Globus Medical, Inc. (NYSE:GMED) Q4 2020 Earnings Conference Call February 17, 2021 4:30 PM ET

Company Participants

Brian Kearns - Senior Vice President of Business Development and Investor Relations
David Demski - President and Chief Executive Officer
Keith Pfeil - Senior Vice President and Chief Financial Officer
Daniel Scavilla - Executive Vice President and Chief Commercial Officer

Conference Call Participants

Shagun Chadha - Wells Fargo Securities, LLC
Matthew Henriksson - Citigroup Inc
Matthew Miksic - Credit Suisse AG
Jason Wittes - Northland Capital Markets
Kaila Krum - Truist Securities, Inc.
Matthew Taylor - UBS Investment Bank
David Saxon - Needham & Company, LLC
Steven Lichtman - Oppenheimer & Co. Inc.
Kyle Rose - Canaccord Genuity Corp.
Richard Newitter - SVB Leerink LLC

Operator

Ladies and gentlemen, thank you for standing by and welcome to the Globus Medical's Fourth Quarter and Full-Year 2020 Earnings Conference Call. At this time, all participants are in a listen-only mode. After the speakers’ presentation, there will be a question-and-answer session. [Operator Instructions] Please be advised that today’s conference is being recorded. [Operator Instructions]

I’d now like to hand the conference over to your speaker for today, Brian Kearns, Senior Vice President of Business Development and Investor Relations. Mr. Kearns, please go ahead.

Brian Kearns

Thank you, Twanda, 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; 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'll now turn the call over to Dave Demski, our President and CEO.

David Demski

Thank you, Brian, and good afternoon, everyone. We had a remarkable finish to a very challenging year. I am really proud of the way our entire team performed in face of unprecedented uncertainty and adversity in 2020.

Revenue for the quarter was $233 million, an increase of 10% over 4Q 2019. This is our second consecutive record quarter resulting in nearly $450 million in revenue in the second half of 2020. Revenue for the year was also a record $789 million, while the growth for the full-year was a modest $4 million. It was a significant accomplishment and considering the deep hole we are in at the end of May and the full-year declines that most of our competitors experienced.

Our fourth quarter performance was led by INR and U.S. Spine. Enabling Technologies continued to make a strong comeback from the Q2 low with $18 million in revenue for the quarter, up 30% over 4Q 2019 and doubled our 3Q 2020 results. U.S. Spine continued to take significant market share, growing at nearly 12% in Q4 even as COVID-related shutdowns became more pronounced as the quarter progressed.

We estimate that COVID restrictions negatively impacted the U.S. Spine business by approximately $7 million to $9 million in Q4 or roughly 5 percentage points of growth, which is consistent with the 17% growth we achieved in the third quarter. We also delivered record non-GAAP EPS of $0.58 in Q4, up 20% over 4Q 2019, as well as 36% in adjusted EBITDA.

Similar to Q3, our profitability was somewhat inflated due to the issues unique to the pandemic, such as limited travel, the elimination of most cadaveric educational activities and the conversion of industry conferences to virtual events. However, the results also reflect continued investments in INR and trauma, which resulted in a drag of $0.03 on non-GAAP EPS and nearly 5 percentage points on adjusted EBITDA. In other words, aside from INR and trauma, the rest of the business produced $0.61 in non-GAAP EPS and 41% in adjusted EBITDA in Q4.

The U.S. Spinal Implant business grew by 12% for the quarter. New product launches, competitive recruiting and implant pull-through from robotics continue to fuel market share gains in this segment. SABLE, HEDRON and RESONATE all continue to see significant growth, as well as the resurgence in biologics, which grew by 30% in Q4. We are also seeing strong adoption of single-position lateral and prone lateral procedures, which are enhanced by the capabilities of ExcelsiusGPS.

As I mentioned, COVID restrictions impacted Q4 growth of the U.S. Spine business by about 5%. The impact got progressively worse as the quarter progressed and became even more pronounced in January, increasing to an approximately 15% to 18% drag. The impact is much less severe than it was last spring and all signs point to some easing in February and significant improvement in March. Unless there is another uptick in hospitalizations, we expect the Q2 impact to be modest.

Our International Spinal Implant business was down by 4% for the quarter. While most markets grew in the quarter, the overall results were dampened by countries experiencing upticks in COVID cases, namely India and the UK. Japan also experienced negative growth in Q4, partly due to COVID and partly due to issues specific to that market.

Our business in Japan is primarily served by a direct salesforce with some regions covered by agents and distributors. We have decided that moving forward, we will be nearly 100% direct. During the fourth quarter, we completed the process of terminating the majority of these third-party contracts. We expect to face growth headwinds in Japan for the next year as we transitioned away from these entities.

