Edward Joyce – Investor Relations Director David Paul – Chairman and Chief Executive Officer David Demski – President and Chief Operating Officer.

David Roman – Goldman Sachs Matthew O’Brien – Piper Jaffray William Plovanic – Canaccord Genuity Richard Newitter – Leerink Swann Ben Andrew – William Blair Craig Hijo – Wells Fargo Jason Wittes – Brean Capital Steven Lichtman – Oppenheimer & Co..

Welcome to Globus Medical’s First 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 will now turn the call over to Ed Joyce, Investor Relations Director..

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 contingent consideration in connection with business acquisitions and other acquisition-related costs; provisions for litigation and with respect to the computation of free cash flow, adjustment for the impact of restricted cash and purchases of property and equipment.

The comparable GAAP financial information and a reconciliation of non-GAAP amounts to their 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, Ed, and welcome to everyone on the call. We’re very pleased with our record quarter sales $131.6 million, an increase of 15.2% over the first quarter of 2014 or 16.4% on a constant currency basis.

Our business has steadily gained momentum since the second quarter of last year, in which, as you may recall, we have turned over a distributor in Louisiana and we saw a drop in pricing. Since then we have been able to regain over half of that business, seen some stabilization in our pricing and have posted robust quarterly year-over-year growth.

Not only that, we have seen steady sequential growth as well. This solid momentum makes us very excited about our prospects for the remainder of this year and beyond. In the first quarter, US sales grew by 18%.

International sales increased by 3.9% over the first quarter of 2014 on a constant currency basis and declined by 7.1% on as-reported basis due to an unfavorable foreign currency impact of $1.3 million.

Innovative fusion sales increased this quarter to $70.4 million or 5.4% from the prior year’s quarter, while disruptive technology sales increased this quarter to $61.2 million or by 29.1% from the prior year’s quarter.

Fully diluted earnings per share were $0.26 in the first quarter of 2015 compared to $0.22 in the first quarter of last year, an increase of 18.2%. Adjusted EBITDA for the first quarter of 2015 was 35.2% compared to 36.8% in the first quarter of 2014.

This decline was primarily the result of a decrease in gross margins, offset by continued operating leverage gains associated with our diligent expense control surrounding SG&A expenses. For the first quarter, gross margins were 75.6%, compared to 77.8% in the first quarter of 2014.

The decline is attributable to a shift in mix associated with biologic sales which typically have lower gross margins than other implants and increase in royalty expenses and the impact of foreign currency exchange rate fluctuations on OUS margins.

Research and development expenses for the first quarter were 8.7 million or 6.6% of sales as compared to 7.4 million or 6.5% of sales for the same period 2014. The increase in R&D spending was primarily due to expenses related to our robotics division along with additional investments made in our research department.

SG&A expenses showed significant improvement in the first part of 2015, coming in at 39.7% of sales compared to 40.9% in the first quarter of 2014. We continue to achieve operating leverage in our business by controlling expenses as our sales volume grows.

We produced free cash flow of 27.4 million and ended the quarter with 285 million in cash and cash equivalents and marketable securities. The overall spine market continues to be encouraging. The three Ps; pricing, procedures, and PODs remain relatively stable in our view.

Pricing pressure, which remained in the mid-single digits in the fourth quarter, was almost entirely offset by favorable product mix, primarily driven by new technologies. Procedural growth remained healthy, but off the torrent pace we saw in fourth quarter.

There were no significant developments regarding PODs in the first quarter, but we are encouraged by the recent trends in certain PODs disbanding and fewer instances of surgeons joining new PODs. As we previously announced Dan Scavilla has joined Globus as Senior Vice President and Chief Financial Officer.

Dan joins Globus after a 28-year career with J&J in which he performed a wide variety of financial management positions of increasing responsibility, as president of finance and business operations at J&J multi-million-dollar Vision Care Division.

Dan’s career at J&J included positions encompassing a wide variety of responsibilities including finance, operations, and IT, both in the U.S. and abroad. Dan’s experience adds significant depth to our team and we look forward to his contributions to our future success.

Based on our strong first quarter results we are increasing full year guidance for both sales and EPS to 540 million and $1.02 per share respectively. In closing, we are very pleased with the strong start to 2015. I will now turn the call over to David Paul, Chairman and CEO, for our closing remarks..

