NUVA - NuVasive Inc. (NUVA) Q1 2023 Earnings Call Transcript
2023-05-10 22:15:09 ET
NuVasive, Inc. (NUVA)
Q1 2023 Earnings Conference Call
May 10, 2023 4:30 PM ET
Company Participants
Juliet Cunningham - Vice President, Investor Relations
Chris Barry - Chief Executive Officer
Matt Harbaugh - Executive Vice President and Chief Financial Officer
Conference Call Participants
Matthew Miksic - Barclays Bank
Vikramjeet Chopra - Wells Fargo Securities
Allen Gong - JP Morgan
Joshua Jennings - Cowan
Shagun Chadha - RBC
David Saxon - Needham
Matt Taylor - Jefferies
Matthew Blackman - Stifel
Presentation
Operator
Good day, ladies and gentlemen, and welcome to the NuVasive First Quarter 2023 Earnings Conference Call. I would now like to introduce your host for today's call, Ms. Juliet Cunningham, Vice President of Investor Relations at NuVasive. Please go ahead, Ms. Cunningham.
Juliet Cunningham
Thank you. Good afternoon, everyone. With me today are Chris Barry, Chief Executive Officer; and Matt Harbaugh, Chief Financial Officer. Chris will provide an overview of NuVasive's first quarter 2023 business results and trends as well as innovation highlights. Matt will review our detailed financial results and full year 2023 outlook, and then we'll host a question-and-answer session.
The earnings release, which we issued earlier this afternoon, is posted on the IR section of our website and has been filed on Form 8-K with the SEC. We have also posted supplemental financial information. As a reminder, this call is being recorded, and an archive will be available on the IR website later today.
Before we get started, I'd like to remind you that our comments during this call will include forward-looking statements, which are based on current expectations and involve risks and uncertainties, assumptions and other factors, which could cause actual results to differ materially from those expressed or implied by such forward-looking statements. The factors that could cause actual results to differ materially are described in NuVasive's news releases and periodic filings with the SEC. Except as required by law, we assume no obligation to update any forward-looking statements or information, which speak as of their respective date.
In addition, this call will include certain non-GAAP financial measures. Reconciliations of these measures to the most directly comparable GAAP financial measures are included in today's earnings release and the supplemental financial information, both of which are accessible on NuVasive's website.
And now I'd like to introduce Chris Barry.
Chris Barry
Thank you, Juliet. And good afternoon, everyone. Earlier today, we reported first quarter 2023 financial results. On today's call, I'll review our performance for the quarter. Share how our continued growth positions as well for the proposed merger and discuss the next steps in our pending combination with Globus Medical. After my remarks, Matt will share additional financial details on the quarter. NuVasive delivered first quarter 2023 net sales of $307.7 million, an increase of 5.8% on a reported basis, or 7.7% on a constant currency basis compared to the prior year period. Our company's performance reflects increased procedure volumes and continued surge in demand for our innovative portfolio.
In particular, our US business had a strong quarter, including approximately 9% growth and US funnel hardware led by thoracolumbar and more than 20% growth from cervical for the sixth straight quarter. In our International business, we achieved 8.3% growth on a constant currency basis compared to the prior year period. This performance was driven by core spine resulting in double digit growth in Europe and solid growth in Asia Pacific offset by reimbursement pricing headwinds in Japan. We remain focused on the three fundamentals of our growth strategy, core growth, intelligent surgery, and market opportunities, while improving our financial profile over time.
Starting with core growth, we have significant opportunities in key procedural segments that we continue to target with our 360 portfolios. X360, C360, P360 and Complex. Our innovation gives us a strong competitive position to extend our leadership in anterior and take share in segments where we historically have been underrepresented. In anterior, we continue to celebrate 20 years our flagship XLIF procedure, in five years of our X360 procedure. As the leader in lateral with more than 500 peer reviewed publications and more than 60 products launched, XLIF continues to demonstrate superior and more predictable outcomes than traditional spinal fusion procedures. Just as we proceed to realize XLIF, we're also taking our know-how and experience and applying it to additional opportunistic segments including cervical, posterior and complex.
