Globus Medical Inc (GMED) 2013 Q3 法說會逐字稿

Welcome to the Globus Medical's 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.

Joining today's call from the Globus Medical will be David Paul, Chairman and CEO; Dave Demski, President and COO; Richard Baron, Senior Vice President of Finance and CFO; and Ed Joyce, Investor Relations Director.

I will turn the call over to Ed.

Thank you for being here with us today.

I will now read our required legal disclaimers. During this call certain items may be discussed that are not based entirely on historical fact. These items should be considered forward-looking statements and are subject to many risks, uncertainties and other factors that are difficult to predict and may affect our businesses and operations. As a result, our actual results may 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 on 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 statements 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 third-quarter 2013 Form 10-Q.

On this call we will also discuss certain financial measures that are not calculated in accordance with Generally Accepted Accounting Principles or GAAP. We believe these non-GAAP measures are useful as an additional measure of our performance. Non-GAAP financial measures have limitations as analytical tools and should not be considered in isolation or as substitutes for financial measures prepared in accordance with GAAP.

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

I will now turn the call over to Dave Demski, President and COO.

Thanks, Ed. And welcome to everyone on the call.

We were very pleased at our third-quarter results. Sales of $107.2 million were up 13.1% over the third quarter of 2012. The third quarter is traditionally a challenging time of the year as surgical volumes typically slow due to summer vacations. Our strong growth this quarter reflects consistent, sustained execution of our strategy.

We've had several exciting product launches this year and David Paul will comment on some of the more significant ones in his remarks. We continue to recruit sales professionals in the US at unprecedented pace. Both the quality and the quantity of our recruiting efforts remain at high very levels. As we mentioned last quarter, this surge in recruiting is going to put pressure on our EBITDA margins in the short term, as new reps typically take up to 18 to 24 months to produce at efficient volumes. However, this investment, along with new product introductions, is the foundation on which our future growth will be dealt upon.

Revenue from international operations grew 19.1% in Q3 over the comparable period last year. This was very encouraging and bodes well for our international growth. We also continue to see improvements in efficiency and increase contributions to overall profitability from our OUS business. Profitability in the quarter remained robust with an adjusted EBITDA margin of 33.4%, as compared to 35.1% in Q3 of 2012. The medical device tax negatively impacted Q3 adjusted EBITDA by 1.8 percentage points.

Our ability to maintain healthy operating margins while simultaneously investing heavily in growth initiatives such as our US sales force expansion, is directly attributable to our disciplined approach to spending. The results are not only evident in our EBITDA margins, but we also produced a record $28 million in free cash flow this quarter.

We continue to see generally positive momentums from the 3Ps, pricing, procedures, and pods. Consistent with last quarter, pricing pressure remains in the low to middle single digits, somewhat improved from recent years. [Pair] push-back on procedures seems to have bottomed. It's not getting any worse but not improving significantly either. We have not seen any specific impact from the recent Aetna policy announcement nor do we see this as material threat in the long run.

Finally we are pleased with the recent OIG reports showing higher utilization and costs associated with pods. We see this as yet one more data point in the growing momentum to eliminate this business structure from our industry. While it is impossible to predict the timing, the trend is clearly going in the right direction.

This quarter marked the one year anniversary of our IPO. In that year we have consistently delivered industry leading top line growth along with operating margins that are comparable to much larger companies. We have been able to do this by driving innovation across the portfolio, aggressively adding to our sales footprint, both domestically and internationally, all the while exhibiting fiscal discipline in our operations.

We feel confident in our ability to continue to execute on this strategy, thereby delivering exceptional financial results, and driving additional shareholder value into the foreseeable future.

With that I will turn it over to Rick to discuss our financial performance in more detail.

Thank you, Dave.

Today I will review our performance for the third quarter of 2013, as compared to the third quarter of 2012, for key elements of the income statement, balance sheet and statement of cash flow.

Our worldwide sales for the third quarter of 2013 were a record-setting $107.2 million. This was an increase of 13.1% over the third quarter of 2012. Our growth continues to be the result of the ongoing execution of each of the drivers of our business; new product introductions and continued expansion of the sales force.