Thank you, Dave and good evening, everyone. The first quarter of 2015 was another strong period for Globus Medical. We grew our sales by 15.2% as reported, or 16.4% on a constant currency basis, reaching 131.6 million while maintaining our strong profitability profile with adjusted EBITDA of 35.2% and free cash flow of 27.4 million.

We launched four new products in the quarter and continue to have a full product development pipeline. On the sales force front, we continue to work on refining our process of recruitment and on-boarding of new salespeople.

We believe that Globus remains the destination of choice for the best sales talent in the industry and are working to capitalize on this demand.

Our overall stellar performances this quarter was a result of consistent and sustained execution of our strategy, of combining robust product innovation and continued sales force expansion with disciplined expense control.

I am proud of the performance of our team this quarter and continue to be confident in our ability to produce profitable growth in the remainder of 2015 and beyond. We continue to execute on our strategy of robust product innovation by launching several new products this year.

I will now comment on two specific new product introductions and provide an update on our initiative in regenerative biologics. We began rolling out the RISE-L system in the quarter, marking another unique offering in the lateral lumbar interbody fusion space.

RISE-L is an expandable spacer designed for optimal disc height restoration with minimized trauma associated with impaction. The 7-milimeter continuous expansion reduces trialing steps and provides an optimized endplate fit.

The device has a large continuous graft chamber that can be filled in situ to help maximize graft contact with vertebral endplates and increase the area available for fusion. We have been pleased with the feedback we have received on its performance from our early users and expect it to further improve our best-in-class lateral offering.

Second, CREO MIS, a minimally-invasive screw and rod fixation system, was launched in April. CREO MIS is designed to help minimize muscle disruption through a minimally-invasive approach, while providing the same strength, rigidity and reduction capability of a traditional pedicle screw system.

Over the past few quarters, we have been highlighting the continued growth of our CREO platform, and CREO MIS is another key module that will be a driver of sales growth.

CREO is an advanced and comprehensive pedicle screw system available for treating a variety of complex deformity, regenerative and trauma pathologies through open and minimally-invasive approaches. Turning to regenerative biologics.

Since the closing of our acquisition of TTOT in the fourth quarter of last year, we have worked diligently to increase production capacity by making significant investments in helping TTOT procure and set up high-precision manufacturing equipment and processes. Several new products from these efforts will launch in the U.S.

throughout the remainder of 2015. We are also making significant strides with our synthetic portfolio and seek to grow our overall biologics market share more in line with our hardware business. Finally, I want to add my personal welcome to Dan Scavilla to our team as Senior Vice President and Chief Financial Officer.

I am looking forward to working with Dan, who brings a great deal of experience from his 28-year career at Johnson & Johnson. He is an accomplished executive with a strong track record of streamlining operations, delivering increased profitability and driving sales growth.

With Dan’s long tenure and successful record of improving and leading large healthcare businesses, both domestically and internationally, he will be a valuable addition to our executive management team and will help support our growth, as Globus becomes a larger player in the muscular skeletal market.

In summary, we continue to execute on our long-term growth strategy of rapid new product introductions and U.S. international sales force expansion, while maintaining a continued focus on profitability and cash flow. We remain excited about our prospects in 2015, as we continue to execute on our disciplined strategy of profitable growth.

We’re now happy to take any questions..

And our first question comes from the line of David Roman from Goldman Sachs..

Thank you for taking the question. Good afternoon, everybody.

I was hoping we could start with the business given the strength in the quarter, and perhaps you could offer a little bit more detail on what were some of the dynamics influencing the better than expected performance that you delivered in Q1? And then help us map what you saw in the first quarter to how you’re looking at the balance of the year?.

Thanks, David. I don’t think anything in particular split out in the first quarter. It’s just – we’ve been saying all along since we went public, if you go back it starts with product innovation and continue to rollout new products, building our U.S. sales force, expanding our international footprint, and then – and acquisition.

So, the one thing that’s maybe little bit different in the past that we bought last year and we’re happy with that integration today and excited about what it’s going to do for us in the future.

In terms of your second half of your question about what we look for the rest of the year, I’m very encourage by what we’re seeing so far and there’s nothing that we see out there that’s negative other than the currency situation that people have talked about a lot of different businesses..

Okay.

And I guess would you agree with an assessment that the volume environment with end market is perhaps a little bit better than it’s been in the past couple of years?.

Yes. I think it’s modestly better..

Okay.

