Ed Joyce - Investor Relations Director David Paul - Chairman and CEO Dave Demski - President and COO Richard Baron - Senior Vice President, Finance and CFO.

Matt Miksic - Piper Jaffray Kyle Rose - Canaccord Bob Hopkins - Bank of America Matthew O'Brien - William Blair Matt McDonough - Goldman Sachs Robert Marcus - Leerink Swann Steven Lichtman - Oppenheimer.

Welcome to Globus Medical Third Quarter Earnings Call. At this time, all lines will be on mute and a Q&A session will be held after the prepared remarks. I’ll now turn the call over to Ed Joyce, Investor Relations Director. Please go ahead..

Thank you. Thanks for being with us today. Joining on today's call from Globus Medical will be David Paul, Chairman and CEO; Dave Demski, President and COO; and Richard Baron, Senior Vice President of Finance and CFO. I will now read our required legal disclaimers.

During this call, certain items may be discussed that are not based entirely on historical facts. These items should be considered forward-looking statements and are subject to many risks, uncertainties and other factors that are difficult to predict that may affect our businesses and operations.

As a result, our actual results may differ -- differ materially and adversely from those expressed or implied by our forward-looking statements. A discussion of some of these risks, uncertainties and other factors is set forth in our Forms 10-Q and 10-K on file with the SEC. These documents are available at www.sec.gov.

We undertake no obligation and do not intend to update any forward-looking statement as a result of new information or future events or circumstances arising after the date on which it was made.

The financial information discussed in connection with this call reflects estimates based on information available at this time and could differ materially from the amounts ultimately reported in our 2014 Form 10-Q for the third quarter.

Our revenue, earnings, operating margins, cash flows and similar items are sometimes expressed on a non-GAAP basis and had been adjusted to exclude certain items including, among other things, interest income and expense and other non-operating expenses, provision for income taxes, depreciation and amortization, stock-based compensation, changes in the fair value of acquisition-related contingent considerations in connection with business acquisitions, provisions for litigation, and with respect to computation of free cash flow, purchases of property and equipment.

The comparable GAAP financial information and a reconciliation of non-GAAP amounts to these comparable GAAP amounts can be found in the tables included in today's earnings release, which is available on the Globus Medical Investor Relations webpage at www.globusmedical.com.

I will now turn the call over to Dave Demski, our President and Chief Operating Officer..

Thank you and welcome to everyone on the call. Our worldwide sales for the third quarter were a record $117.8 million, up 9.9% over the third quarter of 2013. In the U.S., sales growth was 8.7% over the third quarter of last year and 4.9% over the second quarter of 2014.

The sequential growth we achieved in Q3 is significant and that historically, we have seen sluggish procedural growth from Q2 to Q3, as evidence by our flat sequential growth from Q2 to Q3 in 2013 and a 1.6% decline in the same period in 2012.

The strength in 2014 is indicative of the continued solid execution of our business model, namely, new product introductions and expansion of our sales footprint. Our international operations also had a strong quarter up 23.2% over the third quarter 2013.

We are pleased with the progress being made in expanding our penetration within our existing international markets and further the steady improvements of the contribution to our bottom line. We're happy to report record profits for the quarter. GAAP net income was $23 million and fully diluted EPS was $0.24.

Adjusted EBITDA for the quarter was 35.6% of sales, a 220 basis point improvement over the 33.4% EBITDA margin we achieved in Q3 2013. The improvement we have achieved this year is due to our disciplined approach in spending and we continue to see opportunities for operating leverage and margin improvement across all areas of the business.

Free cash was $32 million for the quarter and $62 million year-to-date. We ended the quarter with $346 million in cash, cash equivalents and marketable securities and we remained debt-free. Consistent with last quarter, we have seen pricing pressure in the mid-single digits.

As a point of clarification about what we mean by this statement, we compare the average price per SKU for all products sold in this quarter and the comparable quarter one year ago. The weighted average result of this calculation was in the mid-single digits during the last two quarters.

The calculation does not address the impact of shifting our mix towards newer improved technology which stands to be at higher prices. PODs were back in the news during the quarter, as DOJ filed both civil and criminal actions against certain physicians and a manufacturer during the quarter.

CBSNews picked up on the piece and ran the story that was not favorable to this -- to physicians and hospitals involve with POD.