Our sales of disruptive technology products increased this quarter to $45 million or by 20.7% from the prior year's quarter. Innovative fusion sales increased to $63 million, or by 8.3% from the prior year's quarter. Sales in the United States for the third quarter of 2013 grew to $98.1 million, or by 12.6%, while international sales grew to $9.1 million or by 19.1% from the prior year's quarter. Overall growth in sales was attributed to expansion of both domestic and international territories and greater penetration into existing territories and countries.

Gross profit for the third quarter of 2013 was $81.9 million, or 76.4% of sales for the current year's quarter, as compared to $75.9 million or 80.1% from the last year's third quarter. The percentage in the current year's quarter was unfavorably affected by 1.8% or $1.9 million due to the medical device excise tax, and approximately 0.9% or $1 million in costs relating to new systems launched.

The remaining difference is a combination of increases in distribution, depreciation, and other costs. The costs of sales percentage was unfavorably impacted by increasing sales volumes for OUS, Algea and Biologics, each of which have lower gross profit margins. We will talk in a few seconds about the leverage achieved this quarter in the OUS and Algea selling, general and administrative expenses, which offsets this effect.

Research and development expenses this quarter were $6.6 million or 6.1% of sales as compared to $7 million, or 7.4% of sales for the same period in 2012. The change in spending does not signal a change in overall spend on R&D, but is due to the timing of certain expenditures during the course of the year. Selling, general and administrative expenses were $45.7 million, or 42.6% as compared to $41.8 million, or 44.1% for the sales for the prior year's third quarter. The percentage of sales is an improvement as compared to last year's selling, general, administrative expenses.

The increase in SG&A dollars were primarily due to the increase in sales and related compensation, which included the hiring of additional sales representatives. The improvement in the overall percentage was primarily due to the continued leverage of the OUS and Algea business models.

GAAP operating income increased to $29.5 million, or 27.5% for the third quarter of 2013. This is compared to the operating income of $27.1 million, or 28.6% for the second quarter of 2012. Excluding the impact of the medical device excise tax, the operating income percent would have been 29.3%.

Adjusted EBITDA for the second quarter of 2013 was 33.4% or $35.8 million, as compared to 35.1% or $33.3 million for the prior year's quarter. Without the medical device excise tax expense, the adjusted EBITDA would have been 35.1% or $37.6 million.

The income tax rate for the current quarter was 31.6%. The decrease in the tax provision and the effective rate was primarily due to favorable effects of our domestic product and activities deduction, and the effect of disqualifying dispositions from incentive stock option exercises. Our provisional tax rate is approximately 34.6%.

GAAP net income was $20.3 million, or 18.9% of revenues. Earnings per fully diluted share was $0.22 per share in the third quarter of 2013, as compared to $16.5 million or $0.18 per diluted share in 2012. The change in the tax rate accounted for approximately $0.01 per share. Fully diluted share count for the quarter was 94.4 million and 92.7 million as of September 30, 2013, and 2012, respectively.

Total cash and marketable securities balances combined were $263.8 million as of September 30, 2013, as compared to $231.7 million as of June 30, 2013. Our net cash increase for the third quarter was $32.1 million. Cash provided by operating activities for the nine months ended September 30, 2013, was $60.8 million compared to $51.8 million for 2012. We especially proud of this as by all measures we had an excellent quarter and year thus far for this metric.

Total investment in CapEx was $18.5 million, and $17 million for the nine months ended September 30, 2013, and 2012 respectively. We continue to remain debt-free. In terms of our revenue and earnings outlook for the year, we remain comfortable with our previous revenue guidance of about $432 million. We are increasing our non-GAAP EPS guidance for the full year to be $0.83 to $0.85 per share of Common Stock.

I will now turn the call over to David Paul.

Thank you, Rick. Good evening, everyone.

We're pleased to report our third quarter performance. Once again, our ability to consistently launch innovative products, attract top sales force talent, and maintain financial discipline, has enabled us to deliver superior growth and profitability. In addition to our strong financial results, our sales force recruiting efforts continue to be particularly strong through the first three quarters of the year, and with Globus remaining the destination of choice for the best sales talent [in point].

We launched 5 new products during the quarter, bringing our total launches through the first nine months of 2013 to 15. During the quarter we launched CREO, our next-generation pedicle screw platform, one of the most significant projects in our history. Our product development pipeline across all segment continues to remain robust, and on track to launch more exciting new products in the remainder of the year and into 2014.