And then lastly, I was hoping you just touch on two things that were in the proxy that you files late last week, and one of which relates to the change in the auditor, which I know was disclosed a fee dispute, but I was hoping you could just give us any more detail given that the auditor fees were actually down in 2014? And then if you could just comment on the difference in the final purchase price of the Branch Medical acquisition, the 68 million versus the 57 million just help us bridge the difference between what was originally announced and where things closed?.

Sure. In terms of KPMG, they never gave us an official reason. They just said they declined to stand for reelection. That happen in the midst of fee discussions about 2015, so I’m assuming that’s what prompted it. There were no accounting issues. There were no disagreements about anything in terms of controls or anything we were doing here.

So, I’m just attributing it to that. We are well into the search for a replacement. We’ve taken this from the other big four players as well as a couple of the other large international firms that are not part of the big four.

We expect to be able to announce a replacement within the next two to three weeks as they clear there – make sure they don’t have any conflicts in terms of work they perform for us.

And then in terms of the Branch question, I believe the major difference there was we purchased – since we were such a large customer branch, we owed them money, so we bought their receivables. And we also acquired cash from them. Those are the main....

Okay. That’s helpful. Thanks so much..

Sure..

Our next question comes from the line of Matthew O’Brien from Piper Jaffray..

Thanks for taking the questions.

Dave, can you just give us a general sense for what the impact of TTOT was in the quarter?.

Yeah, we’re not going to break that out as is our normal practice, Matt to go down into any more granularity than we give in the cues and the case. So I think we said last year that we increased our guidance by 12 million for the year.

We are happy with the way things are going to-date and the other aspect of TTOT that, I just want to call your attention to is, one of the fundamental reasons we acquired them is to produce products for Globus.

We have not seen any of that yet in our numbers although we will be launching two products with them probably in the second quarter if not the second quarter it’ll be in the third quarter. So they’re starting to produce Globus branded tissue-based products that you’ll start to see in ourselves as well..

Got it.

But they still sell products during the quarter that you recognize?.

Yes they did. And then back to the guidance we gave last year the $12 million was primarily attributable to their continued sales to other parties..

Got it.

Okay, but it’s still kind of low single digits in terms of revenue contribution for you guys in the quarter?.

At this point we’re just saying that we’re happy with the contribution. We don’t want to get into any more granularity..

Okay. And then there’s a follow-up on the domestic performance extremely strong this quarter. Not the easiest comp in the world from last year.

Can you just give us a sense of some of the factors of play there, was it CREO, newer products, additional new accounts? What were some of the factors that really drove a lot of that growth if you can split up between the different buckets?.

Yes, we have a quantitative standpoint I think going back to the CREO launch we’re still really in early days there in terms that’s a system launch and then David alluded to in his comments tonight regarding we’re just now launching the MIS component of that. So CREO’s been really strong for us as well as ALTERA.

I mean, it’s a latest generation of our expandable technology that launch has gone extremely well. And then looking forward, the RISE-L product as we – our lateral business hasn’t been what we wanted to be in the last year, but we’re really excited about what RISE-L is going to do for that component of the business..

Got it. Thank you..

Sure..

Our next question comes from the line of William Plovanic from Canaccord Genuity..

Good evening.

Can you hear me, okay?.

Yes Bill, how are you?.

I am wonderful, thank you.

Couple of questions disruptive technology is really been accelerating which is interesting because I think we hired all the reps back in 2013, some of commentary was that, we would expect to see the innovative fusion first as they sold kind of the basic products and then see the disruptive technology ramp up? Do this kind of reps bypass the whole innovative fusioning go right to the disruptive technology, is that what’s driving this or is this kind of a new products that are really driving the growth because 29% year over year is a big number..

Yes I would say is more than new products. We’ve highlighted in the recent past all of the Biologics going to the bucket for us. So KINEX is a product we’ve discussed in the past. It’s our in-house synthetic product that’s been doing really well. TTOT sales are in there, ALTERA is a MIS expandable antibodies spacer.

All of those products are in that bucket in doing quite well. And I wouldn’t underestimate the contribution coming from some of the sales reps we’ve hired over the last 12 months also in that bucket.

And products launched even prior to that like rice and four to five of continued keep growing so it’s really been a mix of new product introductions and all the new salespeople we have been able to bring over..