In Cervical, our C360 portfolio continues to deliver well above market growth. Not only has the Simplify Cervical Disc consistently performed, but we saw impressive year-over-year growth in the entire C360 portfolio. The launch of Reline Cervical is driving double digit growth within the posterior cervical fusion subsegment, the additional occipital system enhancement has been receiving positive feedback since its launch in the fourth quarter of 2022. Following a targeted commercial launch in Japan with the Camber Laminoplasty System, we recently introduced Camber in the US and are receiving positive feedback in the beta launch. This is a prime example of our globalization strategy, providing prioritized regional markets with the differentiated solutions they need to compete locally, and identifying how to scale those unique solutions to additional markets.
We continue to see definitive procedural pull through in hospitals that have adopted Pulse. While our surgeons can use Pulse in 100% of spine procedures. We're committed to innovating the platform to provide more intelligent surgery and improve clinical operational and financial outcomes to better support our customers and patients. The next system level software release for Pulse has received positive feedback from our initial sites, giving surgeons and their OR teams enhanced line of sight for navigation, new instrument compatibility, improved remote support and services, and a further streamline OR team experience. The commercial rollout will begin this summer.
In our NuVasive Specialized Orthopedic business, recent achievements include the precise system received pediatric clearance in the US and the precise bone transport system was commercially launched in several countries in Europe. These are key milestones for NSO. And with the support of more than 100 peer reviewed studies, the business is well positioned for long term growth.
Turning to our plan combination with Globus Medical, we are pleased that both NuVasive and Globus Medical shareholders approved a proposed merger to create an innovative global musculoskeletal company. As demonstrated by the overwhelming support of the merger by both company shareholders, the pinning combination greatly accelerates our near and long term strategy. With a presence in more than 50 countries and supported by more than 5,000 employees, the new organization will advance patient care around the globe and deliver on our commitment of prioritizing compelling market opportunities.
As it relates to the antitrust approval, we recently received a SEC request from the US Federal Trade Commission regarding our HSR filing. As a result, the expected close of the merger has shifted from mid-2023 to the third quarter of 2023. While the timing may have changed slightly, our commitment to the deal is steadfast. And our belief that this merger will benefit our stakeholders remains unchanged. As a reminder, this complementary combination expands our reach to surgeons and patients around the world with limited commercial overlap in key [Tech Difficulty] create a comprehensive portfolio of innovative spine and orthopedic technologies, furthers our commitment to meaningful innovation, expands our operational capabilities and creates a strong financial profile and value creation opportunity for our shareholders.
We remain confident in the future vision of our combined company and the opportunity to provide superior service to our surgeon and hospital partners to advance patient care.
Now, I'll turn the call over to Matt.
Matt Harbaugh
Thank you, Chris. And good afternoon. I'm going to cover our first quarter highlights and provide color on our latest thinking around the full year 2023 net sales guidance range, which is unchanged from our guidance provided on February 22. Our detailed financial results have been provided in today's press release and supplemental information. During my remarks, I will be discussing both GAAP and non-GAAP measures. Please see our press release for GAAP to non-GAAP reconciliations. Unless otherwise noted, all comparisons are to the prior year period. We had a strong start to the year delivering worldwide net sales of $307.7 million in the first quarter, a 5.8% increase as reported, and a 7.7% increase on a constant currency basis. Foreign currency negatively impacted our net sales performance by $5.6 million during the quarter.
International net sales for the first quarter were $71.9 million, which was relatively flat to the prior year period on an as reported basis, and an increase of 8.3% on a constant currency basis. From a regional perspective, international growth was led by core spine net sales in Europe, and solid growth in Asia Pacific. Growth in Asia Pacific was primarily driven by Australia and New Zealand, which was partially offset by reimbursement pricing headwinds in Japan. Latin America grew modestly with Brazil and Colombia leading the way.
Turning to US net sales. Let me provide key highlights by product line. US final hardware net sales for the first quarter of 2023 were $170.1 million, representing a 9.3% increase. Our cervical business achieves net sales growth of greater than 20% for the sixth consecutive quarter, led by the C360 portfolio, specifically the Simplify Cervical Disc. US Surgical Support net sales were $65.7 million, an increase of 3.3%. The NuVasive Clinical Services grew nicely, primarily driven by higher case volumes. Biologics net sales declined slightly year-over-year due to case mix.
