Globus Medical, Inc. (GMED) Q4 2017 Earnings Report, Transcript and Summary

Good day ladies and gentlemen and welcome to the Globus Medical Fourth Quarter and Full Year 2017 Earnings Call. At this time all participants are on a listen only mode. Later we will conduct the question-and-answer session and instructions will be given at that time. [Operator Instructions] As a reminder, this conference call maybe recorded. I will now like to introduce your host for today's conference, Vice President of Investor Relations, Mr. Brian Kearns. You may begin.

Thank you very much, Dmitry, and thank you, everyone, for being with us today. Joining today's call from Globus Medical will be Dave Demski, CEO; Dan Scavilla, Senior Vice President and CFO; Anthony Williams, President; and David Paul, Executive Chairman. 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 2017 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 to be considered replacement for and should be read together with the most directly comparable GAAP financial measures. Reconciliations to the most directly comparable GAAP measures are available in 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 David Demski, our CEO.

Thank you, Brian, and good afternoon, everyone. Worldwide revenue for the fourth quarter of 2017 was $176 million, an increase of 16.1% over the fourth quarter of 2016. For the full year, revenues increased 12.8% to $636 million. Non-GAAP EPS for the fourth quarter was $0.38 per share an increase of 20.7% over the fourth quarter of 2016. For the full year, non-GAAP EPS increased 10.2% to $1.31 per share. Revenue growth in the fourth quarter was 100% organic, as we completed the acquisition of Alphatec's international assets in the third quarter of 2016. The exceptional growth in revenue and earnings we achieved in the fourth quarter was a result of a combination of strong performance by all sectors of our business combined with the first quarter of revenue attributable to our ExcelsiusGPS system. The U.S. final implant business continued its recent trend growing by 6.5% over the fourth quarter of 2016. You will recall that year-over-year growth rates have been accelerating for the past five quarters, after having bottomed out in the third quarter of 2016. We continue to be encouraged by the progress in this part of our business even though the easy comps are now largely behind us. Growth from new product introductions remains robust, led by strong results from recent additions to our coalition integrated cervical fusion platform, CREO MIS medical screws, and our QUARTEX posterior cervical fixation system. 2017 was a record recruiting year for our U.S. sales force and we are seeing continued strong interest in Globus due to our position as the technology leader in spine. Our international spine implant business delivered exceptional results in the fourth quarter growing by 16.2% compared to the fourth quarter of 2016. The Japanese business continues to deliver outstanding growth as we are starting to see the impact of increased investments in sets and manpower begin to pay off. We expect significant growth from this market in 2018 as we have aggressive hiring plans and we'll continue to introduce Globus Branded Technology throughout the year, including the introduction of our unique expandable technology. The remainder of our international business also experienced a strong turnaround in the quarter. Operational improvements were seen in several markets combined with the impact from a very soft fourth quarter of 2016 for the Alphatec business. The fourth quarter of 2016 was the first full quarter after the acquisition, and we were working through inventory supply and transition issues that limited sales in some markets. These issues were largely resolved in the first quarter of 2017. While we are pleased with our operating progress, the growth rate we achieved in the fourth quarter is likely not sustainable in the short term, particularly in the first quarter of 2018 as the impact of the Alphatec issues reverses. High-single-digit growth rates are more appropriate expectations for this