Excellent. Thanks. And then you have that distributor change in the second quarter of last year. It seems like the revenues bounce back pretty quickly as we got through the end of the year and even with this quarter.

Would you say that you’re at 100% with that distributor that you replace at 90% kind of where are you in terms of revenues lost and then gained back?.

Just comparing the first quarter this year with last year were about two thirds..

Okay. Excellent. And then my last question is just a guidance one. 131.6 million and $0.26 is 526 and $1 for. If I go back for the last three years and no quarter, and if I took the first quarter and annualize that would it be less than full-year guidance.

Is there something you’re worried about?.

No. We’re not worried about anything. I think we just want to maintain appropriate level of conservatism. We just got one quarter out of the way and competitive markets, so we just want to be appropriately conservative..

That’s all I had. Thank you..

Thanks, Bill..

Our next question comes from the line of Richard Newitter from Leerink Swann..

Hi, thanks for taking the questions. David I think you said that mix this quarter basically neutralized mid single-digit price decline.

So I was just curious what was mix maybe last quarter in the prior quarters?.

This is a very consistent for us, Rich. Our ASPs have been relatively flat and we’ve seen for the last year this mid single-digit pressure on pricing, so we’ve been able to offset almost all of it through mix..

Okay. And is there anything – I mean it sounds like you have a pretty nice new product cadence this year, especially moving into the 2Q in the back half.

Do you think we could see mix actually start to turn that positive? Is that the right way to think about it?.

I don’t know if I want to go that far. I think it’s been our strategy all along to continue to innovate those products, bring more value so they come in a higher price and as people adopt them we’re seeing that mix affect..

Okay. And then I’ve just two more. You know you’re approaching the quarter where you anniversarying the distributor kind of disruption. You said your two-thirds through or firing capacity this quarter.

So should we assume you’re 100% backed by next quarter?.

I would not assume that. Every day is its own battle. So we are continuing to work hard down there and taking a business but we’re not in the business of predicting when we will get it all back..

Okay.

And just gross margin, can you give us any color on where you think you should be for the year? Or how much of a year-over-year decline versus 2014 given the OUS and Biologics pressures that you are talking about?.

We are not really going to get down into that level in terms of our guidance. So, we’re strictly focusing on the top line growth in EPS..

Okay. Okay. Thanks. Very nice quarter guys. Thanks..

Thanks..

Thank you, Rich..

Our next question comes from Ben Andrew from William Blair..

Great. Thanks for taking the question.

If you look at the second quarter in a guidance, is there any to believe that Q2 would be down sequentially? Is there any kind of one-time things in Q1 as people are trying to ask out there would suggest that?.

There’s nothing significant in one that’s out of the ordinary Ben..

Okay.

And then there’s a Biologic and you’re still getting ready to launch those projects in the private label versions or private branded version? Is that something that can actually over time feedback and drive the implant business as well?.

Possibly, yes..

More likely than not it will help us get our fair share of the case with the added Biologics in the case along with our hardware. But it’s also possible that some of those products can help us get the hardware business..

Sure. And then maybe as a percentage or however you would express that, how big of an impact it’s having doubtful portfolio Biologics on your per case revenues.

Is it a 10%, opportunity or 30% opportunity versus where we are today?.

It’s about between a 15% -- 10% to 15% opportunity of a case. And that’s how we’ve always looked at it that we need to have our fair share of the Biologics business. Biologics has to make up about 15% of our total sales..

Okay. That’s helpful. Thank you. And then any update on the Robotics platform when we may get another look or at least a first look of what you’re doing or an update? Thank you..

Well, as I mentioned in the last quarter, we’ve been extremely pleased with the progress we’ve made with the Robotics project. We’ll be able to give more updates in the second half of this year and we’re hoping to give you all more color on the progress and a peek at where the product is.

But we’ve been extremely happy with the status of the development and were still on-track for launching this product next year..

Great. Thank you..

Thank you, Ben..

Our next question comes from the line of Craig Hijo from Wells Fargo..

Hi guys. Thanks for taking the questions and congrats on a very good quarter..

Thank you..

That being said, I do want to touch on the international growth and the step down there.

And I guess what happened there and what can we expect for the rest of the year? Should I expect that it accelerates again?.

Yes. Good question. I think you can see that coming if you look at our last several quarters. Our growth there was decelerating. The international while it is one number that we report is a combination of a lot of different factors, a lot of different countries. We’ve had some struggle in a couple of the countries that are some of our major producers.