Moving to operating results, first quarter non-GAAP gross profit was $221.3 million, compared to $212.2 million in the prior year period. Non-GAAP gross margin as a percentage of net sales for the first quarter of 2023 was 71.9%, a decrease of 110 basis points compared to 73% in the prior year period. The year-over-year decline was primarily driven by an increase in excess and obsolete inventory related reserves. Pricing pressure remained consistent with historical levels in the low single digit percent range. First quarter 2023, non-GAAP operating expenses increased 4.7% to $186.6 million, compared to $178.2 million in the prior year period. The increase was mainly driven by variable expenses associated with net sales growth and higher depreciation costs from significant investments made in surgical instrument sets last year to deliver on our long range targets.
Non-GAAP operating margin during the first quarter of 2023 was 11.3%, a decrease of 40 basis points compared to 11.7% in the prior year period. The year-over-year decrease was primarily driven by the decrease in gross margin as discussed earlier. Non-GAAP other income and expense for the first quarter was $2.1 million of expense, compared to $2.6 million of income in the prior year period. The year-over-year change was primarily due to unrealized foreign currency losses in the first quarter, compared to the favorable impact of unrealized foreign currency gains in the prior year period.
Non-GAAP tax expense for the first quarter of 2023 was $7.9 million, compared to $8.4 million in the prior year period. Our first quarter 2023 effective tax rate was 24.1% compared to 23% in the prior year period. For the first quarter of 2023, we reported GAAP net loss of $1 million, or diluted loss per share of $0.02, compared to GAAP net income of $19.2 million, or diluted earnings per share of $0.35 in the prior year period. Included in Our GAAP results were net unrealized losses from foreign currency exchange fluctuations, and incremental merger related expenses.
On a non-GAAP basis, we reported first quarter net income of $24.8 million, or diluted earnings per share of $0.47, compared to non-GAAP net income of $28.2 million, or diluted earnings per share of $0.54 in the prior year period. The year-over-year change was largely driven by unrealized foreign currency gains in the prior year period, which contributed $0.10 to diluted earnings per share in Q1 of 2022.
Turning now to the balance sheet, we had cash and cash equivalents of $181.2 million as of March 31, 2023. During the first quarter, we made our first net sales milestone payment of $56.5 million related to the acquisition of Simplify Medical. Free cash flow during the first quarter was negative $33.2 million, compared to negative $26.7 million in the prior year period. As a reminder, the first quarter is historically the lowest free cash flow quarter of the year, and typically negative. Additionally, a portion of our contingent consideration payments, which includes the net sales milestone payment, for the Simplify Medical acquisition is presented within cash from operations. Absent that portion, free cash flow would have been negative $7.7 million for the quarter, representing a $19 million improvement over the prior year period principally due to stronger collections in the United States.
As our $450 million 2023 convertible notes mature on June 1, 2023. We plan to use a combination of cash on hand and are currently undrawn $550 million credit facility to satisfy that commitment.
Turning to the full year, following the announcement of our pending merger with Globus Medical, we provided net sales guidance for 2023 when we reported our full year 2022 results in late February. At this time, we continue to expect full year standalone worldwide net sales growth of between 6% to 8% on both a reported and constant currency basis compared to the prior year. As we sit here today, we expect the impact of foreign currency exchange to be relatively neutral on a full year basis, with greater impact in the first half of the year. This expectation is based on foreign currency exchange rates as of April 30, 2023, and is consistent with our full year net sales guidance. We're excited to progress toward our plan merger with Globus Medical, which is expected to close in the third quarter of 2023. We remain focused on maintaining business continuity, and advancing integration planning to ensure a successful combined company.
Operator, we are now ready to open the call for questions.
Question-and-Answer Session
Operator
[Operator Instructions]
And the first question will come from Matt Miksic with Barclays.
Matthew Miksic
Hey, good evening. And thanks for taking our questions. And thanks again, thanks for putting up such a strong quarter here, looks like you're going out on a high note if everything kind of comes together. So I guess on that subject, most folks, I think heading into results, were expecting that there would be some amount of distraction, maybe even some attrition because of the announcement. So we'd love to get your thoughts on what you've seen so far. And if there were such those kinds of effects how they may have impacted the results for the quarter, which ended up being quite strong anyway. And then I have one more to follow up, if I could.
