joints and the trauma, will actually accelerate the development and placement of products in the market at a rate faster than our initial strategic plan.

And so we're leaning in using the financial muscle of the company to bring on more resources throughout the organization to actually fill out that bag faster. I don't have an exact date for you. I would tell you, though, as we exit this year, we'll be in a really strong position to compete. I think within 12 to 18 months, we'll have more to actually start significantly supporting larger institutions and displacing competition, and that's really the goal of this increased investment is they make that happen faster.

David Saxon -- Needham & Company -- Analyst

Great. Thank you.

Operator

Your next question comes from the line of Matt Taylor with UBS.

Matt Taylor -- UBS -- Analyst

Hey, guys, congrats on a great quarter. Thanks for taking the question. I was just trying to square your comments from the last call, because I remember you said, in January, there was like a 15% to 18% drag on the U.S. business and just some improvement in February.

So it must have been a real rebound in March. And I just wanted to make sure getting the math right. Is that drag relative to kind of the underlying double digits you have been growing last year? So if that's true, then January was, I don't know, flattish, then you saw some improvement in February that would allow us to back into the exit rate in March?

Dave Demski -- President and Chief Executive Officer

Yes. In terms of the -- it was relative to our, if you will, the fourth quarter, so October, November run rates that we were seeing, COVID started to hit again in December. So that was -- the commentary was 15% to 18% off that. But keep in mind, as we're comparing to last year March, we got hit with COVID halfway through March of '20.

So as you compare year over year, you've got January and February negative impacts in '21 and a March negative impact in '20. And as one of the earlier callers had asked, I think the impact there was about flat. So the COVID impact was relatively neutral on the U.S. between the Q1 last year and Q1 this year.

And then, within the quarter, we definitely saw a progression. January was bad, February got better, and March was good.

Matt Taylor -- UBS -- Analyst

OK, OK, great. And could you take us through any thoughts or help on what you believe recovery will look like through the year in your international business, just given your exposure to Japan and some geographies doing better or worse? Help us parse that out a bit.

Dave Demski -- President and Chief Executive Officer

Yeah. We're doing well in almost every other market. And Japan is going to be a headwind. That's our biggest country.

Again, we're confident in the team that we have in place there, the process of rebuilding, if you will, in those areas where we've gone away from certain distributors, it's just -- our robotic technology is going to roll out this year. So that will be a leverage point as well. So I think it will mirror what we saw this quarter, where the two are going to probably offset each other to a large extent as we go through this year. And hopefully, by the end of the year, we'll see some of that growth in Japan start to pick up sequentially.

Matt Taylor -- UBS -- Analyst

Thanks a lot.

Operator

Your next question comes from the line of Richard Newitter.

Richard Newitter -- SVB Leerink -- Analyst

Thanks for taking the questions. Congrats on the performance this quarter. I have two questions. The first just on what's assumed in guidance right now.

I appreciate that you bumped the outlook on a very strong 1Q. But when you had last provided guidance at the beginning of the year, you had suggested that you weren't baking in any assumption for really much of a pickup in growth in the back half of the year relative to a strong second half of 2020. I'm just curious with the commentary that March picked up big, April is better than March. The guidance range wasn't quite that much more than the 1Q.

Keith, I'm just curious what you're assuming for the back half.

Keith Pfeil -- Senior Vice President and Chief Financial Officer

Thanks for the question. As you think about going from $880 million to $925 million, clearly, we came out and finished with a strong Q1. As I think about -- or as we think about Q1 into Q2, we still expect good momentum into Q2. But I will say just to clarify that April is a little bit of a slowdown from March, but we still feel strong about where Q2 is going to land.

Stepping back and looking at the $925 million holistically, I would still say there's still appropriate conservatism in there from a Globus perspective as we look because when you get to Q3 and Q4, we know we had those strong bounce backs last year and still -- we are still in this environment where we're still not sure how Q3 and Q4 will turn out. But where we're positioned right now, I really fall back in some of the earlier statements is that we feel positive about where we're at. We came out of a strong Q1. We're going into a Q2 that we feel is going to be a strong quarter.

We still want to maintain that conservatism as we look to the back half of the year just because it's April. A lot could happen between now and the end of the year.

Richard Newitter -- SVB Leerink -- Analyst

OK, got it. It sounds like you're still being conservative, but you're encouraged, if I'm hearing you correctly. OK. And then, just on the capital side, can you remind us what the capital selling cycle, how long it has been historically? And what's changed, if anything, kind of now? Like how long it takes kind of the beginning of a conversation to when you close the deal? It's just an extremely strong 1Q placement quarter.

And I'm just wondering if something structurally has changed, either a mindset, capital prioritization on ortho robotics? Or has anything dramatically shifted there?

Dave Demski -- President and Chief Executive Officer

Yeah, thanks, Rich. Well, our goal is to compress that capital cycle and make the technology and the economic opportunity for the hospital compelling enough to break out of the capital cycle. So that -- I would say it was challenging last year when you couldn't get in front of executives and surgeons, and that's still a challenge, but it's possible now. So that is one structural difference between last year.

And then, I will just remind you that at the end of -- as we exited the year, I said our pipeline was really strong. So the deals that we had that we were pursuing as we exited the year, several of them were closed in the quarter. And I'll say that again, we've got -- we continue to have a strong pipeline and a lot of potential as we look at Q2.

Richard Newitter -- SVB Leerink -- Analyst

Really impressive. Congratulations.