As discussed on previous calls, the legacy management team in Japan was replaced in 2019 with a team recruited and led by Steve LaNeve, the former country manager for all of Medtronic Japan, as well as the former worldwide President of Medtronic Spine. I am confident that Steve and his team will navigate the space and put us in a much stronger position to ensure sustainable growth going forward.

Trauma continued its strong performance, growing by over 130% in both Q4 and for the full-year. We continue to invest in this business with an aggressive sales rep expansion plan and several new products expected to launch in 2021.

Revenue from Enabling Technologies was $18 million in the quarter, eclipsing our all time best quarter by over 25%. We not only delivered a great quarter, we exited the year with a very strong pipeline coming into Q1 traditionally a slow period in capital. While access to surgeons and executives continues to be a challenge, our team is constantly overcoming these challenges to drive interest in revenue.

Our focus continues to be on enabling our customers to derive clinical and economic value from the capital equipment they purchase. We are not simply selling capital, nor are we using capital to drive implant sales. We are changing the way surgery is done. To that end, we are seeing steady improvements in the internal metrics we use to track the number of surgeons trained for robotic adoption and self-sufficient sites.

We believe these clinical achievements are beginning to build market acceptance and grow the overall market for robotics. We are in the final stages of testing our imaging system and anticipate filing with the FDA in the coming weeks. Excellent progress has been made in ramping up manufacturing and operations, and we anticipate a Q3 launch. There is very strong interest among surgeons in acquiring this technology.

Globus is in the early stages of a technology transformation that will combine the capabilities of our enabling technology solutions with our innovative implant portfolio. We have reorganized our product development efforts around procedural solutions, teaming up engineers from the implant side with those from Enabling Technologies. We expect that this collaboration from the ground up will result in more impactful seamlessly integrated solutions, accelerating the advancement of patient care.

We believe Globus is in a unique position to capitalize on this convergence, given our nimble organization structure and strong track record of internal innovation in both implants and enabling technology.

We finished the year strong with a lot of momentum going into 2021. Revenue in the second half of the year grew by 10%, led by U.S. Spine, which grew at a stellar 14%. In the second half of 2020, Globus produced nearly $450 million in revenue, $1.07 in non-GAAP EPS, 35.5% in adjusted EBITDA and $102 million in free cash flow. I am extremely happy with the way our team executed during this difficult time to produce markedly better results than any of our peers. It's a testament to their grit, perseverance, and unrelenting focus on our customers and their patients.

I'll now turn the call over to Keith.

Keith Pfeil

Thanks, Dave, and good afternoon, everyone. As we concluded 2020 operating in an environment of uncertainty and challenge, Globus was able to demonstrate its resiliency and strength evidenced by our strong fourth quarter results. We continue to drive above market sales growth while also delivering on the key metrics of profit and cash flow generation. For the full-year 2020 revenue was $789 million, growing 0.5% as reported.

Net income was $102.3 million and non-GAAP net income was $144.9 million. Fully diluted earnings per share was $1.01, while our fully diluted non-GAAP earnings per share was $1.44. Adjusted EBITDA was 29.4% for the year and we delivered a record $135.1 million of free cash flow.

Now turning our attention to Q4. Our revenue was $233.4 million, growing 10.3% as reported. On a constant currency basis, sales grew by 9.9% versus the prior year quarter. U.S. revenue for the quarter was $198.7 million, growing 12% versus Q4 of 2019. The growth was led by the strong performance of U.S. Spine and Enabling Technologies, so I do call out the U.S. Spine growth was slightly tempered by the impacts of COVID as Dave mentioned earlier.

International revenue was $34.7 million, growing 1.4% as reported. Revenue growth was affected primarily by the uptick in COVID cases within our musculoskeletal business as well as the issues identified by Dave specific to Japan. These Q4 headwinds to our musculoskeletal business were offset by growth in Enabling Technologies driven by new robotic sales.

Q4 gross profit was 73.9% compared to 77% in the prior year quarter. The 310 basis point decline was attributable to higher inventory reserves, higher depreciation and the mix of volume. Approximately 150 basis points of this reduction was due to one-time inventory expense items that we do not expect to repeat in the future. Looking ahead to 2021, we project a mid-70s gross profit rate.

Our Q4 research and development expenses were $15.2 million or 6.5% of sales compared to $15.5 million or 7.3% of sales in Q4 of 2019. The resulting decline was driven by the leverage effect of higher sales as well as lower travel and consulting-related expenses. However, our R&D expense continues to reflect high levels of investment in our Spine, Enabling Technologies and Trauma businesses.

Our full-year 2020 research and development expenses were $84.5 million or 10% of sales compared to $60.1 million or 7.6% of sales in 2019. It is important to note that our 2020 research and development expense includes the $24.4 million impact of our Q2 Synoste acquisition. Adjusting for this, our research and development expense would have been $60.1 million or 7.6% of sales. Looking ahead to 2021, we project R&D expenses to be approximately 7% of sales.