I think we’ve addressed the issues that we have there now. I’m sure that we got one situation on the right track. The other when I’m fairly sure I’m just waiting for confirmation there, so I do expect the sequential growth as we build that backup to the rest of the year.

It’s going to be a bit before you’ll see the year-over-year growth catch up to it given kind of a hold that were in at this point..

Okay, thanks. That’s helpful. And then if I could just ask on M&A. I know you’ve done couple of small deals and you obviously have a lot of cash on the balance sheet. And just how do you think about M&A going forward.

Is it – are you going to be more focused on technologies? Potentially some vertical integration acquisitions similar to Branch or maybe then international acquisitions to get access to the market there?.

Thank you for the question. We have always said that M&A is part of our growth strategy. And we’ve been extremely discriminating on the types of things that we’ve been looking at. While we look at a lot of companies throughout the year, we really look for companies and businesses that will add value to our product portfolio and our strategy.

We did that with Branch which we felt matched with our strategy, we felt that with TTOT as it fit a hole in our biologics platform. We continue to be extremely active in this space looking at other opportunities like TTOT to further fortify our biologics portfolio.

But we are also looking at ancillary areas to build our company in the musculoskeletal space. So, we want to be discriminating yet active in the M&A space, so we can add more value to our company. That being said, we will always look at every acquisition with a lens of, will it add to our sales growth, our EBITDA margins and cash flow.

And so that’s really the lens through which we would evaluate a new acquisition..

Great. Thanks for taking the questions, guys..

Thank you, Craig..

Our next question comes from the line of Jason Wittes from Brean Capital..

Hi. Thanks for taking the question. I wanted to ask about biologics. That 10 of 15% number in terms of per case biologic usage, my understanding is that at least half of that or actually a little bit more is from either a stem cell product or a growth factor product, which I think when you bought TTOT you said would still be a couple years off.

Is that still part of your thinking in terms of what the market breakout is and sort of what timing may be for you to get a stem cell product out there?.

Thank you for your question, Jason. Yes. I think that would be fair to say because we think that the TTOT acquisition kind of gave us about roughly $800-million market space in which to add new products into. But we still would be missing two components that make up the biologics space.

And one is the BMP product line, and then the second is the stem cell space. We actively have a program in our company working on a product. But I think we’re still one to two years away from fully realizing 15% of the case share..

Okay. That’s very helpful. Also, I know you don’t get too granular on the expense side. But my understanding was this year R&D would go up as a result of – a) the biologics program; but also the robotics program.

Is that still the right assumption when modeling for this year?.

Well, the robotics program is the major driver there. And it is up, if you look at the dollars. We’ve been able to grow sales kind of at the same rate. So we are seeing the same percentage. But the back half of the year will probably have a little more in terms of the robotics program, as we get closer to the market..

Okay. And then in terms of the cascade of new products I know that you guys always introducing new products and very innovative but you mentioned three.

Should we assume that those are the three main drivers in 2015 or is the cascade going to continue for the rest of the year and related to that if I look at those three products it seem like they have pretty longlegs and should continue to contribute pretty nicely for the rest of the year as well, so just if you can give us sense on that? Thanks..

We have a full product portfolio of products to be yet launched in 2015. I only highlight the products that are more significant than others but we have several other products that are vehicle significance as the ones we launched that we will get out in 2015. So I’m extremely bullish about our product portfolio in 2015..

Okay. Thank you very much..

Thank you, Jason..

And our final question comes from Steven Lichtman from Oppenheimer & Co..

Thanks. Hi, guys. Just a couple of follow-ups. Just a question of where we are with the POD trend.

Do you get a sense that there is some of that POD business coming back to the market or do you see it more of a stable situation right now that isn’t getting worse?.

There’s a little bit coming back Steve. And that’s anecdotal. I know of a few surgeons who have reengaged us after being in our PODs. So I would say at this point it’s a trickle. It is not a big trend coming back..

Got it. And then just one quick one on the P&L. your tax rate higher this year than last.

A lot of that has to do with geographic mix and any opportunity do you see, tangible opportunities you see to drive that down over the next several years?.

Yes. I think as our international business grows we should have significant opportunities to bring that down..

Okay, great. Thanks guys..

Great. Thank you..

Thank you..

This concludes tonight’s call. You may now disconnect. Thank you..