Dave Demski -- President and Chief Executive Officer

Thank you.

Keith Pfeil -- Senior Vice President and Chief Financial Officer

Thank you.

Operator

[Operator instructions] Your next question comes from the line of Matt O'Brien with Piper Sandler.

Korinne Wolfmeyer -- Piper Sandler -- Analyst

Hi. This is Korinne on for Matt. Thanks for taking the questions, and congrats on the quarter. So first off, just following up on imaging, how much of that is baked into guidance for this year? Or will that be more of a 2022 impact that we should expect?

Keith Pfeil -- Senior Vice President and Chief Financial Officer

We're not going to sit and break out the parts and pieces because we know that coming from Q1 -- or coming from our $880 million to $925 million, we know that it was a nice move forward. We still want to maintain some conservatism in our number. But one thing I will say is that even though we are not breaking out the parts and pieces, we do hope to launch it later this year.

Korinne Wolfmeyer -- Piper Sandler -- Analyst

Great. Thank you. And then, one last one. Can you just expand on some of your efforts in the ASC channel? There's a huge push in the ortho space to shift to the ASCs, how are you positioning yourself to move from -- through that but still stay competitive in the hospital setting?

Dave Demski -- President and Chief Executive Officer

Look, that's a great question. I don't know that anybody's fully figured that out at this point. But more efficiency in terms of both capital and our implant sets is probably the way to go there. They're constrained.

In terms of their capital budgets, they're constrained typically in terms of their operating budgets and their space issues. So we're trying to look at products that address all of those constraints while we focus as well on the hospital environment. So it's a challenging but high-impact opportunity for us.

Operator

And your last question comes from the line of Craig Bijou with Bank of America.

Craig Bijou -- Bank of America Merrill Lynch -- Analyst

Hi, guys, thanks for taking the question. Just wanted to start with a high level -- a couple of high-level questions on the use of robotics in spine. And really wanted to get a sense for, I guess, could you give us a sense for what percentage of your procedures are on the robot? Is it 10%? Or is that roughly in the ballpark? And then, secondly, maybe higher level thoughts on how you see the use of robotics in spine over time. Is there a percentage of procedures that you expect that will ultimately be done with a robot? And then, how -- what's that progression over the next couple of years?

Dave Demski -- President and Chief Executive Officer

I mean, thanks, Craig. In terms of our percentage right now, we don't share that information from a competitive standpoint. I will tell you that it's an internal focus of the company, though. We're highly focused on driving adoption and utilization in this installed base because, ultimately, that's why it's going to continue to grow.

As the value of computer-assisted technology is recognized, and we're able to measure it, more and more people are going to do it -- utilize it. I actually think it's going to be standard of care. And I don't know when that will be. I certainly think within 10 years, it could be sooner.

It's hard to say. I do think that there's a growing acceptance by surgeons of the technology. And I see a lot of anecdotal evidence where guys are just shifting over to everything they're doing, they're really seeing those benefits. So we're pushing as hard as we can to drive that.

And we're doing that both with our procedural focus in the field, as well as trying to make the technology just better, easier to use and more efficient in the OR. So I wish I had a better answer for you, but we're super bullish on where it's going and our ability to compete there.

Craig Bijou -- Bank of America Merrill Lynch -- Analyst

I appreciate that. And maybe just a follow-up on some of your acquisition commentary. Your target areas, is it more the enabling technologies, the Ortho, you've done a couple of deals there or spine technologies? Anyway, I'm assuming you're looking at all of those areas, but is there any one of those areas that may be more of a focus than the others?

Dave Demski -- President and Chief Executive Officer

Well, I think the answer is we're looking at all of them, but we have a very broad line of innovation in spine. So it's probably less likely that we would find something there and the opposite of that is true on the Ortho side. So those are probably going to be things that fit better into what we're doing and have a bigger impact. But we're open to any and all areas where we can improve the differentiation of our portfolio.

Craig Bijou -- Bank of America Merrill Lynch -- Analyst

Great. Thanks for taking the questions, guys.

Dave Demski -- President and Chief Executive Officer

Sure.

Operator

I'd like to turn the call back over for any closing comments.

Brian Kearns -- Senior Vice President of Business Development and Investor Relations

Thanks very much, everybody. With no further questions, this ends the Globus Medical first-quarter earnings call. Thanks for joining us. Have a good night.

Operator

[Operator signoff]

Duration: 53 minutes

Call participants:

Brian Kearns -- Senior Vice President of Business Development and Investor Relations

Dave Demski -- President and Chief Executive Officer

Keith Pfeil -- Senior Vice President and Chief Financial Officer

Matt Miksic -- Credit Suisse -- Analyst

Kaila Krum -- Truist Securities -- Analyst

Steven Lichtman -- Oppenheimer & Co. Inc. -- Analyst

Shagun Singh -- Wells Fargo Securities -- Analyst

Matt Henriksson -- Citi -- Analyst

Dan Scavilla -- Executive Vice President, Chief Commercial Officer, President of Trauma

Jason Wittes -- Northland Securities -- Analyst

Kyle Rose -- Canaccord Genuity -- Analyst

Ryan Zimmerman -- BTIG -- Analyst

David Saxon -- Needham & Company -- Analyst

Matt Taylor -- UBS -- Analyst

Richard Newitter -- SVB Leerink -- Analyst

Korinne Wolfmeyer -- Piper Sandler -- Analyst

Craig Bijou -- Bank of America Merrill Lynch -- Analyst

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