One of our major undertakings this quarter as a Company, was the launch of CREO, our next generation pedicle screw platform. The CREO platform offers surgeons tremendous intra operative versatility in the operating room, to tailor each construct for the patient's individual need, specific anatomy and spinal pathology. The first two product launches within this platform are CREO and CREO AMP. CREO consist of a complete range of pedicle screw offerings for treatment of a variety of degenerative and deformity conditions.

With polyaxial screws, monoaxial screws, hooks, connectors, and 4.75 millimeter and 5.5 millimeter and 6.35 millimeter rod diameters, made from titanium, titanium alloy, cobalt chromium, and stainless steel. These screws have one of the lowest profiles on the market and the intuitively designed instruments enhance efficiency and use in the OR

The CREO AMP system consists of the same breadth of offering, but with modular screw heads. This enables the surgeon to [decorrugate] and place bone graft in the lateral gutters after screw insertion, but prior to final tightening. The screw heads are available in top loading, side loading and closed head options that enable flexibility and construct building based on anatomy and indication. Overall, the CREO system offers unmatched intra operative flexibility.

CREO enables surgeons to customize each construct to that individual patient's needs. They can utilize any combination of side-loading, top-loading, or closed head screws in modular or preassembled options, as well as select from a wide range of rod sizes and rod materials, to tailor the construct for that patient. No other system offers such a broad range of intra operative choice, which is particularly important on complex deformity cases. Future additions to the CREO platform include several new systems including MIS, threaded screws, and cortical screws, which will be rolled out in 2014.

I'm also happy to report that we received 510-K clearance for KINEX in the quarter, marking the first of a series of products in our biomaterials development pipeline. KINEX is an osteo stimulative synthetic biomaterial that includes all the necessary components for enhancing and stimulating bone growth.

Its key component, bioglass, has long been known to simulate and amplify cell activity for bone formation. KINEX has the highest bioglass content of any product on the market. KINEX also incorporates collagen, which acts as a scaffold for bone regeneration, and hyaluronic acid which may help promote angiogenesis. The proven osteo stimulatory properties of bioglass, the optimized scaffolding of collagen, and the angiogenic potential of hyaluronic acid, march to promote a premier next generation biologic. KINEX is slated for launch in Q4 of this year.

In summary, we continue to execute on our long-term growth strategy of rapid new product introductions and US and International sales force expansion, while maintaining a laser focus on profitability and cash flow. We remain excited about our prospects in the remainder of 2013 and into 2014 as we continue to execute on our discipline strategy of profitable growth.

We're now happy to take any questions.

(Operator Instructions)

Your first question comes from the line of Matt Miksic from Piper Jaffray.

Hi, thanks for taking our questions. Can you hear me okay?

Yes, Matt.

First, I wanted to get a sense of any particular drivers you can talk about. You mentioned continued execution. You've mentioned new product launches. You mentioned success in building the field force, in your commentary.

Can you talk -- how much of what you're seeing do you think is market related? Or do you feel like most of it is you're outperforming the market? Some color would be helpful, and then I have one follow-up on the margins.

Yes, Matt, this is Dave. I think we're taking share. I don't see a meaningful increase in the overall market. I think it's slightly positive overall. So, to be up 13% in the quarter, and for the year about the same amount, it means we're taking share.

Sure. No, that's clear. I'm speaking more about what -- upside relative to our numbers, and maybe where the Street was in the quarter. Right or wrong, clearly something went better than expected.

But on the margin side, can you talk maybe -- and maybe this is for Rick -- is to walk through maybe how the -- understand the [med dev] tax impact, but the new product launch impact -- is that in the form of E&O charges? Is that in the form of higher depreciation of new sets for inventory? Can you talk just -- help us understand that math a little bit, that would be very helpful.

As you know, we're calling out the device tax really only this year because by next year the comps will be equal. The percentage ticked up a little bit for us this quarter.

Simply, it's the combination of two things. We did a year-to-date reconciliation, which is ongoing with the new process, so it ticked up a little bit that way. But it also ties to the volume of new product launches, which ties to the uses of instrumentation and other such things. So, you won't see it fluctuate any higher, I don't think, and it will range between where it's been over the past two quarters and now. That is one, too.

