Globus Medical Reports First Quarter 2021 Results

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Tuesday, May 4, 2021 - 9:15pm
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Globus Medical
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AUDUBON, Pa., May 04, 2021 (GLOBE NEWSWIRE) -- Globus Medical, Inc. (NYSE: GMED), a leading musculoskeletal solutions company, today announced its financial results for the quarter ended March 31, 2021.

  • Worldwide net sales were $227.3 million, an increase of 19.3% as compared to the first quarter of 2020

  • GAAP net income for the quarter was $45.3 million, or 19.9% of net sales, which is an increase of 74.7% as compared to the first quarter of 2020

  • GAAP diluted earnings per share (“EPS”) was $0.44 and non-GAAP diluted EPS was $0.49

  • Non-GAAP adjusted EBITDA was $81.0 million, or 35.2% of net sales

“We got off to a great start in the first quarter, continuing the momentum we established in 2020,” said Dave Demski, President and CEO. “On a day-adjusted basis, our U.S. Spine business grew by almost 22% over last year, as we continue to take meaningful market share. Pull through from robotics; contributions from new product introductions; a resurgence in our biologics business; and competitive recruiting were all factors driving growth. Enabling Technologies revenue increased 86%, as surgeon recognition of the clinical superiority of our robotic technology produced back-to-back quarters of strong year-over-year growth.”

Worldwide net sales for the first quarter of 2021 was $227.3 million, an as-reported increase of 19.3% over the first quarter of 2020, and an increase of 18.7% on a constant currency basis. U.S. net sales for the first quarter of 2021, including robotics, increased by 22.0% compared to the first quarter of 2020. International net sales for the first quarter of 2021 increased by 5.9% over the first quarter of 2020 as-reported and increased 2.1% on a constant currency basis.

GAAP net income for the first quarter of 2021 was $45.3 million, an increase of 74.7% over the same period last year. GAAP diluted EPS for the first quarter of 2021 was $0.44, compared to $0.25 for the first quarter 2020, an increase of 74.2%. Non-GAAP diluted EPS for the first quarter of 2021 was $0.49, compared to $0.29 in the first quarter of 2020, an increase of 66.9%.

The Company generated net cash from operating activities of $63.6 million and non-GAAP free cash flow of $49.9 million during the first quarter of 2021. Cash, cash equivalents and marketable securities were $838.4 million as of March 31, 2021. The Company remains debt free.

2021 Annual Guidance

The Company today increased guidance for full year 2021 net sales from $880 million to $925 million and non-GAAP diluted earnings per share of $1.83 to $1.89.

Conference Call Information

Globus Medical will hold a teleconference to discuss its first quarter 2021 results with the investment community at 4:30 p.m. Eastern Time today. Globus invites all interested parties to join the call by dialing:

1-855-533-7141 United States Participants
1-720-545-0060 International Participants
There is no pass code for the teleconference.

For interested parties who do not wish to ask questions, the teleconference will be webcast live and may be accessed through a link on the Globus Medical website at www.globusmedical.com/investors.

The call will be archived until Thursday, May 13, 2021. The audio archive can be accessed by calling 1-855-859-2056 in the U.S. or 1-404-537-3406 from outside the U.S. The passcode for the audio replay is 991-6828.

About Globus Medical, Inc.

Globus Medical, Inc. is a leading musculoskeletal solutions company based in Audubon, PA. The company was founded in 2003 by an experienced team of professionals with a shared vision to create products that enable surgeons to promote healing in patients with musculoskeletal disorders. Additional information can be accessed at www.globusmedical.com.

Non-GAAP Financial Measures

To supplement our financial statements prepared in accordance with U.S. generally accepted accounting principles (“U.S. GAAP”), management uses certain non-GAAP financial measures. For example, non-GAAP Adjusted EBITDA, which represents net income before interest income, net and other non-operating expenses, provision for income taxes, depreciation and amortization, stock-based compensation expense, provision for litigation, acquisition related costs/licensing, and acquisition of in-process research and development, is useful as an additional measure of operating performance, and particularly as a measure of comparative operating performance from period to period, as it is reflective of changes in pricing decisions, cost controls and other factors that affect operating performance, and it removes the effect of our capital structure, asset base, income taxes and interest income and expense. Our management also uses non-GAAP Adjusted EBITDA for planning purposes, including the preparation of our annual operating budget and financial projections. Provision for litigation represents costs incurred for litigation settlements or unfavorable verdicts when the loss is known or considered probable and the amount can be reasonably estimated, or in the case of a favorable settlement, when income is realized. Acquisition related costs/licensing represents the change in fair value of business-acquisition-related contingent consideration; costs related to integrating recently acquired businesses, including but not limited to costs to exit or convert contractual obligations, severance, and information system conversion; and specific costs related to the consummation of the acquisition process such as banker fees, legal fees, and other acquisition related professional fees, as well as one-time licensing fees. Acquisition of in-process research and development represents the expensing of acquired assets with no alternative future use and related fees.