While we saw no direct impact as a result of these events, we remained hopeful that continued scrutiny and publicity from DOJ will convince those involve with PODs, particularly hospitals that they should discontinued doing business under the POD model.

Recruiting year-to-date is within our historical norms and we continue to attract highly successful reps to our team. In addition, we are happy with the on-boarding process for the large group of sales reps we hired in 2013. As we announced last week, we acquired allograft tissue processing and manufacturer Transplant Technologies of Texas or TTOT.

This is our largest acquisition to-date with the purchase price of $35 million up front and a total of $15 million in milestone payments over three years based on the achievement of revenue targets. It is important strategically as they bring a long track record of profitable selling biologics.

The combination is expected to drive value in four distinct ways. One, sales to existing to TTOT customers, two, improve sourcing of products Globus currently sells, three, sales of current TTOT product by the Globus sales force and four, the development of new products for sales through both the Globus and TTOT channels.

David will elaborate further on the opportunity later in today’s call. As we look forward to the remainder of 2014 and beyond, we are confident in our ability to continue to take market share and grow well in excess of the market.

We remain focused on driving innovation and expanding our sales footprint both domestically and abroad while maintaining sound fiscal discipline and improving our profitability. As I’m sure, you’ve read in the earnings release today, Rick Baron has decided to resign so that he can pursue other interests.

He has offered to remain with the company to assist with the transition during the search for his replacement which has already begun. Before turning the call over to Rick, I’d like to take this opportunity to thank Rick for his service and contributions to Globus and wish him well in his future endeavors.

I will now turn the call over to Rick to provide detail on our financial measures..

Thank you, Dave. Today, I will review our financial performance for the third quarter of 2014 as compared to the third quarter of 2013. For key elements of the income statement, balance sheet and statement of cash flows. Our worldwide sales for the third quarter of 2014 were $117.8 million, 9.9% increase over the third quarter of 2013.

Innovation -- innovative fusion sales increased in the quarter to $67.7 million or by 8.2% from the prior year's quarter while disruptive technology sales increased this quarter to $50.1 million or by 12.3% from the prior year’s quarter.

Sales in the United States for the third quarter 2014 grew to $106.6 million or by 8.7% while international sales grew to $11.2 million or by 23.2% from the prior year’s quarter. Overall growth in sales was attributed to expansion of both domestic and international territories and greater penetration in existing territories.

Gross profit for the third quarter of 2014 was $90 million or 76.5% of sales for the current year's quarter as compared to $81.9 million or 76.4% of sales from the prior year's third quarter.

The gross profit percentage is slightly favorable to the prior year which reflects favorable mix of product sales and our ongoing leverage in the OUS sales model. Research and development expenses this quarter were $8.1 million or 6.9% of sales as compared to $6.6 million or 6.1% of sales for the same period in 2013.

The net increased expense was predominantly due to expenditures associated with our Robotics project. Specifically expense areas which were increased were due -- were approximately $800,000 of employee compensation expenses and approximately $800,000 of project and clinical trial costs.

Selling, general, administrative expenses were $47 million or 39.9% of sales compared to $45.7 million or 42.6% of sales for the prior year's third quarter. This represents a lower percent of sales due to the leverage of our operating model.

The increase in costs quarter-to-quarter was due mainly to compensation costs associated with the growth in sales and the expansion of salesforce in both U.S. and oUS markets. GAAP operating income increased by $5.4 million to $34.9 million for the current year's quarter.

This also represented an improvement of over 200 basis points as the operating margins increased to 29.6% of the sales of sales for the third quarter of 2014 as compared to 27.5% of sales for the prior year’s quarter. This reflects the overall controlled expenses, and the leverage in our operating model.

Adjusted EBITDA for the third quarter of 2014 improved by $6.2 million to $42 million as compared to $35.8 million in the prior year's quarter. Our adjusted EBITDA grew to 35.6% of sales for the quarter, an improvement of over 200 basis points over last year’s quarter results of 33.4% of sales.

Again this improvement demonstrates our successful strategy of growth through innovation coupled with diligent expense control. Our income tax rate for the current quarter was 33.7% as compared with 31.6% in the third quarter of last year. Our guided tax rate is approximately 35%.