segment of our business in the near-term. As we have stated in prior calls, we have seen tremendous enthusiasms by surgeons for our ExcelsiusGPS robotics and navigation system. As a reminder, this is the only Robotic technology that combines robotics and navigation on a single platform and supports three different imaging modalities, Preop CT, Interop CT and Peroscopy. These features combined with the full integration of Globus Implant Systems and an elegant work flow design have generated strong interest in the product. That interest resulted in significant revenue in the fourth quarter. I could not be more pleased with the team work exhibited by our capital and implant teams to deliver these results in such a short period of time following FDA clearance. In addition, our clinical support and implant teams have done a tremendous job of turning these early installations into burgeoning robotics programs in the accounts that purchase this technology. Robotic technology has the potential to transform the way spine surgery is done and Globus intends to remain the leader in this endeavor. Our early results are very encouraging. Moving on to trauma, we are pleased to announce that we have now received FDA clearance for the 10 systems that we have identified as our core systems. As we noted in our last call, we have begun doing cases on a limited basis with one system. Our focus now is building the inventory required to fully launch all these systems and recruiting a world-class sales force. I'm happy to report great progress on both fronts. We expect to begin launching new systems throughout the first quarter with the full launch of all systems to clearly in Q2. Based on the surgeon feedback we received at the Orthopedic Trauma Association last fall, we believe we introduce solutions to advanced patient care in this market and the same way, we have advanced patient care in spine. Furthermore, the quality and quantity of highly skilled successful sales representatives who have joined our team is further endorsement of what we are doing and the potential of this opportunity. As we look forward to 2018 we expect to maintain our recent growth trends in the U.S. spinal implant business as we remain focused on new product launches, sales recruiting and development, Internationally, we anticipate our outstanding performance in Japan to continue and are encouraged by the early signs of a turnaround in other parts of the world. We remain bullish on the impact that our robotics technology will have on 2018 revenues and in trauma we expect to set the stage in 2018 for significant growth in 2019. Our non-GAAP EPS for the fourth quarter was $0.38 per share and improvement of 20.7% over the $0.31 we delivered in the fourth quarter 2016. Much of this improvement is due to robotic sales as EPS drag from emerging technology is strong from negative $0.03 on a non-GAAP basis to approximately breakeven. Given our plant increases and investments in trauma commercialization combined with the investments we are making for growth in robotics in 2018, we expect it will be 2019 before we see a significant profit contribution from emerging technologies. As Dan will outline more in the segment of the call, we were very pleased to see the tax reform legislation path, we try to reinvest the portion of the anticipated savings into our business but also expect a large contribution to our earnings in 2018. Our performance in the fourth quarter was an outstanding way to closeout a very significant year of change for Globus Medical, the CEO transition from David to me has gone very smoothly which is a credit to the strong leadership team we have in place and are passionate and dedicated employees all over the world. Furthermore, our foray into the field of robotic technology that's crossed a significant milestone with the commercial success we are experiencing. Our innovation and spinal implant technology remains vibrant and we have set the stage for new journey into the field of trauma. Well, we have accomplished a lot in the last 15 years our future looks even brighter. I will now turn the call over to Dan.