In addition, for the period ended March 31, 2021 and for other comparative periods, we are presenting non-GAAP net income and non-GAAP Diluted Earnings Per Share, which represent net income and diluted earnings per share excluding the provision for litigation, amortization of intangibles, acquisition related costs/licensing, acquisition of in-process research and development, and the tax effects of all of the foregoing adjustments. The tax effect adjustment represents the tax effect of the pre-tax non-GAAP adjustments excluded from non-GAAP net income. The tax impact of the non-GAAP adjustments is calculated based on the consolidated effective tax rate on a GAAP basis, applied to the non-GAAP adjustments, unless the underlying item has a materially different tax treatment, in which case the estimated tax rate applicable to the adjustment is used. We believe these non-GAAP measures are also useful indicators of our operating performance, and particularly as additional measures of comparative operating performance from period to period as they remove the effects of litigation, amortization of intangibles, acquisition related costs/licensing, acquisition of in-process research and development, and the tax effects of all of the foregoing adjustments, which we believe are not reflective of underlying business trends. Additionally, for the period ended March 31, 2021 and for other comparative periods, we also define the non-GAAP measure of free cash flow as the net cash provided by operating activities, adjusted for the impact of restricted cash, less the cash impact of purchases of property and equipment.  We believe that this financial measure provides meaningful information for evaluating our overall financial performance for comparative periods as it facilitates an assessment of funds available to satisfy current and future obligations and fund acquisitions.  Furthermore, the non-GAAP measure of constant currency net sales growth is calculated by translating current year net sales at the same average exchange rates in effect during the applicable prior year period.  We believe constant currency net sales growth provides insight to the comparative increase or decrease in period net sales, in dollar and percentage terms, excluding the effects of fluctuations in foreign currency exchange rates.

Non-GAAP adjusted EBITDA, non-GAAP net income, non-GAAP diluted earnings per share, free cash flow and constant currency net sales growth are not calculated in conformity with U.S. GAAP.  Non-GAAP financial measures have limitations as analytical tools and should not be considered in isolation or as a substitute for financial measures prepared in accordance with U.S. GAAP.  These measures do not include certain expenses that may be necessary to evaluate our liquidity or operating results.  Our definitions of non-GAAP adjusted EBITDA, non-GAAP net income, non-GAAP diluted earnings per share, free cash flow and constant currency net sales growth may differ from that of other companies and therefore may not be comparable.
Safe Harbor Statements

All statements included in this press release other than statements of historical fact are forward-looking statements and may be identified by their use of words such as “believe,” “may,” “might,” “could,” “will,” “aim,” “estimate,” “continue,” “anticipate,” “intend,” “expect,” “plan” and other similar terms. These forward-looking statements are based on our current assumptions, expectations and estimates of future events and trends. Forward-looking statements are only predictions and are subject to many risks, uncertainties and other factors that may affect our businesses and operations and could cause actual results to differ materially from those predicted. These risks and uncertainties include, but are not limited to, health epidemics, pandemics and similar outbreaks, including the COVID-19 pandemic, factors affecting our quarterly results, our ability to manage our growth, our ability to sustain our profitability, demand for our products, our ability to compete successfully (including without limitation our ability to convince surgeons to use our products and our ability to attract and retain sales and other personnel), our ability to rapidly develop and introduce new products, our ability to develop and execute on successful business strategies, our ability to comply with laws and regulations that are or may become applicable to our businesses, our ability to safeguard our intellectual property, our success in defending legal proceedings brought against us, trends in the medical device industry, general economic conditions, and other risks. For a discussion of these and other risks, uncertainties and other factors that could affect our results, you should refer to the disclosure contained in our most recent annual report on Form 10-K filed with the Securities and Exchange Commission, including the sections labeled “Risk Factors” and “Cautionary Note Concerning Forward-Looking Statements,” and in our Forms 10-Q, Forms 8-K and other filings with the Securities and Exchange Commission. These documents are available at www.sec.gov. Moreover, we operate in an evolving environment. New risk factors and uncertainties emerge from time to time and it is not possible for us to predict all risk factors and uncertainties, nor can we assess the impact of all factors on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements. Given these risks and uncertainties, readers are cautioned not to place undue reliance on any forward-looking statements. Forward-looking statements contained in this press release speak only as of the date of this press release. We undertake no obligation to update any forward-looking statements as a result of new information, events or circumstances or other factors arising or coming to our attention after the date hereof.