Chris Barry
Yes, Matt, thanks for the question. Yes, we're very proud of how the organization handled what has been, anytime you have a change that we've been talking about, you're going to have some level of distraction. But I would say based on the results, I think the team's doing a really nice job, biting through the distraction and really staying focused on things that we can control. As far as attrition goes, it's been fairly normal. We were actually net positive on the competitive hiring front. And from an overall attrition perspective, we're in line with what we've been in previous quarters. So all things considered, I think the organization is focused, I think they see the value in the combined density. Clearly, there's going to be questions, I think we're being, we're taking a lot of time communicating being as transparent as humanly possible. Obviously, we're in a pre- integration phase. So for us, in many cases, in many situations, it's business as usual, we're going to go out and continue to execute our plan, deliver the strategies that I articulated, and in the background plan for this combination that we're excited about.
Matt Harbaugh
Yes. Matt. I also interpreted in your question you're asking about the P&L a little bit. So what I would say is there wasn't material savings in there from attrition, that would be an outlier as a result of the announcement. It would have been in line with what we've seen historically, in previous years in the first quarter. So no savings there. I know, we had a BEAT and up income and EPS, I'd say the primary driver of that was the strength in the top line, to your point earlier.
Matthew Miksic
Yes, no, that's the way it came in, relative to our estimates. And I guess, just geographically, if you could talk a little bit about the strengths, weaknesses, obviously very strong. Most of the strength leads to our estimates was in the US. Maybe any lingering dynamics or ebbs and flows in some of your overseas geographies that are worth commenting on?
Chris Barry
Yes, good question. I'm glad you're asking. We continue to see strong growth in our global business. The one thing that may not have come out is we saw, we obviously had strength in Europe, good growth in LATAM and in Japan, we've had reimbursement related challenges. So if you actually look at our volume growth in Japan, and you sort of factor that in normalized that our international business still growing double digits, so we're excited about the results we continue to see. And we think a durable growth engine for us over time, we'll have to analyze some of the reimbursement challenges in Japan. It's not specific to us, it's their governmental pricing or reimbursement strategy that they apply. And that's hitting our pedicle screw business over the course of the last couple quarters into the next couple quarters. We will analyze out over the course of the year. So that'll save a little bit of drag on international business, as because that's our second largest market, but the underlying strength of Japan is still there for us. We'll just have to get through the next couple of quarters.
Operator
The next question will come from Vik Chopra with Wells Fargo.
Vikramjeet Chopra
Hey, good afternoon. And thanks for taking the questions. And congrats to a strong start to the year. So just to for me, the second request from the FTC that you received, I guess, can you provide an update? And what can you share on what the FTC is looking for specifically, and then had a follow up? Thank you.
Chris Barry
Thanks for the question, Vik. We did receive a second request. It's, I will just say this that it's not overly surprising, and not necessarily unexpected. Obviously, we were hopeful that we will be able to complete the HSR work without a SEC request. But we will complete the work. Both companies are very committed. And we're collaborating closely to ensure that we fully comply with the FTC and their SEC request. It's broad, there's not, there's nothing overly specific about it. It's a broad request for additional information that we'll be putting together next several weeks. So nothing out of the ordinary, nothing really overly specific. nothing overly surprising, but obviously some work to be done here. So we need to rally and make sure we comply, and we're trying to do so.
Vikramjeet Chopra
Great. And then just on my follow up. I think you had mention that there was strong start to procedure volumes. Obviously, that sort of part related to the Q1 strength. How are we thinking about Q2 after such a strong start to the year. Thank you.
Chris Barry
Yes, I mean, it's a little, the good news is it feels like and I've talked about this before, coming out of last year, we saw, we didn't see the high spike in December that we normally see. And we, of course finally didn't see the valley that we normally see in January. So we had strength in January. So I guess the thing that we're looking for is the seasonality and what that reflects in the numbers as we look at this year. And we'll see any seasonality, the volumes, I think are better than last year, clearly. And I think that will continue to stabilize. I don't know if they'll increase with any because the bigger question is, are we seeing a trend of increasing volume? Are we just seeing a return to pre COVID volumes? And so far, I'll just say we've seen returned to pre COVID volumes. We'll have to wait and see what kind of transpires here over the next several weeks in the quarter. But generally speaking, I would say the market, at least in the spine, I feel like the volumes have strengthened over the course of the last few quarters. We'll have to see how that turns out over the next couple.
Operator
The next question will come from Allen Gong with JP Morgan.