SG&A expense in the fourth quarter was $92 million or 39.4% of sales compared to $92.1 million or 43.5% of sales in the prior year quarter. Although overall spending was essentially flat to the prior year quarter, we incurred lower travel expenses driven by the impact of COVID in Q4. Adjusting for the lower travel expenses, SG&A expense would have been approximately 41.2%.

Our full-year SG&A expense was $354.8 million or 45% of sales, essentially flat to the prior year. Including our 2020 spending, reductions attributable to COVID-19 mainly lower travel as well as cost containment actions partially offset by COVID donation costs. We expect SG&A spending to return to more normalized levels in 2021. However, we expect to benefit from cost containment actions implemented during 2020, and also from additional leverage on our spend due to higher sales.

The income tax rate for the quarter was 14.9% compared to 16.4% in Q4 of 2019 and includes an additional 150 basis point benefit driven primarily by additional stock option exercises. Our full-year income tax rate was 18.8% slightly higher than 2019 driven by the impact of our Q2 Synoste acquisition, partially offset by tax benefits primarily attributable to stock option exercises. Looking ahead to 2021, we expect full-year effective tax rate of approximately 21%, which does not assume any significant changes to current U.S. tax policy.

Fourth quarter net income was $53 million and non-GAAP net income was $59.2 million. Diluted earnings per share were $0.52 and non-GAAP diluted earnings per share were $0.58, reflecting a 19.6% increase over Q4 of 2019 of $0.49.

Adjusted EBITDA for the quarter was 36.2%, reflecting a 190 basis point improvement over the prior year quarter. Looking ahead to 2021, we are planning for a full-year mid-30s adjusted EBITDA margin rate. We expected to follow a similar pattern to 2019 where our first half adjusted EBITDA was lower than our second half. Overall, as I had mentioned, we expect the full-year to balance out at a mid-30s adjusted EBITDA margin rate.

We ended the year with $785.3 million of cash, cash equivalents and marketable securities. Fourth quarter net cash provided by operating activities was a record $80.2 million and free cash flow was also a record at $66.1 million. Earlier, I had commented on our record full-year free cash flow of $135.1 million. This result was achieved in a year of lower earnings, however, our focused approach to managing working capital and slightly lower capital expenditures helps drive us to achieving this record in the midst of the COVID-19 pandemic.

We continue to evaluate potential M&A opportunities and we will deploy capital as needed if an opportunity represents a strategic fit and drives long-term value creation. As we look at 2021 based on the current market dynamics, we expect easing of the regional COVID restrictions as we move towards the conclusion of our first quarter. I would only expect a modest impact in Q2 assuming no uptick in hospitalizations.

At this time, we are establishing full-year 2021 guidance. To help set the stage, we are providing our guidance in reference to 2019 performance as it is a better comparative metric as opposed to 2020, given the COVID-19 variability. As such, we are projecting full-year 2021 sales guidance of $880 million, representing 12% growth versus 2019. Though we expect our first quarter sales to be impacted by COVID, we are optimistic that Q1 will finish slightly ahead of our first quarter in 2020.

We are guiding to a full-year fully diluted non-GAAP earnings per share of $1.83, representing 9% growth versus 2019. Our guidance assumes that business spending will ramp up to more normalized levels net of cost containment actions implemented. Included in our 2021 guidance, our expected non-operating headwinds, which includes lower interest income of $0.07, a higher tax rate worth $0.07, and higher stock compensation expense worth $0.05.

The lower interest income is driven by lower expected returns on our investments based on current market conditions. Overall, we view this guidance as appropriately conservative given the current operating environment.

As I conclude on my Q4 and full-year comments, I want to thank our Globus team and highlight to everyone, their ability to drive execution and deliver these strong results in spite of the challenges we face with the COVID-19 pandemic. Looking ahead, we are excited about our business and its position in the market as we continue to take market share, drive profitable growth and deliver long-term value to all of our stakeholders.

Operator, we will now open the call for questions.

Question-and-Answer Session

Operator

Thank you. [Operator Instructions] Our first question comes from the line of Shagun Singh with Wells Fargo. Your line is open.

Shagun Chadha

Thank you so much for taking the question and congratulations on a great quarter. I wanted to start with guidance. Can you help us a little bit and let us know what you've assumed on an underlying basis for U.S. and OUS spine, as well as the capital environment, the Japan transition and also for catch-up and procedures. And then to that effect, when do you expect to see above normal growth given the pent-up demand? Should we expect that in late Q1, early Q2 or late Q2, early Q3? Thank you.