Thanks, Dave, and good afternoon, everyone. We are pleased with the strong financials in Q4 resulting from continued improvements in the U.S. business, significant international growth driven by Japan and strong uptake of the Excelsius robot by hospitals throughout the country. Full year sales were $636 million growing 12.8% as reported with one less selling day in 2017. GAAP net income was $107.3 million including a one-time tax reform charge of $11 million. Non-GAAP net income was $128.1 million delivering $1.31 fully diluted non-GAAP earnings per share and adjusted EBITDA of 35.6% and $107.8 million of free cash flow. Q4 sales were $176 million growing 16.1% as reported with GAAP net income of $24.4 million including a one-time tax reform charge of $11 million. Non-GAAP net income was $37.3 million delivering $0.30 fully diluted non-GAAP earnings per share and adjusted EBITDA of 34.9% and $31.4 million of free cash flow. Focusing on sales, U.S. sales for the quarter were $148 million 16.1% higher than Q4 2016. We continue to see year-over-year organic growth acceleration and sequential improvements in the U.S. business our sales growth resulted from the launch of the Excelsius robot coupled with stronger competitive rep recruiting in U.S. spine and other structural improvements we have made to the business that we believe will drive continued momentum in 2018. International sales for the quarter were $28 million, growing 16.2% as reported or 15.2% in constant currency. Gains were achieved through continued market penetration in Japan, increases in key distributor markets and improved momentum in the core international business. Some of the year-over-year revenue growth was attributable to the lower Q4 2016 comp. As Dave mentioned, Q4 2016 was the first full quarter of the Alphatec acquisition and during that period we were working through inventory supply and transition activities that limited sales in some markets. As a result, some distributor orders were shipped in Q1 2017 once enough inventory was received from Alphatec. Disruptive technology sales for the quarter were $90.6 million or 25.8% growth driven by Excelsius integrated and expandable spacers, CREO MIS and Biologics. Innovative fusion sales were $85.5 million or 7.3% growth with sales increases in QUARTEX, CREO and Alphatec international business. Turning to the rest of the P&L, Q4 gross profit was 76.8% compared to 74.3% in Q4 2016'. There were one-time charges in both Q4 2017 and Q4 2016, that impact year-on-year comparability. In Q4 2017, we extended the depreciable lives of instruments and cases from three to five years, which had a 100 basis points gain in Q4 2017 gross margins, while in Q4 2016 we recorded multiyear depreciation as scrap charges negatively impacting the Q4 2016 gross profit by approximately 170 basis points. Full year gross profit for 2017, remains strong at 76.3%, and full year 2018 gross profit is projected to be approximately 75%. Research and development expenses for the fourth quarter were $11.4 million or 6.5% of sales, compared to $13.6 million or 9% in Q4 2016. Q4 2016 contained a one-time $4 million acquisition related charge, excluding this one-time expense, operational R&D grew 18.4% versus prior year, driven by increased investments and emerging technologies in spine. SG&A expenses for the fourth quarter were $73 million or 41.4%, compared to $60.8 million or 40.1% in Q4 2016', the increase was primarily from investments at our U.S. spine sales force building the Robotic commercial teams and the expansion of our Japanese sales force. The GAAP net income tax rate for Q4 was 51.8% including a one-time $11 million tax reform charge for deferred tax asset re-measurement and forced foreign earnings repatriation. Excluding this one-time charge, the effective tax rate in Q4 was 30.1%, versus 33.4% for Q4 2016. The 330 basis points gain in the effective tax rate resulted from the reorganization of our domestic legal structure, foreign tax credits and the adoption of stock compensation accounting regulations in 2017. We project an effective tax rate for 2018 of approximately 23%. GAAP fourth quarter net income was $24.4 million, and GAAP diluted earnings per share were $0.25, non-GAAP net income was $37.3 million, and non-GAAP diluted earnings per share were $0.38, emerging technology has negatively impact the Q4 2017 EPS by less than $0.01 compared to approximately negative $0.05 in Q3 2017, and $0.03 in Q4 2016. Adjusted EBITDA for Q4 2017 was 34.9%, reflecting gains from the strong robotic sales partially offset by increased investments in emerging technologies since spine coupled with year-end adjustments and provisions. Full year 2017 adjusted EBITDA was 35.6%, full year 2018 is projected to be approximately 35%. We ended the quarter with $429.8 million of cash, cash equivalents and marketable securities, net cash provided by operating activities in Q4 was $44.8 million, and free cash flow was $31.4 million. Full year net cash from operating activities was $159.5 million, and free cash flow was $107.8 million, the company remains debt free. The company reaffirms guidance for full year 2018 sales of approximately $690 million, and non-GAAP diluted earnings per share of $1.50. We will now open the call for questions.