Allen Gong
Hi, thanks for the question. Just a quick follow up on that. We've definitely seen other areas of orthopedics, also posting really strong first quarters, there's been some discussion on backlog recovery. I know this is something that's really, really hard to quantify at all. But are you seeing any signs that there was maybe been a little bit of a pickup in backlog recovery now that staffing is a little bit under control? Any comments you have on that. And then I'll just throw in my follow up here as well. When we think about what you're seeing in terms of the capital environment, you're definitely a lot less exposed to some of your peers, but sounds like Pulse is still seeing very good demand. Glad to see this, that expansion coming up as well. Just about anything you're hearing on capital demand, demand for Pulse. Thank you.
Chris Barry
Yes, thanks for the questions, Allen. So this is a probably an opinionated answer to your question on volume recovery or pent-up demand. I mean, generally speaking, or maybe I should say just theoretically, I believe there is some pent-up demand. There's some level of patients out there that have forgone treatment for whatever reason over the last, let's just say over the last several quarters, can even say the last couple of years. The ability for the market to rebound I still think it's challenged. I've had a conversation with one of our board members that has participated on the healthcare side and he was just commenting on the fact the hospitals are still challenged, they've gotten much better, but they're still challenged. I think they are trying to push through profitable procedures, their ability to accelerate above and beyond a normal throughput is probably still challenged in many cases. So I think you are seeing some underlying strength in the market, from a volume perspective from some level of pent-up demand. I don't -- I also would say that I don't think that you'll see a bolus of pent-up demand come through in a given period of time, I think, if anything, I look for there to be stable strength and volume over the next several quarters, and to potentially alleviate or diminish some of that pent-up demand that may be out there.
As far as your capital question. It's an interesting time, we had a lot of -- we had a lot going on in our business, we had the announcement of Globus and that's coming together. When you have those types of announcements, obviously, your customers that are going to buy Pulse may hit a pause button to just double check with us. But the good news is, as you said it there's we still have a strong pipeline. I think the value proposition is resonating. For those reasons, it's hard for me to comment on the capital market in general. I've heard and read things as you will likely have of some level of capital deceleration or capital spending deceleration at the hospital level. I can't really point a finger to that from our businesses, I don't think we have a big enough capital business today. But for Pulse, demand is still good, pipeline is still strong. We're working through with our customers to make sure they're competent in the long term strategy and how that fits in with the merger, in specifics to Pulse but we'll continue to work through it.
Matt Harbaugh
Yes, Allen, I totally agree with what Chris just said the only thing I would add to it, broad brush against the business is I highlighted in the prepared remarks, just how strong our cash collections were. And we get asked the question, a fair bit around, are you getting paid? Are you worried about your DSOs, things like that, and our cash flow in the first quarter was really strong, which is coming in right on time, if you will, because we've got the $450 million convert coming up. But I was really happy to see the cash collections so strong, despite the fact that some of these hospitals are really struggling to get through right now.
Operator
The next question will come from Joshua Jennings with TD Cowen.
Joshua Jennings
Hi, good afternoon. Thanks for asking the questions. Wanted that too just on the merger, like we've talked about this Chris, and Matt, over the last couple of months, but just with NuVasive, having 40% share in the lateral segment, there's been some concerns that there would be some regulatory scrutiny there. You've described plates, interbody cages, pedicle screws, instruments were used in many spine procedures outside of lumbar interbody, fusion, lateral lumbar and lateral fusion, but just wanted to get your sense of whether there's a risk there just with that share position debates because I don't think Globus, its, close their lateral share position.
Chris Barry
Yes, I mean, clearly, we're proud of our focus in XLIF. And we've pioneered a procedure and we've just celebrated 20 years of excellence and five years of X360. and so we'll continue to drive that procedure. I talked about in my prepared remarks about the clinical evidence surrounding that procedure. But when you really back up lateral as a subsection of anterior which I've talked about, which is a subsection of thoracolumbar, which includes posterior. And when you start adding all these things together, we think that we relatively have a small share, or a smaller share of the broader thoracolumbar spinal fusion market. So I think it's contextual, we've pioneered lateral, but surgeons still do XLIF, and that's a good procedure as well. So for those reasons, we feel confident that the data will show that this is not and not competitive in any way. It's a very competitive market. That quite frankly lacks a lot of standardization. So we'll continue to drive and lead in lateral but it's a big market with a lot of different approaches, a lot of different products. And for those reasons we feel like we'll be successful in showcasing our opposition to the FTC.