As far as the $1 million associated with new product launches, I called that out separately because we feel as though it's really related to the volume of launches that were held this quarter. It wasn't lumped into depreciation and other such things because we don't feel that that's an ongoing cost over the course of the next several periods. I wanted to isolate it so that as you look at our numbers and your numbers into the future, it is not factored in as a permanent change.

Okay. That's helpful. Thank you.

Your next question comes from the line of Rich Newitter with Leerink Swann.

Hi, thanks for taking the questions. Rick, just on that last point -- so I just want to make sure I'm understanding correctly. So it sounds like a couple of those factors in the gross margin, the mix, the new product step-up expense, those are fairly transient and we should see gross margins move higher next quarter? Or is that more into kind of 2014? When should we see that normalize a little bit more with the prior quarters?

I think we've always felt comfortable with gross margin, once you bake in the device taxes, in that 77%, 78% range. This fell slightly below it because of that one item.

As I think it is called out either in the script or will be in the Q tomorrow, this is -- we've launched about 15 products over the course of the year. The biggest concentration of those products, especially the biggest launch of this Company's history, happened this past quarter. So you would expect something of that magnitude to affect somewhere. And it really just simply affects the retooling, the preparation, and those types of things, which we feel most comfortable lumping into cost of sales as opposed to R&D or sales and marketing.

And just with respect to some of those products, particularly CREO, it sounds like a very interesting, exciting new option for physicians. Can you give us a sense of how that launch rolls out -- what the time line is? Should we think of that as a steady ramp, a bigger impact in 2014, as soon as 4Q? How should we think about that?

Rich, this is David Paul. We've begun the launch of CREO -- two products into it now over the last three months. We're beginning to see very positive acceptance. But we continue to add more systems into this platform, so we see an ongoing impact into 2014. Clearly it will have the biggest impact for us in 2014 of any product we introduce.

Okay. That's helpful.

And maybe just one last one, David. In biologics, that has been an area that you guys had been I think looking to fill some holes for a while. KINEX seems like the solution for now. But it is also an area that I think you were potentially exploring acquisition opportunities.

Can you provide us just an idea of what made you decide with this product, and I'm assuming an internal development versus external? And then, what other areas do you think you might be looking at next, internal and/or external?

Thank you, Rich. I think, as we've always said, we know that this has been an underperforming area for us. So about 18 months to two years ago, we put in place a robust internal development program to fill in some of these holes and create some products through internal development.

But we've also been aggressively looking at options that are out there in the market for any type of bolt-on acquisitions, and we continue to look at those. And hopefully we'll be able to announce some of that when we get to that point.

And, Rich, as we've talked about in the past, many of our decisions from a internal make or a build would be a build or buy type of a trade-off. For us to wait until the perfect property came along would not allow us to advance as quickly. And two years ago we decided that we would have the dual path, which will continue into the future.

Great. Thank you.

The next question comes from the line of Matthew O'Brien with William Blair.

Afternoon. Can you guys hear me okay?

Yes.

Okay. Thank you. I was hoping to talk a little bit about -- I know you don't want to get into 2014 guidance by any means, but you keep talking about all these sales force additions. You've got a bunch of pretty exciting new products coming right now. I think Algea likely will pick up a little bit next year. Can you give us a reason why, heading into next year, we wouldn't see a pretty meaningful acceleration on the top line compared to what you've been doing over the last couple of years?

Our growth over the past six quarters since we have been public has been about 12.5%, including this quarter. We'll start talking about guidance in Q -- with our Q4 call, as would be newly traditional for us as we attempted to do the last year.

A lot of the returns that you have with these sales force additions -- I think Dave mentioned last time -- take 12 to 18 months, and we're seeing the fruits of those labors now with the ongoing 12%, 12.5% growth into this year.

Okay. And then just on the profitability side -- Rick, this is probably for you. You called out the CREO additional spend in the quarter; you're adding a bunch of additional reps. I think adjusted EBITDA would have been -- excluding the device tax would have been about the same as what we had this time last year, if not about 10 basis points higher. Can you quantify in total what that would have looked like excluding those other -- the additional spending?

And then just longer term, should we think about Globus as a 35% adjusted EBITDA type of business that -- any kind of upside to that number you're going to fall back into the business, or do we think we'll see modest levels of expansion on that metric going forward?