The lower effective rate for the three months ended September 30, 2014 was favorably impacted by the results of the internal -- internal revenue service audits in relation to certain FIN 48 reserves for 2011 and 2012 tax years. Quarterly net income was $23.1 million as compared to $20.3 million in the third quarter of 2013.

GAAP earnings per diluted share were $0.24 for the third quarter of 2014 and $0.22 for the prior year’s quarter. Diluted share count as of the end of September was $95.5 million. Cash, cash equivalents and marketable securities balance was $34 -- $345.8 million as of September 30, 2014 compared to $275.5 million as of December 31, 2013.

Operating cash flow for the nine months ended September 30, 2014 was $77.2 million free cash flow as defined by operating cash flow, less capital expenditures were $61.6 million and we continue to remain debt-free. Guidance.

Lastly, as we’ve announced previously, we expect the purchase of Transplant Technologies of Texas to contribute approximately $2 million in additional sales and to be neutral to fully diluted earnings per share for the fourth quarter of 2014.

Adding to the guidance, we provided on the second quarter call, we now expect the annual sales to be in the range of $462 million to $467 million. Finally, it has been a pleasure to work with the entire team here at Globus. I have enjoyed participating in the growth of Globus, as it matures as a public company over the past three years.

I would like to thank my staff, my colleagues here at Globus, Dave Demski and the Board of Directors. I would also like to thank, in particular, David Paul for giving me this opportunity. While I’m looking forward to the life ahead for me, I'm committed to a smooth transition for Globus.

I'm also confident that I will be able to continue to follow global success story with great interest and pride over the coming years. I will now turn the call over to David Paul..

Thank you, Rick and good evening everyone. Before I begin, I would like to reiterate Rick’s sentiments and thank Rick for his many contributions to Globus during his tenure and wish him well, as he embarks on the next stage of his career.

In terms of next steps for us, we have begun our search for Rick’s replacement and have put a transition plan in place. As part of that plan, Rick will be stepping down next week as our Chief Financial Officer to allow him to focus on issues relating to the transition.

Dave Demski will assume the Chief Financial Officer duties on an interim basis until a new CFO is hired. Some of you may remember that Dave was our first Chief Financial Officer and served in that capacity for over five years until his promotion to President and Chief Operating Officer in 2008.

I'm confident that Dave can handle the additional duties and by doing so will allow for a smooth transition to our next CFO.

Turning to the quarter, our strong performance in this quarter has been a testament to our focus on improving patient outcomes by delivering innovative products, growing our sales force worldwide and a disciplined approach to expense control. We took market share this quarter and continue to generate very strong profitability.

Our EBITDA margin of 35.6% was particularly strong, despite increased pricing pressures validating our disciplined business model. We are also extremely happy with the recently announced acquisition of Transplant Technologies of Texas or TTOT, as this will be transformative for our presence in the $800 million regenerative biologics marketplace.

On the product development front, we have continued to execute and launch new products out of our R&D pipeline, launching three products this quarter, bringing the year-to-date total to 13. I will touch up on two of those here.

First, we further expanded the rollout of the CREO platform and our presence in the complex deformity market by launching SILC, a low-profile sublaminar fixation system that is easy to insert and provides the stability to perform standard reduction maneuvers for correction of spinal curvatures without the need for pedicle purchase.

This new system adds to our growing portfolio of leading technological solutions, offering another option for deformity correction. The SILC system also works in weak or osteoporotic bone, and in a variety of complex deformity curves, aiding in reduction for vertebral segments in which pedicle fixation is not an option.

Second, we began the rollout of ALTERA, a new articulating expandable TLIF spacer that is designed to maximize the achievement of lordosis and sagittal balance from a posterior approach.

The combination of CREO MCS that facilitates a simple MIS midline approach that minimizes soft tissue disruption and ALTERA provides for a powerful tool for minimally invasive posterior procedures. I will now provide some details on the TTOT acquisition.

TTOT is an allograft tissue processing and manufacturing company based in San Antonio, Texas, whose products are successfully been used in over 600,000 patients over the last 20 years. This acquisition will provide Globus with its own source and capabilities for allograft tissues, including bone, soft tissue and other biologics.

Joe Mims, Founder of TTOT has created an excellent organization that has produced steady sales growth, while running the business with a keen eye towards profitability, leading to the right cultural fit for our two organizations.