Thank you. [Operator Instruction] Our first question comes from Larry Biegelsen with Wells Fargo. You may proceed.

Hey, guys. Thanks for taking the questions and congratulations on a good quarter. Dan let me just start with the guidance, you did 16% organic in Q4, but you are guiding to about 8% for 2018, so can you talk a little bit about the cadence of growth you expect through 2018, and is the only thing that you expect to be softer the international growth you called out in from Q4 to Q1, is there anything, any other reason why you are expecting a deceleration from 16% to 8% and I have a couple follow-ups. Thanks.

Thanks, Larry. I would say there is a couple things with this. First is, you're looking at a spine market that everyone would probably triangulate to between 0% to 2%. So, to walk into the beginning of the year, as we are with our core and declaring that leader grow between two to three times market. It is I think a good step for us that way and I think it's just a natural approach. In addition, as you know we're layering on top emerging technologies primarily robotics with that and again having just one quarter of lunch under our belt we think is prudent to put out a strong growth well above the market but not necessarily continue forward with the fourth quarter growth rate. And as Dave called out and I also mentioned, we also had a different international comp and that as well gets factored into that move.

That's helpful. And then just for follow-up, what are you guys assuming for emerging technologies, I think the 2018 guidance? And David, could you provide some qualitative feedback on the robots that you are hearing from the field. What's the most attractive feature that people are gravitating too? What type of accounts are buying the robot or are these primarily Globus loyalist or physicians or surgeons who typically haven't used Globus implants in the past? Thanks for taking the questions, guys.

Hey Larry, I'm going to answer the first part then handed over to Dave. So, we have not split out individual parts of our guidance. I think there are ranges within all of our areas and we think some will overachieve and some may fall short but in total getting the 690 we have many different combinations to get there. So, we're going to guide as one total company and use those leavers appropriately to achieve that number.

And David on the…

Yeah, let me take the second part of your question there in terms of the response we're getting. It's been really gratifying today in terms of the installations that we've made, it's gone very smoothly. And to your question about what they find most attractive, I think it's a combination of factors, I think probably most importantly is the integration of robotics and navigation on a single platform. I think the different imaging modalities enables us to accommodate any investments or hospitals have made in terms of imaging equipment emplace. And I think finally the way we've integrated it with the Globus implant is very elegant workflow, the surgeons appreciate, and they don't disrupt them from the way they normally do the case. I think it's a combination of those factors that has had the appeal. And to the second part of your question, we're seeing interest from both Globus accounts as well as focus that we haven't don't business within this past and it's then pretty mixed up to this point. So, it does been a greatest well, we're starting to get some interest and time we've focus to, who haven't use this prior to know.

Thanks for taking the questions guys.

Thanks, Larry.

And our next question comes from Jonathan Demchick with Morgan Stanley. You may proceed, sir.

Hello. And thanks for taking the question. I wanted to follow-up a bit on Larry's questions really on the profile of some of the accounts that purchased the Excelsius. Specifically, you kind of mentioned it's been I guess split between Globus loyalist and another account. I was really trying to focus on those other accounts and what you've seen in terms of implants whole through from the system, but there are people that they really shifting more sales towards Globus now that they can optimize that using the robot? And as I have one quick follow-up, thanks.

So, Jon, we're seeing almost exclusive use of Globus implants for pedicle screws on those cases. The system just works much more efficiently with these screws.

Thanks. And just wanted to follow-up a bit on the added investments that are going to be made during into the emerging technology platform next year, where are these initially going to be focused? Do you think about $14 million of added revenue or added expense that you are going to place there? Is this predominantly on the sales force and marketing, is this more for getting trauma products off the ground? Is there any clarity there that would be helpful? Thank you.

I can take that Jon, it's across the board and for in terms of trauma, we're heavily ramping up the sales force at this point. And then on the imaging navigation robotics piece of the business, we are continuing to invest in product development there to enhance the current platform. We're looking at some follow-on products as well. And then we're expanding our capital sales force to meet the demand that we're seeing in the market.

Thank you very much.

Sure.

And your next question comes from Ryan Zimmerman with BTIG. You may proceed.

Great, can you hear me, okay?

Yes.

Thank you. So just want to follow up on the robotics questions a little bit as well. Not to throw water and what was the fantastic quarter, but should we think that there was some pent-up demand in the early start of the robotics commercialization. And just kind of how we should think about the run rate? And what the sales cycle looks like at this point, and then I have a couple of follow ups as well. Thank you.

Hey Ryan thanks for asking. So, couple of things, first of all fourth quarter for core Spine is that hockey stick effect and certainly we saw an experience that in the fourth quarter as you normally do. And we see something come out differently in Q1. So, I think that's normal. What we're thinking we see as well is we look to think about 40% of the capital demand occurs in the fourth quarter based on hospitals financial cycles and things like that as well. So, I don't know if we appropriate to take that fourth quarter performance to roll that forward. I think it is open the seasonality. And I think certainly there is some pent-up demand some interest that we process through. I don't think we have a true accurate measure to say what was new, what was pent up those type items. But nonetheless you would just think here there some of that there.