Keith Pfeil

Hi, Shagun. Thanks for the question. This is Keith. The [$180 million], we're not breaking out the pieces of it going into 2021. When we step back, we made the decision to give guidance because we felt it was appropriate. But in some of my other comments, I talked about, Q1 being impacted by COVID, but I did say that we’re confident that we've finished slightly ahead of prior year. But when you sit back and look at 2021 relative to 2020, we're extremely confident in our business and we're very happy with where we finished.

But at the same time, we still don’t exactly know what's going to happen. So knowing that we've had some COVID impact at the tail end of Q4 coming into Q1, like I said, slightly ahead. But as we get out to the back half of next year of 2021, we're modeling conservatively because when you look at our Q3 and Q4 and our strong finish this year, we're still not 100% sure that some of that maybe backlog that came back as a result of some of the lost sales in Q2. So as we went into 2021, we wanted to come out with a number that we felt was appropriate and achievable.

Shagun Chadha

Thank you. And then with respect to the above normal growth rate, when do you expect to get there?

Keith Pfeil

I mean, I still think for the full-year we're providing an excellent growth rate, we're still growing…

David Demski

Are you referring to the overall market, Shagun?

Shagun Chadha

Well, I'm just referring to your growth as well as spine, if you'd like to comment on that. I'm just wondering, when should we expect to see the pent-up demand maybe catching up a little more? Is Q2 going to be the quarter of above normal growth of Q3?

David Demski

From a market standpoint, Q1, we're definitely feeling COVID restrictions. Q2 from what we can see right now, it looks like the impact would be modestly negative. But then into Q3 and Q4, assuming no uptick in hospitalizations, again, I would think we'd see some bounce back in procedures. Since we didn't go as deep this time as we did last year, I don't think the bounce back will be as strong, but that's how we're looking at the market right now.

Shagun Chadha

Thank you for taking the questions.

Operator

Thank you. Our next question comes from the line of Matt Henriksson with Citi. Your line is open.

Matthew Henriksson

Yes. Hi. Thanks for taking the question. Just going with the orthopedic trauma business. Can you provide some commentary on how the quarter went? And then any kind of broad stroke kind of guidance for how you expect that business to ramp in 2021?

Daniel Scavilla

Matt, thanks for your question. This is Dan Scavilla. I think we're pleased for the year and for the quarter with the growth in trauma. We're seeing that existing docs are using more of our products are increasing procedures at the same time. We've had a significant gain in accounts through the year including in the fourth quarter. We're pleased with the product performance that we've seen. We're continuing to develop several more that will allow us to capture even more of the share and gain better access going through it.

We didn't break out trauma as far our sales will go into 2021 as Keith mentioned. But we do expect to have very strong growth as we launch quite a few products that are on slate to go out the door, and actually really start to drive this into the area we've projected it to be over the next few years.

Matthew Henriksson

That's helpful. Thanks. And then just going back to the Japan restructuring. When would you expect to kind of see that kind of year-over-year tough comparable to subside? Is that – are we looking at that for entirety of 2021? Or is that by fourth quarter we should start seeing that subside? And thanks for taking the questions.

David Demski

Sure, Matt. It's hard to say at this point. I wouldn't think we would see much of a lift until at least the fourth quarter if not into next year. We may have to work through an entire cycle to get that behind us.

Operator

Thank you. Our next question comes from the line of Matt Miksic with Credit Suisse. Your line is open.

Matthew Miksic

Hey. Thanks so much for taking the questions, and congrats on a really impressive and to a really tough year. So a couple of follow-ups on Enabling Tech and Spine and Trauma, if I could. So I'd love to get any color that you'd be willing to provide on things like for the percentage of your business now that's sort of being pulled through on robots are being robotically driven to the extent that you can kind of guess at that? I suppose, I know it's hard to know where your screws go, for example. It would be super helpful maybe where you see utilization of the robots that you have out there at this point and to the extent you are seeing the need to go to a second robot? And then as I mentioned, I have another follow-up.

David Demski

Hey. Thanks, Matt. We don't disclose sort of the specifics around the pull-through, but it is fairly significant on the sites where we have the robot. It's much more efficient to use our screws in our interbody to utilize it. So we are really pleased with that. In terms of utilization, and that’s – as I've commented a couple of times, that's really been our focus is to drive that utilization and adoption from a business standpoint, but also from just creating value for the customer and for the patients to see value from it as well. We're happy with where that's going. We have a lot of work to do.

Being a new technology, it's always challenging to get people to adopt new practices, especially in that early going where there's a learning curve. But we do have, I’d say several situations now where we have either purchased a second robot or considering doing so. So all signs are very positive from that perspective.