Through this opportunity, we expect to not only leverage TTOT’s current portfolio across our sales force, but also utilize the combined capabilities and expertise to bring new products to our existing customers.

We're very pleased to welcome TTOT’s Founder, Joe Mims and his entire team to Globus and look forward to TTOT’s contribution to our growth strategy. More specifically, we see three specific areas of growth with this opportunity. First -- growing TTOT’s sales of existing and new products through their current distribution channels.

TTOT has several exciting products in their portfolio, including SteriSorb Sponge, a 100% Cancellous Sponge that is compressible, SteriShield Amnion Patch, a physical barrier for protecting wounds and STERIFLEX Wrap, 100% cortical sheet that can be bent, contoured or rolled for various applications.

Second, selling the entire TTOT portfolio of spine products through our sales force, thereby significantly expanding customer contacts throughout the U.S.

and other worldwide markets, and lastly, having capabilities and capacity to develop and bring to market a portfolio of differentiated products, including precision machine spacers, next generation BBMs and specialty plan products.

We have already been actively working on several new products in various stages of development that will lead to multiple product introductions in 2015 and beyond. In summary, we are confident in our ability to execute on a long-term strategy by bringing new products to the market, continuing to expand our sales territories both in U.S.

and international markets while maintaining a steadfast focus on profitability and cash flow. We will be happy to take questions now..

(Operator Instructions) Your first question comes from the line of Matt Miksic from Piper Jaffray. Your line is open..

Hi, good evening. Thanks for taking the questions..

Thank you, Matt..

So I guess one of the first questions on most folks minds is going to be some sense to the degree you’re willing to share with us of the progress that you’ve made and sort of rebuilding around the skill that you have earlier in the year with one of your distributors about the termination of a contract.

I don’t want to focus too much on that, but I know that is an important question just qualitatively or quantitatively or whatever you want to share would be helpful?.

We can give you some qualitative color, Matt. We moved some of our experienced folks into that market and we've made couple of hires, one in particular was in the fourth quarter we’re pretty excited about. But as we mentioned last quarter’s call, that’s going to be a long process down there. So we’ve taken the right steps, but it’s very early days..

Okay.

So we shouldn’t read into the strength in the quarter as to anything dramatically bouncing back or happening in that particular area?.

No not at all. .

I wanted to talk a little bit about. You spent some time before talking about CREO, this new product. And I am hoping, I suppose we are going to see more and learn more about NASS in a couple of weeks.

But if you could give us an idea of what that does for your channels like the deformity side of the business and potentially what the size of that market or how we should think about that moving the needle to the business over the next year or two?.

Matt, this is David. So SILC is a product that continues to build on our deformity platform. It’s a band made out of PET. Many times when you have deformity corrections in long constructs, it’s hard to line up all the screws in line with one another. And often times you have a vertebral body that derotated in the sagittal or coronal plane.

And having a band like this enables the surgeons to pull the vertebral body and make correction and bring it in alignment with the rest of the construct. It’s an extremely flexible way because it connects on the lamina, through the sub-lamina space and there is no need for pedicle fixation at that level.

Other times you can have a smaller thoracic pedicle where you cannot have screw fixation where again you can use this type of a device. Not too many competitors out there, in fact I think there is only one other viable company. Second much smaller one but really one viable alternative for this type of devices in the deformity space.

So we are pretty excited about this products and what it can do for our deformity business..

And I think I familiar with the product you’re talking about.

In terms of size just to put this in perspective of your arsenal of products, is this -- does this get into more deformity cases? Is that the value? Is it in itself of $5 million or $10 million product overtime and how should we think about it?.

I would think about it in terms of a single. To your earlier point, it clearly gets us into deformity cases that we don’t have today and it has already led to us being in cases that we wouldn’t have been in without this product. So it is a door opener type of product for us as only one other company really has a comparable product.

So we look at this still as a single. We also look at this as another piece to the CREO platform, as we continue to build and flesh out this platform to be the most comprehensive fixation system in the lumbar and thoracic spine..

Great. Those are very helpful. Thank you, David..

Thank you, Matt..

Your next question comes from the line of Bill Plovanic from Canaccord. Your line is open..

Great. This is actually Kyle on for Bill.

Can you hear me all right?.

We can hear you Kyle..