Appreciate the color on that. And then kind a follow up on your comments about sales reps. I mean you guys have had really robust hiring over the 2017 and really at the end of 2016. And just curious given your comments that you are going to continue to hire in 2018. How should we think about greenfield opportunities for reps and competitive territories potentially splitting? Those types of dynamic that may challenge some of your existing reps.

Now it's great question. Keep in mind that we're 7 shares in the U.S. And so, there is a lot of territory for us still to get into. A lot of penetration that we can do before we really start bumping into our own reps. And so certainly a few of those may occur somewhere, but the fact where 7 shares and share a take where it gives us a lot of opportunity to continue to convert or higher and drive into the market.

Thank you very much for taking the questions.

And our next question comes from Richard Newitter with Leerink Partners. You may begin.

Hi, thanks for taking the questions and congrats on the quarter. So, Dave, maybe the first one for you, at your Analyst Day a few years ago, you kind of talked about at a $1 billion in sales beyond 2020. You would expect the emerging technologies business combined between trauma and robotics to be about 15% in that or $150 million. And did you talk about OUS. being about 15% of sales. I'm just wondering with trauma now kind a just about to get going a robot clearly commercial. Any changes on the view of the aggregate emerging tech kind a revenue contribution as you approach that $1 billion mark? And then what about on the international side, I'm sure you weren't contemplating the Alphatec contribution at that point in time. So, any updates there would be helpful. Thanks.

Thanks Rich. We haven't really gone back and revise the projections there. But I don't think we're too far off. I think we're still low within range of hitting the emerging technology numbers. And while we didn't account for Alphatec, I think our organic growth has been less than optimal in the interim period. So, I think those numbers are still in the ballpark, we will probably be looking at that plan later on this year and maybe doing some update to it then.

Okay. That's helpful. And then maybe just one more, you've got 400, or just under $430 million of cash on the balance sheet here. I know Brian and the team there are constantly looking at the opportunities. So just can you give us any sense as to where you think the portfolio needs the most help potentially externally? And where and when we might see kind of that capital deployed? Thanks.

Yeah. Thanks Rich. And we're actually as we look at 2018, I refer to as an execution year, with what we have the opportunity in front of us with robotics and that we need to in trauma as an organization, I think our bandwidth is where it's going to be deployed on those two opportunities. So, I don't see as doing anything at all significant this year. We of course we're always looking at things and if something very opportunistic present themselves we'll take a look at it. But I think our best bet for this year is on ourselves basically.

Okay, thanks.

And our next question comes from Kaila Krum with William Blair. You may proceed.

Hey, guys. Thanks for taking our questions. So, I guess first off, a couple on robotics. I think you came back into the number of robotic systems in the quarter, but I guess can you help us understand first off how many accounts that you fill those systems. And then second, can you give any detail about the pipeline potential on this platform I mean how or when we should think about you scaling the system into trauma and extended into augmented realty - et cetera?

Yes, thanks Kaila. We have tried to give you enough information to figure out the revenue, but it's not our intention to get into detail on ASPs or units or that granular level just for competitive reasons. It's highly competitive market right now. And in terms of our expanding the pipeline late in this year and early into next year we will probably have some things to begin sharing with you in terms of where we are taking the platform.

Okay, that's helpful. And then I guess as we think about kind of that U.S. spine implant growth. I mean really strong performance in the quarter, you guys talked about a handful of contributors, but can you just parse out those specific drivers in the quarter and just how durable those drivers are into this year. Thanks.

Hey, thanks Kaila. I would concern them durable, I think it's really about going through 2016, addressing some of the items that we had and how we recruit, how retain providing newer products into the bag through those continues launches and then going out penetrating the market, I don't think there is anything that occurred as we continue to have sequentially improvements through 2017 that we would not see rolling into 2018 and continuing to be strong. We called out several of the products, but I would tell you just in every area we are doing really well, I mean expendables continue to grow, we feel like we are making inroads with other product cycling, pedicle screws, biologics et cetera.