Matthew Miksic

That's great. Thanks. And the follow-up on trauma, and then if I could just sneak in a quick question on this Japan transition. But on trauma, I'm curious you’re making good progress there up until now. I think a lot of us or maybe just me has been thinking about separate trauma field force, building a trauma business around a commercial organization in trauma. And I'm curious to what degree you're able to sort of approach hospitals with your combined offering in some way both spine and trauma or pulling trauma into the conversation on the strength of some of your spine relationships? Is one.

And then just if I could briefly to follow-on Japan, maybe just – if you hadn't already mentioned it, just the rationale for the move to direct, what's some of the benefits you expect to see there?

David Demski

Sure. I'll take both of those as well. We are utilizing our relationships in spine to try to help get trauma going in certain ideas and accounts. I would say, modest success there given the small – it's still small numbers. We've grown a lot percentage wise, but still small numbers on trauma. So that's more aspirational than really any significant impact.

And then over on the Japan question, it's really about maintaining the consistency in terms of our marketing messages and our business practices. It's challenging to maintain that control over distributors and agents. And we decided with Steve and his team there and his background at Medtronic, we thought it just made more sense to build a really strong foundation going forward. So we made that decision really over the course of 2020, but it's fully implemented at this point.

Matthew Miksic

Thanks so much.

Operator

Thank you. Our next question comes from the line of Jason Wittes with Northland Capital. Your line is open.

Jason Wittes

Hi. Thanks for taking the questions. Just real quick, in terms of the change in sort of your product development combining procedural with Enabling Technologies, is that simply just integrating more with a robot, or is this a more fundamental change to how you are doing product development and how you are thinking about launching products?

David Demski

It's more fundamental in the fact that we're starting to think about enabling as we develop implants and vice versa. As we're developing features into our enabling, we're considering how specific implants might be utilized. And we're looking at that from – a holistic way to look at that is by procedures. So it's taking advantage, whereas in the past it's been more like silos. If you think about the enabling folks would develop features and benefits on their technology with an eye towards how it would be utilized in the OR certainly. But we're starting that from day one to drive new innovations. And what it's going to produce is things that you wouldn't have thought of had you not utilize enabling from the beginning.

Jason Wittes

Okay.

David Demski

Or early stages to see some of that in development.

Jason Wittes

Okay. But that will impact both non-robotic users and robotic users. It sounds like in terms of products are going to offer them.

David Demski

It will and probably have the mark more impactful on the computer assistance side both robotic and navigation.

Jason Wittes

Okay. One follow-up question. You had – I think in the past, you've commented that you've had record hiring in terms of the salesforce this year. Can you comment on what the fourth quarter look like and also kind of what the outlook is for 2021? Should we assume that type of pace continuing?

David Demski

Yes. The pipeline is still very strong. We didn't have such a great fourth quarter. We were tracking along with the prior year through the third quarter. A little drop-off versus a really strong comp from 2019. We had a tremendous fourth quarter. So off the pace a little bit, but still an extremely strong year. A great year in onboarding and a great pipeline. We've already hired several folks in 2021.

Jason Wittes

Great. Thank you very much.

David Demski

Sure.

Operator

Thank you. Our next question comes from the line of Kaila Krum with Truist Securities. Your line is open.

Kaila Krum

Hi, guys. Thanks for taking our questions. So I'll start off on guidance. Just I think in general, you guys have consistently taken a very conservative approach to your revenue outlook, and now you're calling for 12% growth from 2019, which I also imagine includes some level of conservatism. So I guess, what are you assuming is the impact of COVID on revenue this year and what are you assuming as it relates to contribution from imaging in 2021?

Keith Pfeil

Thanks, Kaila. This is Keith. I think like I said earlier, coming into earnings call, we talked about whether we give guidance or not, and we decided to give guidance because we felt that it was important to do so. But we're coming out of a year where the quarters really look very unusual, which is why we can comp into 2019 is a better metric. But when you step back and look at it, in 2020 there could be real loss or there is real loss in the market when you think about how we go forward. As we think about spine – spinal patients and who is getting surgeries, we also have to think about some of the macroeconomic factors coming into 2021.

Unemployment, there's lots of people unemployed. Those people may not have access to healthcare. They may have needed surgery before that might get pushed off. So as we set forth with this guidance, we know we have COVID impact here in Q1, but we are conscious of conservatively modeling our back end of the year next year because we had strong Q3 and Q4 this year. We're just not sure how it's going to finish out as we get into the year. As it relates to Enabling Technologies, I have no comment on that right now because we're really not looking to break out the pieces of our guidance for 2021.

Kaila Krum

Okay. And that makes sense. I guess, so if I look at imaging specifically, it does sound like you're in final stages there you're planning to launch in Q3. That is, I guess, a little bit later than we had expected. So first, can you help me understand why that's the case? And then, I guess, the second part of that question, I'm looking at your Enabling Tech business sitting at $40 million in revenue today. Without asking or touching about on 2021 numbers, could that business double over the course of the next two to three years? Is there a reason why it wouldn’t?