Great. Thank you very much and congrats on a great quarter. Just wanted to see if you could add a little more color on the topline. It’s really strong quarter as you guys have talked about. Obviously there’s some products helping there but also in distribution coming online from some of the hires last year.

Just wondered, if you could kind of -- we could tease out some of the mix between where the cadence of those new hires coming online.

And then also contribution from some of the new products?.

Kyle, this is Dave Demski. We really don't typically share that sort of information at that granular level. It’s -- as we look at the business, our growth is going to come from both of those areas.

So in any particular quarter, it might be little bit more one or the other but over time its all about adding new products to the bag and getting our sales reps hired and developed..

Okay. Great. And then one other product or one other question, on the operating side revenues are up almost $4 million or $5 million quarter-over-quarter but the SG&A stayed nominally flat.

How should we think about the SG&A as a percentage of sales moving forward at some more revenue levels?.

We are looking at a similar percentage. If there is leverage, there is leverage in two line one I pointed out with a slight leverage in G&A. the other side of it is in the sales operation and the general operation OUS. That’s part of the reason why it’s been flat.

I think you almost look at us from bottom line up approximately 34%, 35% are just adjusted EBITDA. There will some pushes and calls. Some put and calls between R&D and some SG&A spend but we’ll pull that bottom line out with a fair amount of reliability..

Okay. Great. And then just one final question here. Obviously you made the acquisition recently. Biologic has been an area that you’ve noted was a place of focus for the company in a hole in the portfolio. And you look at your product portfolio now and now that you kind of fill the hole of biologics there.

How do you view your product portfolio and where do you think you need focus some of the future R&D and then that’s it?.

Thank you, Kyle. As I mentioned in the call, this is an area that even in prior calls we’ve been pointing this out as an area of that we’ve been intensely focused on improving our position.

As I mentioned in the call, we are working really on a series of new products that it has have been in development for over 18 months now that we want to get out which we couldn’t due to lack of supply. That's going to be really helped by this acquisition.

And secondly, TTOT has an incredible portfolio of existing products that they have now that we don't have access to of previously and we couldn’t be in those markets. I mentioned we look at the allograft space as roughly an $800 million market, of which we have been participating in less than about a $100 million to $200 million at current level.

So this enables -- this opens up the entire $800 million market as a market for us to be active in. So we're really excited about this. We still have more work to do on the biologic space and we're going to continue to keep our eyes open for other opportunities also..

Great. Thank a lot..

Thank you..

Your next question comes from the line of Bob Hopkins from Bank of America. Your line is open..

Thanks.

Can you hear me okay?.

Hey,Bob.

Hey good afternoon. So two things first just a question on the guidance -- implied guidance for fourth quarter. It looks like it's pretty flat relative to what you put up in Q3 an that’s usually a seasonally strong quarter. Just wondering given the strength in Q3.

Why it wouldn't see more of an uptick in Q4?.

I guess it’s more a function of our desire on policy, just issue annual guidance so we’re basically keeping our guidance unchanged but for the acquisition of TTOT..

So but is there anything -- is there any kind of a negative headwinds that you’d point out for Q4, do you think that we should be aware of?.

No..

No headwinds. Also I think one thing Dave mentioned that the last call last year’s Q4 was particularly strong for us and for everyone else. We are not quite sure how this Q4 is going to be for everyone. So we want to be reasonably conservative in what we're looking at..

Okay.

And then for Rick, I was wondering if, sorry to hear the news, but I was wondering if you could give us some background as to what drove your decision? What are your plans, just would love to get a little more color, because it seems like the gap between the decision and when you're leaving is pretty quick and we’ll just appreciate a little more background?.

Actually, I’m not leaving as quickly as perhaps the way that you could interpret the decisions that we are making. What we felt was most important was continuity over the long-term. My transition, end transition date, quit frankly isn’t defined yet. I am going to be here for as long as the transition requires.

I’ll actually be out and in some of the investor conferences later in the months. So it's simply a way to make sure that we have the right continuity. You can trust the Dave. He is a really good CFO. I followed him. So it’s a good way to be.

As far as my personal plans, I’m really sincerely of looking at those other interest that some CFOs could have and other opportunities as they come along. And I hope to see all of you over the next couple months as I transition here at Globus and then at some point in time in the future separately..