Yes, I actually made sure this time I called out the device tax metric. We're really only doing it for last year. I know all you guys have baked it into our adjusted EBITDA. When we went on the road, we felt that we were approximately a 35%-plus adjusted EBITDA. That was always without the inclusion of the device tax. So, when you fully bake that in, we need to be looked at as about a 34%, 35% adjusted EBITDA.

Clearly there's still lots of room for leverage of the Algea and the OUS model. However, as we've said, what we feel we need to do is plow that back into the operations of the Business, either in the form of R&D spend, which again will fluctuate quarter to quarter based upon trials and big spends, or the additional sales force hiring.

Clearly with the way that we've hired this year, the leverage we've gotten off of the model still puts us within your -- the consensus of where we are on the operating margins and adjusted EBITDA. So I think the model works very effectively in the way that we have it. We're going to take it and reinvest, and get another shot on goal. That is kind of the mantra here.

Okay. Thank you.

Your next question comes from the line of Chris Hammond with Goldman Sachs.

Hi, there, guys. Can you hear me okay?

Yes, Chris.

Great, thank you very much for taking the questions here. Couple of questions here. So, at the beginning of the call, I know that you mentioned that you had not seen any impact from the Aetna change thus far. And we really wouldn't expect to see that happening, it not going to in effect -- by the close of the quarter.

Is there any -- hoping that you guys could quantify at all what percentage of revenues that you think would be exposed to any kind of change by Aetna? And what also what your outlook would be for the likelihood that other payers could adopt a similar coverage policy?

Chris, we don't have a lot of visibility into who our customers -- are behind our customers. We sell to the hospitals. So we don't know necessarily the insurance carrier behind it, so I can't really quantify the exposure to Aetna.

We think that there is very little likelihood of that being adopted by other carriers. PEEK in the cervical spine is well accepted among all surgeons as an effective treatment option. I don't see it being an impact either really in the medium term to long term.

Okay. Great.

And just a quick follow-up for Rick on the financials here. I know that -- people keep coming back to the $1 million in incremental spend on the COGS line, but I'm a little curious -- or maybe I'm not really understanding as to why these incremental costs would be more transient in nature?

We've always talked about part of the business model being very still about rapid product development and bringing new products to market. So, I'm not sure that I understand why CREO would be materially different from other products that you guys have rolled out. And what does that imply for other products that you guys have in the hopper on a forward basis?

You're right in that we're going to introduce products on a regular basis, and there are always costs associated with it. The dollar volume of the launches this quarter was particularly high. And that's really what it is related to. And we don't anticipate that sort of investment in the next two, three quarters.

And then, in prior quarters, and every other quarter that you've seen, those launch costs, wherever they would fall, either in sales and marketing, PD, or in the cost of sales, have been tucked in neatly into the quarter. These were unusual costs, if you would, not, of course, in the accounting-term sense, but just unusual, and more or less things that we don't expect to repeat.

Got you. Great.

And on the sales force additions, is there any type of metric that we can hang our hats on that you guys are targeting for an exit rate for 2013? Or any type of targets that you can share with us for headcount additions in 2014 at this point?

We're still not sharing any of the specifics around the headcount.

Okay. I had to try. Thanks for the question, guys.

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

Great. Thanks, good evening. Couple of questions. First is -- we've seen the innovative fusion line growth accelerate the past couple of quarters. Is that a function of the commercialization of CREO, or any specific product line?

It would be way too early for that to be a conclusion. That line will ebb and flow, as we've said over the past. But what it also is -- as we bring on those experienced reps, the distribution of their business is just not incremental to disruptive technologies. It would be bringing on their full line -- their full bag.

So, as you begin to feel the effect of those reps bringing on business, you're going to get a proportionate across all lines of business, of which their biggest product line is going to be the innovative fusion, pedicle screws and other such things. So, it's more a confirmation of the strategy, I think, than it is anything that is a negative trend in the Business.

Good. So, basically it's some of the reps you brought on a little while ago -- we haven't seen CREO yet, that would be even more additive to that innovative fusion line as we go forward. And LATIS would be a disruptive technology product, correct?

Correct. Understand that with the way that we both grow products and introduce products to surgeons -- attracts sales people with those new products, those new products also cannibalize existing lines. So, part of CREO's success is also going to be simply that it will cannibalize a line that hasn't been replaced, I think, or truly updated from start to finish in approximately six years. So, that also adds to the magnitude of this project, and its overall impact to the entire Business.