David Demski

Thanks, Kaila. In terms of why we're leading with imaging, we hit a couple of bumps in the road in terms of getting through the final verification and testing. We've addressed all those concerns are actually in the last couple of days of finalizing that testing right now. And we're hopeful to be with the FDA early in March and then hopefully things go smoothly there and we get to the Q3 launch. We're almost at the finish line when it comes to that.

And to answer your question, is there any reason why enabling couldn't double over the next two to three years? No, none whatsoever. We're really bullish on that opportunity and that's why we've invested the way we have and why we're expanding the portfolio there. So we're excited about it.

Kaila Krum

Great. Thank you, guys.

Operator

Thank you. Our next question comes from the line of Matt Taylor with UBS. Your line is open.

Matthew Taylor

Thank you for taking the question. I have one follow-up on the imaging question there. So assuming you do have a Q3 launch, I think in your earlier comments, you mentioned there were a number of surgeons who were interested in acquiring the technology. Do you have orders kind of penciled in already? Could that be a quick ramp or should we expect it to proceed more slowly after you do get to the launch phase?

David Demski

Yes. It's hard to predict, Matt. There's a lot of folks interested. We're not able to really market the device yet until it's approved. So well there's indication of interest. We haven't gone through that kind of business process of coding and going through administration. So it's hard to predict that as well as our manufacturing ramp. So at this point, we're not going to be specific with a number. We're excited about the technology. I know once we do get going, it's going to be significant for us, but the actual start and what the impact will be in 2021 is still a little bit murky.

Matthew Taylor

Okay. Great. And you commented a little bit around this question, but could you just speak to the strength in Enabling Tech in Q4? What does that say about the environment? And are you seeing a strong interest level in order book as we’re starting the year here in 2021?

David Demski

Well, as I mentioned in my comments, our pipeline, when we came into this year, it wasn't ever stronger. To offset that with a Q1 is typically the worst quarter in capital. So it typically comes down to the last month of the quarter. So a lot of activity, a lot of great deals in the works, but we'll – just going to have to see how it plays out. But I would say we came into this year with more strength than we ever have. And I think we came off a great second half of last year. So capital is just one of those things where it's really hard to predict because each deal is a deal in itself and it's not a recurring revenue stream like we have in the OR.

Matthew Taylor

Okay. I'll leave it there. Thank you very much.

David Demski

Okay.

Operator

Thank you. Our next question comes from the line of David Saxon with Needham & Company. Your line is open.

David Saxon

Yes. Thanks for taking the questions and congrats on the quarter given the environment. I guess, first one on trauma, you've talked about how you want to take a point of trauma market share annually, and you continue to see really strong growth. I think you said 130% in the quarter. So do you feel like you have or you're on track to take a point of share in 2021? And if not, what needs to happen there?

Daniel Scavilla

Thanks for the question. This is Dan Scavilla. I would say that's a bit aggressive because we need the full portfolio. We need to gain the access. You've got to get through the COVID disruptions where the value committees in the hospitals and all were delayed, things like that. So we're pleased with the growth. As Dave said, they are on smaller numbers. We're more pleased with the fact that we've got 14 product families out there, several more in late development, and we'll have the ability to start not only penetrating, but displacing as we get through into the end of 2021. And I think that's really where we're focused on now. We'd have to assess the market and the entire situation to understand what points of growth will come over time.

David Saxon

Got it. And then just a question on the total joint robotics application. Can you just give an update on that timeline? And once that's launched, I think StelKast, when you acquired them, they were about a $10 million business. So once that robotics is launched, how should we think about that portfolio and revenue contribution? Thanks so much.

David Demski

Sure. We're looking at 2022 launch for the robotic system and we continue to make progress on the development. In terms of specifics as is our practice, we really don't breakout the segments with specifics. Although I will say that once we launch the robot, that was our thought process going in that we would get some pull-through from our Enabling Technologies as we hit the market. And we're also expanding and enhancing their product line that we got. So we've got some second half launches, a plan there for just the manually implanted devices. So we're working on that business and we do expect that business to grow even in advance of the launch of the robot.

David Saxon

Great. Thank you.

David Demski

Sure.

Operator

Thank you. Our next question comes from the line of Steven Lichtman with Oppenheimer. Your line is open.

Steven Lichtman

Thank you. Hi, guys. I'm just wondering how much has COVID impacted the rollout of the interbody module for Excelsius if at all. Has it impacted your ability to train surgeons? Or is that be done on virtually? And any thoughts overall in terms of the pace of that rollout would be great.

David Demski

Thanks, Steve. I don't think it's affected us very much. I think we're really happy with the rollout. We're getting strong adoption. A lot of the training occurs at the site if they already have an Excelsius installation. So really pleased with that. And I don't think COVID has had a major impact on it.