And I totally appreciate if you don't want to go into the color, but I'm just curious as to what, basically why are you leaving, I mean, just curious?.

Other interest and opportunities, we’ve done a lot here in three years. Ed points out to me that this has been something that I’ve been doing over the course of my career, although I don’t really think of it that way. This is the fourth or fifth company that I’ve been with as a public CFO, most of those I took public.

And with the results and how good we are right now, it seems like a really good time to transition off and make sure that it’s as seamless as possible. It’s as simple as looking to do something else, nothing more nothing less..

Okay. Appreciated. Thank you..

Your next question comes from the line of Matthew O'Brien from William Blair. Your line is open..

Good evening. Thanks for taking the questions.

Dave Demski, I was hoping we could start off with just any additional color you could provide around the pricing dynamics that you saw in the quarter? I know last, during Q2, one of the big pressures was some contracting work that you did and the rates that you were able to get were a bit lower than you had expected historically and you had some contracts that were coming up here in Q3? Did you see the -- those contracts kind of come in as expected, were they worse than expected? And then, are you seeing any of your other customers coming back to you more aggressively following the Q2 disclosure?.

Our sales are pretty diverse, as this is huge number of customer. So I think it may have been a little bit of an exaggeration to attribute last quarter to any particular contract or two.

I would say that the tenure of our negotiations reflects the numbers that we’re seeing, so they’re little more aggressive in the last six to nine months than perhaps a year to two ago. And that’s reflected and in fact, that our numbers have gone from sort of the low to mid-single digits to the mid-single digits.

Is that helps?.

Okay. That’s helpful..

And Matt, can I add one thing. On the last call I think something was lost and perhaps the way that we articulated it. A couple things, one on the pricing environment is roughly the same now as it was when we went on the road as an IPO. It also was a quarter that was consistent and this quarter as we looked at other people who have reported.

The pricing that we’re experiencing seems to be more of the norm in the industry. So its not so much an anomaly of today and maybe even last quarter as it may have been that we enjoyed a couple softer quarters prior to that and now its just return to where it was when we went public..

Fair enough. And also we could talk about the international margin opportunity.

The results again were quite strong, but still off a fairly small base? Is it fair to assume that there's still some opportunity to take your international margins up? You don't have to quantify exactly by how much, but, I don't know if you want to use a baseball analogy and say maybe you're in the fourth inning of improving those gross -- those operating margins, but just any kind of sense for how much more opportunity is available there?.

I’m more of a basketball and football guy, so I’d say we’re in the first half..

Okay. And then one more….

It’s quite a bit of run..

We’re not even leasing or anything. There is still a lot of room in the game..

Okay. One more quick one if I may. The biologics commentary from David Paul, some of your competitors out there quoted some numbers as far as where they think they can get their biologics franchise as a percentage of revenue, eventually, in the 15%, 20% range longer term.

And is that something that given your distribution network that we could potentially see from GMED as you roll out these new products over a three, four year period?.

Aspirationally that’s where we’d like to be, Matt. I think it’s 10% to 15% is how we see the biologics space. I think unless if you count BNP for one of our competitors, I think it's safe to say that that's about the mix of biologics in spine..

Okay.

And I’d imagine, you’re really low single-digits as far as your total business goes at this point?.

We’re improving. And we were definitely underperforming relative to the average, that’s why we made this acquisition and why David alluded to, we have a number of projects in the pipeline..

Understood. Thank you..

Your next question comes from the line of David Roman from Goldman Sachs. Your line is open..

Good afternoon. This is actually Matt McDonough on for David. I wanted to start with the P&L. As has been referenced you've generated some pretty meaningful operating leverage this quarter.

And I was just wondering is this something we should be modeling moving forward? And I was also wondering to what extent will such leverage depend on top line growth?.

To answer that Matt, I think you need to look at the business and the components. So in the U.S.

business, there is less room for operating leverage although we are experiencing it quite a bit in the international business, but as we bring up the speed to robotics business later this year and into next year, you’re going to see us spend a little more money there as those get off the ground.

So if you look at it overall, I think we’ve said we want to be in the mid-30s in terms of EBITDA percentage and that’s kind of where we try to moderate to keep the business. As we’re going in one area, we’ll invest in another, it maybe bring the percentage down..

Got it. Thank you.