Thanks, guys.

Our next question comes from Bob Hopkins with Bank of America Merrill Lynch. You may proceed.

Hi. Good afternoon. This is Travis [ph] on for Bob. So, one of the ways we are getting to your 2018 guidance is we are assuming $20 million to $25 million for the robot, $5 million to $10 million for trauma U.S. business grows in a more mid-single-digits U.S. high single-digits, low double-digits, I am just trying to think are we inflation of the ballpark of what you're thinking and your various scenarios that you talked about?

Yeah, I think you are reasonably close to those type of things Travis. One thing I'd say with trauma is keep in mind we are investing this year, we are hiring folks, we plan on launching. I wouldn't get carried away with it I think that's more of a 2019 story onward, I think will get some points on the board towards the second part of the year, but I wouldn't make it a bigger part of the guidance or anything you are modeling right now.

Okay, that's helpful. And on hiring plans for reps this year can you talk about that, and also some of the performance, some of the new reps that you put to your development program.

Sure. Our hiring plans are to exceed the record we set in 2017, so we continue to be active in that area in terms spinal implants. And then it's still on the early stages of the development program, but we are happy with the folks that we have in the program, we're happy with the way they are progressing through their experiential as well as their classroom learning, and we are just now starting to put them into some territories. So, it's little too early to say whether they're going to be effective in those territories, but all signs are very positive right now.

Okay, and then thinking about the cadence for 2018, are there any selling day differences in 2018?

There is one extra day for the overall year, I don't have the exact -quarterly split with me now, but we always take that offline and take a look through as you model.

Okay, great. That's all I had.

And our next question comes from Steve Lichtman with Oppenheimer. You may proceed.

Thanks. Hi, guys. Just wonder if any updated thoughts on the market overall, anything new you've heard from the field in terms of why they continue sluggishness we have been seeing in any potential for us to breakout of that from the things that you've heard on the ground.

Thanks, Steve. Do I will tell you, we don't have anything in particular to call out for this I am just looking at the public reported sales and looking at the changeover years, we don't have chance to get to a few healthcare conferences and talk to some investors and I think we are all saying we look at some move that make us between 0% to 2%, but if you talk about the actual lies we've not heard anything concrete that we would assign to us and push forward. Keep in mind again as a 7 share, we're share taker and regardless of the market being 0% or 5%, we plan to go out and capture more and more share and drive forward.

Okay. Thanks. And Dan I think you mentioned gross margin would be down a little bit in 2018, why would that be is that mix international or what are the other drivers are there?

Thanks for asking. There are couple things. One is guidance, so I am always going to go in that mid-70s as we declare and then look to see how that works and beats it, but I just going to give you some stronger rationale in that. I'd say growth in international business and Biologics coupled with some continued U.S. price pressure, price just gets down there I think is an overall modeling tool that's a conservative approach and a reasonable approach to use as we enter into 2018.

Thanks. And then just lastly what are your thoughts in terms of how bigger trauma sales force yield get to when you go to the broader launch in the second quarter and maybe how big you think the thing needs to be ultimately a few years out to compete against the couple of bigger player?

Yes, Steve as is our tradition, we were really not prepared to share the number of reps that we're higher, but we are we plan to compete head-to-head with the market leader, so we know we need to match up with them graphically and account by account, so it's going to be a significant investment.

Okay, got it. Thanks.

And our next question comes from Matt O'Brien with Piper Jaffray. You may proceed.

Hi, this is Will [ph] on for Matt, thanks for taking the questions. I guess one quick question regarding the robot, then I'll move on the Japan. But as far as what you've seen so far with Excelsius are there certain types of cases that surgeons are using the platform for specifically I know complex versus DeJohnette and patient versus outpatient et cetera. And then how should we think about that going forward in terms of your go to market strategy.