Steven Lichtman

Got it. Okay. Thanks, Dave. And then Keith, just wondering on the puts and takes on SG&A. You mentioned more normalized spend, what are the type of investments do you see making in 2021 and maybe it held off due to COVID in 2020? And when you think about those investments offset by some of the cost save you mentioned, are you targeting that 45% SG&A range like we've seen in the last couple of years overall?

Keith Pfeil

Okay. Thanks for the question. Number one, I would think that as we go into 2021, then our SG&A would be actually lower than the 45%. I know, obviously, we've had savings this year in travel. Some of that was partially offset by the COVID donation cost that I had called out. But the interesting thing or the nice thing about stepping back and looking at 2021 is that we've continued to invest in our business like we always were.

And really we have an infrastructure that can handle a higher level of sales. As we win the 2021, we're going to continue to do those types of things, but with some of the cost containment actions that we put in place, that's – some of the – I would say the continued increase in SG&A spend. As I go into next year, I'm thinking SG&A is going to beat more in the range of 42% to 43% of sales.

Steven Lichtman

Got it. Helpful. Thanks guys.

Operator

Thank you. Our next question comes from the line of Kyle Rose with Canaccord. Your line is open.

Kyle Rose

Great. Thank you for taking the questions. David, I first wanted to start, maybe just help us understand, you've obviously got the robot, you've got the interbody module launch and you're going to launch imaging later on this year. And then you're also talking about a new design and development ethos. How long do you expect it'll be before you get some of those procedural type solutions to rollout onto the market?

David Demski

Kyle, I think you're referring to the change kind of in our org structure that I spoke off.

Kyle Rose

Yes. Exactly.

David Demski

Products from that. Yes. Possibly by the end of this year, but certainly early next year. We've got a couple of things in the hopper we're excited about.

Kyle Rose

Okay. And then just, I believe there was – you had a capacity issue from some 3D printing products through 2020 and in the second half. Can you just maybe help us understand, is that behind you now? How much of a benefit can that be when we move into 2021? And then with respect on the trauma side, with respect to the continued investments as far as sets, products and the commercial channel, maybe just help us understand, is that a – is that an order of magnitude as far as new sales reps you’re putting in the field and new products you're going to bring out, I'm just trying to kind of frame out the investments there relative to how the topline is going to grow?

David Demski

Got you. I'll take the 3D one, and then Dan will pick up the trauma question. We have not addressed that. Yes, we have ordered equipment, we have installed some equipment. We actually ordered more equipment. So I think that will be a constant source of growth for us this year. As that capacity comes online, we have a tremendous demand for it right now. We have to turn people away from access to the technology until we can get ramped up. So I think all this year, we're going to see benefits from that.

Daniel Scavilla

And Kyle, I'll pick up the trauma side of it. So when it comes to the salesforce, we certainly have plans to significantly change that, double that, or go beyond if we're capable of doing that. Again, we're starting with small numbers. We won't disclose those numbers, but the investment to continue to put feet on the street in order to penetrate as planned in our 2021 numbers.

For our existing products, we do feel like we have enough sets in place, some slight expansions, but nothing that would move you financially. So the spending on sets will be more related to the new product launches that are coming up. And as you mentioned, we have several of them in process today. The rate of spending in those projects would be equivalent to what we’re spending in 2020 from everything I've seen.

Kyle Rose

Thank you very much.

Operator

Thank you. [Operator Instructions] Our next question comes from the line of Richard Newitter with SVB Leerink. Your line is open.

Richard Newitter

Hi. Thanks for taking the questions. Just to kind of summarize what I think I heard about how to think of the guide $880 million. It sounds like you guys were saying, to be conservative, you're not assuming that the back half of your year is going to necessarily trend at the same run rate when things presumably normalize as they had in 2020, where you were at a mid-teens kind of normalized U.S. core spine. So if you were to kind of be there and it wasn't just all backlog work down, is it fair to assume? But that's one kind of big lever to deliver upside relative to your starting point for the year. And also in the same vein, is it fair to assume? You're just not assuming any imaging really meaningfully either and that would be another source of upside to a base case that's embedded in your guide. Is that a fair characterization?

Keith Pfeil

I would say the answer to that is, yes. We modeled the year conservatively from the standpoint of the things I had mentioned earlier. We talked about the Q3 launch for the imaging system, but, I don't – we're not really getting into the pieces of what makes up all the $880 million.

Richard Newitter

Okay. Got it. And then did you quantify the Japan headwind or can you quantify in any way what the Japan headwind might look like? And you said it would be down, is that down relative to 2020 or down relative to 2019 for international? Thanks.

David Demski

Yes. Thanks, Rich. As our practice, we don't breakout the specifics of any part of our business. But that in particular, it'll be down in relation to 2020 and 2019, I guess as a matter of fact as well.