And then one more, just taking a step back, I was wondering if you could just clearly go through the moving parts of what changed versus last quarter? And I guess more specifically did the market pick up fully outside the distributor loss from the last quarter or is a just that you’re regaining share more quickly?.

I’m not sure how to answer the question. We have not made any really meaningful improvements in terms of the distributor loss. We put good people in place, but we haven’t see, a lot of results from them.

So the upick in the business this quarter over last quarter over last year again goes back to continuing to launching of any products and higher and develop good sales people..

Okay. Thank you..

Your next question comes form the line of Richard Newitter from Leerink Swann. Your line is open..

Hi, good evening. This is Robby in for Rich. My question is on the U.S. environment. It seems to be you back out price given some of the commentary. Volumes are improving. Just wanted to get your thoughts on that area. And then I had a follow-up question on just your cash balances..

Yeah. I think the third quarter seems to be a good quarter, not exceptional by any means but a good healthy market..

So would you say that the volumes have been sort of increasing throughout the year? And sort of maybe what your expectations are for fourth quarter?.

Yes to the increase, but it’s a modest increase. And as David alluded to in his answer earlier on the fourth quarter, the fourth quarter is really hard to predict, because last year was such an anomaly. We love to see that same spike again, but we don’t -- we are not --certainly not predicting it at this point, because it was so remarkable last year..

Okay. Great. And then sort of, on the cash balance you have about $345 million.

A couple of tuck-in acquisitions with Transplant Technologies and Excelsius, what areas I guess, are of interest in the portfolio right now?.

We continued from the time we’ve gone probably. We were interested and as you alluded to tuck-in, companies, either from a technology standpoint or from expanding our distribution footprint here or about. Nothing major..

Great. And then -- thanks and then last one, I’ll get back in queue.

Rick, your other interests include staying in industry or going to some other new opportunity outside of spine?.

Along with fly fishing, they include perhaps going back into other industries, something in the healthcare area. I also want to say one thing and I just maybe more responsive to someone else who had asked the same question.

Sometime when people transition out like this and especially if you were concerned about a quick transition, one might worry about financial stuff and controls and things like that.

The one thing that I found very good here from the beginning was either the programs that we have established levels, when I got here to which quite frankly, I’d tribute some of that to Dave and then the success of the programs that ever since.

So if anybody out there is worried about those types of things and hopefully it is a good job that we will hopefully continue that way into the future. And now to be back to your question. It is interest and opportunities and we’ll see what the future holds..

Great. Best of luck. Look forward to speaking with you again..

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

Thank you. Hi guys. Just on the TTOT, Dave, you mentioned that the acquisition broadens your access within the market, just wondered if we could flesh that out a little bit more.

What are the incremental areas that TTOT brings you now to give you access to that full $800 million market that you discussed?.

Thank you, Steve. As I mentioned, one of the areas that it clearly broadens our access is the area of precision machine spaces. But we have not really being playing that much in and that’s really open that space. We look at that space as roughly $250 million space. And we only have ACBF space in that space.

And it’s a much larger market than our presence, so that’s one space. We also look at the cell-based matrices that are being sold and stem cell type products and I think that’s another space that opens out.

Another ancillary space is a traditional allograft space which is the bone tendon bone and cancellous allografts and cortical cancellous allografts that we are not in. And finally it also enabled us to work on next generation DBMs. We still think DBM is a great graph material and we’re looking forward to expanding our presence in that space..

Got it.

And just as follow-up, do they have a stem cell product already or just give you the ability to do some of the internal work on stem cells?.

Thanks for the questions, Steve. We don’t comment on that -- on specific product until they’re launched. So they don’t have a product that is on the market now..

Understood. And then I guess just lastly, maybe asking about the products that’s not on the market.

Just robotics, just in general, if you could talk a little bit about sort of the privacy there and when we’ll get a little bit more detail on that front, perhaps next year then?.

We have been making a tremendous progress with the robotics projects. But we’re still on track for what we said when we made the acquisition. That’s going to be a second half 2016 event, sometime in 2016. It is a difficult project that there is a multi-disciplinary effort. But we’ve made a lot of progress.

Quite frankly, we’re ahead of where we thought we were going to be at this time..

Okay. Got it. Thanks guys..

There are no further questions at this time. This concludes today’s conference call. You may now disconnect..

Thank you..