Well, thanks for the question. It's been surprising with the early days here. The variety of cases that we're seeing we're seeing lateral, posterior MIS, open DGEN, the form - it shows the versatility the system and also the surgeon's willingness to put it through its paces and really tested out and its performed well in every aspect.

That's great to hear. Thanks a lot. And the as far as Japan you know where you out with registering new products there and what type of contribution do you expect from those new products in 2018?

Hey, Will, this is Anthony. So, we've gotten so we break it two, so there is we have two products two Globus products that are registered and selling in Japan and then we've got another half a dozen or maybe a few more that are approved and then a slay of additional ones that are in the process of being submitted. Initially that we expect incremental revenue contribution to be fairly nominal as we switch to existing customers from the existing products that they are using today onto our systems is not opportunity to get premium pricing in Japan because pricing is set by the government so it's pretty uniform across systems. We do think that some of our advanced technologies and as Dave mentioned our expendable's as we get those in the market we are be able to drive additional revenue from those that but aren't prepared at this point to call out what we think the incremental contribution will be.

Okay, that's fair. And then just one last question, so are there any other new geographies, you asked in 2018 that we should think about in terms of driving growth?

I would think not at this point where we continue to go penetrate those markets both from our core international and the Alphatec acquisition. I don't think we have any plans or have in the site currently that would take us beyond those borders.

Great. Thank you very much.

And our next question comes from Young Lee [ph] with Barclays. You may proceed.

Hey, guys taking my questions. I guess the first question just on the utilization rates of the robotic system new place so far, can you maybe talk about how that compares to your internal expectation and also maybe talk about how many surgeons are needed from each account in order to get approved by the hospital admins?

Sure Young, in terms of the adoption as I mentioned in my prepared remarks what we call robotics programs which is really utilizing the technology in a robust way is already beginning so were very happy with the initial utilization of the systems and in all the accounts we're in. And then to your question the one spine surgeon can be enough to get it approved and it depends on their influence and the amount of volume that they might do in their hospital, but certainly multiple surgeons interested in and it's going to make it easier for them.

Okay, great. That's helpful. And I was just curious, you had a very successful launch, but are there any push backs on the robotic systems so far from either surgeons or hospital administrators?

Just to understand your question, you mean in terms of the installed units.

In terms of the selling process, like pricing or service or maybe anything like that.

As in most things price is always an issue and you always have to negotiate that, but I think we've demonstrated the value that this can bring to the practice into the hospital and we've been able to keep our pricing where we wanted it to be.

All right, great. Thank you so much.

Thank you.

And our next question comes from Kyle Rose, with Canaccord Genuity. You may proceed.

Hi, this is actually Brendon [ph] in for Kyle. My first question just sticking on robotics in terms of in your current accounts can you just speak to any early halo effects, so you might be seeing those accounts and then maybe to dovetail off of that just any color in terms of volume or implant arrangements that are tied to the robotic sales at this point?

Thanks Brendon, I am not sure I understand exactly what you mean by halo effect, could you clarify that.

Yeah, sure so, I just mean in terms of in accounts that you are placing Excelsius are you seeing a pull through in terms of other products in the entire portfolio?

I don't think at this point but that's obviously in the long term I think that's a real opportunity for us as were in those robotics cases and we have a full portfolio of compelling technology the opportunity work with the surgeons and continue to talk to them about the advantages our products can bring to the practice is huge and I'm confident our guys will be able to do that over the long-term.

Great, thanks. And just in terms of the capital reps and your core spine reps in the U.S. can you just talk to maybe what to what degree they interact with each other and maybe they can create leads for one another down the road? Thanks.

It is been fantastic I just really want to comment both groups for the way they're working together, we understand from other companies experience when they try to mix the capital group in with the with the strong implant team that there can be treefrogs [ph] if you will but our guys has done a fantastic job and they are generating leads for each other and I think this result in the quick start.

Thank you.

Thank you.

With no further questions. This concludes the Globus Medical fourth quarter and full-year 2017 call you. Thank you for your participation. You may now disconnect. Good night.