Richard Newitter

Got it. And if I can just one last one, I think, you had rattled off a couple of per share items, I think non-operating items. Can you just rehash those again? And what were those relative to 2019 to get to the $1.80 or $0.07 here or $0.05 there?

Keith Pfeil

Yes. We call that lower interest income of $0.07, a higher tax rate of $0.07 and higher stock comp of $0.05. Those comparisons, again, going back to 2019 and really the lower interest income is reflective of current market conditions based on our investments.

Richard Newitter

Thank you very much.

Operator

Thank you. Our next question comes from the line of David Lewis with Morgan Stanley. Your line is open.

Unidentified Analyst

Hi, everyone. It's Drew on for David tonight. Just a quick question on your adjusted EBITDA guidance. Not to split hairs here, but I think you said mid-30s, and maybe in the third quarter call, you said you were confident in 33% to 37% in 2021. So just want to be clear if we should be thinking about 34% to 36% or 33% to 37% for the full-year.

Keith Pfeil

The way I would answer that is we are a mid-30s business. One of the comments I had in my prepared statement was that we would expect our first half adjusted EBITDA to be lower than our second half. Good way, I think about it is go back and look at – and look and see how 2019 performed, that would give you a good indication of how we expect it to improve going forward. But we expect for the full-year that we are a mid-30s EBITDA business.

Unidentified Analyst

Got it. And then you've mentioned throughout the call that rep hiring is still going to be a [indiscernible] for the company. But just with one competitor announcing a spin-off, do you see an even better opportunity to be more aggressive on onboarding reps over the next 12 to 18 months really?

David Demski

Yes. Drew, I wouldn't say we'd be more aggressive or we have been extremely aggressive in the past and we're not going to back off. And I think the attractiveness is Globus is only getting better given the technology that we're rolling out and the opportunity folks have to grow their business personally. I don't know that announcement is going to have much of an impact on us one way or the other.

Unidentified Analyst

Got it. And then just one last one to go back to Dan for a moment. I know that you have a relatively new management team in there, and part of that was they should get better access to KOLs. So just in your direct business in Japan now, was there any progress that you can point to your evidence for enthusiasm on an underlying basis for the direct business in Japan?

Daniel Scavilla

Yes, absolutely. Steve and the guys have refocused into the – I guess more KOLs and more academic institutions. They're very interested in robotics. We haven't sold one yet there, but we're getting more traction in those accounts and more interests, more credibility. So it's going to be a matter of that offsetting the drag of the folks we've lost over time that mix the quality, if you will of the customer base is going to be greatly enhanced and more stable, and I think just a better opportunity with long-term after we get through this year.

Unidentified Analyst

Thank you so much for taking the questions.

Operator

Thank you. Our next question comes from the line of Matt O'Brien with Piper Sandler. Your line is open.

Unidentified Analyst

Hi, guys. This is Drew on for Matt. Thank you for taking the questions. I just wanted to follow-up a little bit on the capital environment. You guys seem to be outpacing a lot of the other capital equipment providers. So I guess just wondering in your opinion, have your strong results really just been due to a general overall interest in the technology or is there anything pandemic specific that you've kind of capitalized on in the last couple months? Some competitors struggling or anything you guys are doing on price?

David Demski

Yes. Thanks Drew. I don't think it’s pandemic-related. I think over time the quality of the system, the functionality of it and if you will, the user experience is being born out. So we're competing for a deal on the front end and we're holding the line in terms of the value we're bringing and our competition doesn't always do that. So we may lose a deal or two upfront, but we're seeing actually some of those come back around as they've had failed installations and we're gaining that business. We're continuing to focus on clinical value, driving our value proposition, if you will. And you saw some of the results in the fourth quarter and really excited about the pipeline we have right now.

Unidentified Analyst

Okay. That's perfect. And then I think you've talked about this a little bit in the past, but we've obviously heard some Ortho companies talk about the shift to ASCs is a potential tailwind that helps to offset some volume disruption as of late. Just curious about your take on that in the spine space, and then I guess the durability of that trend in general as we sort of move beyond that dynamic? Thank you.

David Demski

Certainly, we're seeing that as well. The pandemic accelerated it as they were not able to operate in hospitals, so they would move some surgeries over there. And then longer term, I think that is a trend that we're going to see across the board in orthopedics. So we're positioning ourselves accordingly and trying to make sure we're meeting the needs of those customers as well as our more traditional hospital-based ones.

Unidentified Analyst

Thank you.

Operator

Thank you. I'm showing no further questions in the queue. With no further questions, ladies and gentlemen, we will now conclude the Globus Medical fourth quarter and full-year 2020 earnings conference call. Thank you for joining us. You may now disconnect.