And have we seen an impact from the LATIS product yet? Because that was just recently launched, as well.

We've done what we would consider to be the appropriate number of cases for a product like LATIS. And not to surprise you with the way I'm going to describe it, it is clearly along the lines of a single. So, we're out there, and it has been a nice product for us.

Okay, and then, as we think of the sales force expansion, you've kind of come back to this theme again and again. Is the way to think about going forward that you have an incremental spend associated with it, that we're more likely not to see leverage in the line versus adding costs to the line -- the SG&A line, that is?

That's an interesting, different type of a question. I think you probably would have seen a bit more leverage in the line only because you're bringing on some bigger names with a fixed cost for a period of time. Even though that's a fixed cost, over time they start to sell, so you do see the leverage in the line. It is a little bit fleeting. It moves from quarter to quarter, year to year.

Okay.

Bill, in the normalized numbers that we've all talked about over time, that number in a normalized period is pretty well baked in. We're just making sure that the hiring has been good, and that it may have a slight drag temporarily.

Okay. And then last, simple question for you, Rick, is -- tax rate obviously was low this quarter, helped you out. What's the full-year tax rate for 2013 going to be?

The provisional rate is 34.6%. The full rate year, you should expect it to resume to that next quarter. The major change between that 34.6% and the 31.9% or 32% really has to do with reconciliation items from a book financial perspective to the tax return. We were able to take advantage of certain things, and [antra] and all of those things that have confused it this year. Next quarter, look at it from a 35%, 34.6% range.

35% for the quarter?

Yes. And it will be weighted -- I didn't do the weight for the year.

Yes. Okay. Great. Thank you very much, and congratulations on a solid quarter.

Thank you, Bill.

Thanks, Bill.

Your next question comes from the line of Ed Antoian from Chartwell.

Hi, guys. Two questions -- maybe just Algea -- break even, not break even? Give us a little update what's going on there.

And then, I was a little surprised -- Rick, you referred to LATIS as a single now and that is all you expect it to be? Or maybe this thing can get some legs and stretch it out to a double?

I'll take that. We're not sharing profitability numbers on Algea. So, we continue to get some traction there. And as we've spoken of in the past, it is not what we expected a couple of years ago, but it is getting a little better.

And in terms of LATIS, we're not going to get into predicting and get too far ahead ourselves. We're very happy with the product; the performance clinically has been great so far. It always takes a while to work through hospital administrations and new product committees to get products going, but we think this is going to be a really good product.

Thanks.

Your next question comes from the line of Steve Lichtman with Oppenheimer & Co.

Thank you. Hi, guys. Really just one question area on SECURE-C -- maybe can you give a little color on the training there? And then with Mobi-C getting the two-level indication, how do you see that playing out competitively over the next couple of years, and your guys' ability to get into those multi-level type of cases? Thanks.

Thank you, Steve. I think the data that we have for SECURE-C is extremely strong. We have continued on our path of training surgeons. Month after month we continue to train more surgeons on the use of SECURE-C. We're happy with the results that we see in the clinics. Maybe going back to Rick's analogy, it seems to be getting to be a strong single.

And I think the biggest impediment for SECURE-C is really going to be reimbursement from insurers. That is really the biggest impediment for growth. Reimbursement for the hospital, for the procedure, and then reimbursement for the physician. So, the physicians still are reimbursed more for an ACDF, and that is partially the reason why the adoption hasn't been as robust.

The clinical data on SECURE-C has been phenomenal. We continue to see great results. As we go into the longer-term outcomes, we're looking at five-year data and seven-year data now, and it continues on a really promising trend. And so hopefully if these reimbursement hurdles are lifted, then we can see tremendous increase in sales.

You want to add anything?

Yes, Steve, I think in terms of the two level, I'm not sure that is very meaningful. If you look at the market today, and ProDisc really dominates it, I would say a lot of their cases are multi-level. So, the indication doesn't necessarily dictate what the surgeon does.

Okay. Thanks, guys.

There are no further questions at this time. Do you have any closing remarks?

We would like to thank everybody. Okay. Thank you all for being on the call.

This concludes today's conference call. You may now disconnect.