Joshua Jennings
No, thanks and welcome, you do that. And then just wanted to get your views on the combined company close NuVasive kind of cash flow generation potential, balance sheet strength and then potential to be opportunistic on the M&A front, once all everything's said and done, and this merger is closed, thanks for taking the questions, guys.
Chris Barry
Yes, listen, it's one of the key areas that I'm excited about. If you recall, at our Investor Day in October, we talked about core growth, we talked about intelligent surgery, we talked about market opportunities. And talking about market opportunities, I was somewhat constrained on what I could do individually. And so when you put these two companies together, I mean, you're talking a two plus billion dollar entity, generating the profit margins, that Globus has done a really great job at delivering. And once you get through the first couple of years of this, then you started looking at the free cash flow generation and the ability with their balance sheet, which I'll remind you is debt free, generating a lot of cash allows a lot of flexibility. And in really removes those restrictions or constraints. And that's why I think it's important and exciting to talk about this, hey, we are going to continue to lead in spine collectively. But the ability to be a global musculoskeletal company becomes within reach for the new entity. So for those reasons, I think it makes a lot of sense why these two companies come together and obviously, potentially change the competitive dynamics. So where we can play today will continue to participate and lead in spine, but the opportunity to do more, treat more patients I think is a byproduct of the merger.
Operator
The next question will come from Shagun Chadha with RBC.
Shagun Chadha
Great, thank you for taking the question. One on guidance and one on just integration planning here. I was hoping you could put a finer point on guidance, you've maintained that it implies a step down for the balance of the year. Prior to today's call, a consensus was modeling about $327 million in sales and $0.56 in EPS. Is that a reasonable place to be? Or should we be higher given Q1 results? Or how should we think about the backlog? It sounds like there could be kind of a drop off in volumes post Q1, as the backlog is realized. And I do believe that spine tends to have less of a backlog given that it's a high pain burden. So could you just help us with the puts and takes there?
Matt Harbaugh
Yes, Shagun. Thanks for the question. What I would say is, look, we are really pleased with the results in the first quarter. The strength on the top line was impressive. And I want to do a shout out to the team and thank them for all their efforts with some noise and distraction, as Chris talked about earlier. But I would say is, as I look at the consensus, on a full year basis, I think the analysts are pretty close to pretty close as far as top line. I think the second quarter probably is just a tad hot. But we definitely plan on doing better than what we did in the first quarter.
Shagun Chadha
I got it. And just as a follow up, I know there's a big focus on the FTC process right now. But I was just wondering if there are any steps being taken at the moment integration planning to minimize potential dyssynergies down the road? Just anything to touch on? Thank you for taking the question.
Chris Barry
I would you say that what we can reasonably do without, obviously gun jumping or anything of that nature we're working through, we've got a fully staffed integration management office on both -- from both companies that are working closely together. Clearly, we still are operating the companies completely independently. But we've got an eye on how to bring the companies together and maximize our success out of the gate. So to the extent that we can make those decisions, we will, we clearly have the work to do with the HSR process, which will be our focus. But to be sure, a lot of people are working really hard to ensure that we hit the ground running as we do come to a close and ultimately create this new company we're talking about.
Operator
The next question will come from David Saxon with a needle please go ahead.
David Saxon
Hi, Chris. Hi, Matt. Congrats on the quarter. And thanks for taking my questions. Maybe to start in surgical support. You called out MCS growth. So can you just remind us the size of that business and the margin profile and how you envision it fitting into kind of a longer term story?
Matt Harbaugh
Yes, so for MCS, you should think $900 million range plus or minus. And what I would say is, we did have a good first quarter there. We did have some benefit. I'd say some tailwinds because we did have some modest COVID impact last year that we didn't see this year. But all-in-all, we are pleased with the results side of the business and the team performed well.
Chris Barry
As far as longer term, listen, it's been a part of our strategy as we bring the two companies together over time, we'll have to look across the entirety of the enterprise. And let the new, the company really look at where it fits in. But for now, it's been a strong performer for us for the last couple quarters. And we look forward to that over the next of year as well.
David Saxon
Okay, got it. And then Matt, I think, or maybe it's Chris, I forgot in the script, you noted pull through in hospitals that have adopted Pulse. So I guess first, any way to quantify that? And then number two, just generally speaking, how's that launch going? Is it still in kind of the friends and family stage? Or if you kind of rolled that out more broadly? Thanks so much.
Chris Barry
Yes, I would just look at a premium on top of our growth. So where you see Pulse units installed, we're seeing in certain situations, the trend is getting closer to the double digit range of growth, in some cases exceeding that depending upon the mix going in. I would say that we're moving past the friends and family. The current pipeline reflects a broader swath of customers and potentially some newer folks to NuVasive. So we're excited, it's clearly something that we continue to focus on. It's a build strategy, meaning we're going and I've said this all along, we're going at a very deliberate pace, because we want to make sure that we not only sell the product, but install the product effectively, service the product as needed. Support the product as need it. And for those reasons, we're continuing to be diligent in our efforts, but all things considered the value proposition seems to resonate. We're getting good feedback from our customers. We're on track, as I said before, with software releases that continue to enhance the system. And we're seeing good pull through, as I talked about, as well. So all those things are going in the right direction. We'll continue to update as we move forward.
Operator
The next question will come from Matt Taylor with Jefferies.
Matt Taylor
Hey, thank you for taking the question. And congrats on the good quarter. I was just wondering if you could maybe speak a little bit more about what you can do in terms of integration preparation. And I'd love to hear more about the specific kinds of communications that you're giving to stakeholders in the salesforce to help them understand why this is such a good proposition to combine the two companies.
Chris Barry
Yes, we, I mean, there's a lot of things that we can plan, in many cases can't execute those things as we talked about, but to be clear, even when [inaudible] brings up the HSR work, there's still a lot of integration planning to happen, whether we were to close tomorrow or close six months from now, the work still has to be done. So there's got to be a lot of work that we do, in order to truly integrate the two companies. As far as the field and our channel, the thing that seems to resonate with everyone is two things really that we did our homework, and we don't see a lot of overlap at the customer level. That's one thing and that was a very positive and the messaging that you've heard from both sides is we want to keep all of our channels, we want to keep all of our commercial folks, there's work to be done for everyone. The second thing is just the compelling portfolio. You look at the two companies complementary portfolios. It just creates I think a game changing portfolio that just creates a lot of value, allows our channel to continue to create value for the customers and ultimately, there are our customers continue to be treated, and better treat more patients. So those two things, little geographical overlap and compelling portfolio opportunity.
Operator
The next question will come from Matthew Blackman with Stifel.
Matthew Blackman
Good afternoon. Thank you for taking my question. Matt, I think on biologics, I heard you mentioned case mix headwinds. So just a couple of quick ones there. Are you seeing that same case mix headwind in the hardware business? And then number two beyond case mix, are you seeing any shift in hospital purchasing patterns in biologics in general, maybe shifting away from higher ASP products? Thanks.
Chris Barry
Yes, I mean, it's, we're still trying to get a complete understanding of what we're seeing with our biological business, but clearly, we are seeing the shift from higher price products down to lower priced products. So there is going to be some continued pressure there. The mix on the biologics was really a reflection of what we talked about in the past, which was some of the complex cases use a lot of biologics. I think that's sort of analyzing out. So there's still a bit of a drag in that business that we need to continue to track. So something we're working on, it was a little bit softer quarter than I would expect it in biologics compared to what we did with the rest of the portfolio. So we've got some work to do there.
Matt Harbaugh
Yes, I would just highlight too, hardware was really strong, as Chris said in the prepared remarks and one of the questions earlier, so we are really pleased with the performance in the US market specifically.
This concludes our question-and-answer session. I would like to turn the conference back over to Mr. Chris Berry, Chief Executive Officer for any closing remarks. Please go ahead, sir.
Chris Barry
Thanks, Chuck. And thank you all for joining us on our Q1 earnings call today. As we mentioned earlier, we're making great progress on the plan combination and working with Globus toward an expected closing in the third quarter of 2023. We believe that this merger will create a leading global musculoskeletal company that is well positioned for growth and success in the years ahead. I look forward to speaking with you all next quarter. Thank you.
Operator
The conference is now concluded. Thank you for your participation. You may now disconnect.
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NuVasive, Inc. (NUVA) Q1 2023 Earnings Call Transcript