GLOBUS MEDICAL, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(unaudited)

    Three Months Ended
    March 31,
(In thousands, except per share amounts)   2021     2020  
Net sales   $ 227,344     $ 190,577  
Cost of goods sold     55,027       48,864  
Gross profit     172,317       141,713  
             
Operating expenses:            
Research and development     14,924       15,402  
Selling, general and administrative     97,891       93,539  
Provision for litigation     (94 )      
Amortization of intangibles     4,774       3,776  
Acquisition related costs     274       548  
Total operating expenses     117,769       113,265  
             
Operating income/(loss)     54,548       28,448  
             
Other income/(expense), net            
Interest income/(expense), net     2,712       4,324  
Foreign currency transaction gain/(loss)     (280 )     (468 )
Other income/(expense)     214       194  
Total other income/(expense), net     2,646       4,050  
             
Income/(loss) before income taxes     57,194       32,498  
Income tax provision     11,865       6,549  
             
Net income/(loss)   $ 45,329     $ 25,949  
             
Other comprehensive income/(loss):            
Unrealized gain/(loss) on marketable securities, net of tax     (1,666 )     (3,842 )
Foreign currency translation gain/(loss)     (4,113 )     474  
Total other comprehensive income/(loss)     (5,779 )     (3,368 )
Comprehensive income/(loss)   $ 39,550     $ 22,581  
             
Earnings per share:            
Basic   $ 0.45     $ 0.26  
Diluted   $ 0.44     $ 0.25  
Weighted average shares outstanding:            
Basic     99,866       99,635  
Diluted     102,420       102,146  
             

GLOBUS MEDICAL, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(unaudited)

    March 31,   December 31,
(In thousands, except share and per share values)   2021    2020
ASSETS            
Current assets:            
Cash, cash equivalents, and restricted cash   $ 184,848     $ 239,397
Short-term marketable securities     218,711       187,344
Accounts receivable, net of allowances of $4,358 and $4,408, respectively     160,939       141,676
Inventories     232,007       229,153
Prepaid expenses and other current assets     16,132       17,771
Income taxes receivable     1,736       6,424
Total current assets     814,373       821,765
Property and equipment, net of accumulated depreciation of $282,346 and $276,451, respectively     216,186       216,879
Long-term marketable securities     434,877       358,522
Intangible assets, net     80,414       86,949
Goodwill     155,373       156,716
Other assets     28,693       32,039
Deferred income taxes     7,974       6,615
Total assets   $ 1,737,890     $ 1,679,485
             
LIABILITIES AND EQUITY            
Current liabilities:            
Accounts payable   $ 22,409     $ 18,205
Accrued expenses     69,908       78,334
Income taxes payable     8,434       1,101
Business acquisition liabilities     6,048       5,777
Deferred revenue     8,653       8,125
Payable to broker     8,225       9,250
Total current liabilities     123,677       120,792
Business acquisition liabilities, net of current portion     29,973       31,493
Deferred income taxes     5,925       6,202
Other liabilities     15,321       14,701
Total liabilities     174,896       173,188
             
Equity:            
Class A common stock; $0.001 par value. Authorized 500,000,000 shares; issued and outstanding 77,587,013 and 77,284,007 shares at March 31, 2021 and December 31, 2020, respectively     78       77
Class B common stock; $0.001 par value. Authorized 275,000,000 shares; issued and outstanding 22,430,097 shares at March 31, 2021 and December 31, 2020     22       22
Additional paid-in capital     474,307       457,161
Accumulated other comprehensive income (loss)     (1,824 )     3,955
Retained earnings     1,090,411       1,045,082
Total equity     1,562,994       1,506,297
Total liabilities and equity   $ 1,737,890     $ 1,679,485
               

GLOBUS MEDICAL, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)

    Three Months Ended
    March 31,
(In thousands)   2021     2020  
Cash flows from operating activities:            
Net income   $ 45,329     $ 25,949  
Adjustments to reconcile net income to net cash provided by operating activities:            
Depreciation and amortization     17,157       14,568  
Amortization of premium (discount) on marketable securities     520       20  
Write-down of excess and obsolete inventories     1,550       679  
Stock-based compensation expense     7,698       6,807  
Allowance for doubtful accounts     80       756  
Change in fair value of business acquisition liabilities     258       506  
Change in deferred income taxes     (808 )     (2,895 )
(Gain)/loss on disposal of assets, net     103       207  
(Increase)/decrease in:            
Accounts receivable     (20,346 )     14,131  
Inventories     (3,997 )     (12,108 )
Prepaid expenses and other assets     4,516       (205 )
Increase/(decrease) in:            
Accounts payable     4,212       (283 )
Accrued expenses and other liabilities     (4,783 )     (13,702 )
Income taxes payable/receivable     12,081       7,863  
Net cash provided by operating activities     63,570       42,293  
Cash flows from investing activities:            
Purchases of marketable securities     (185,110 )     (57,418 )
Maturities of marketable securities     39,850       71,766  
Sales of marketable securities     33,818       5,374  
Purchases of property and equipment     (13,672 )     (22,314 )
Net cash used in investing activities     (125,114 )     (2,592 )
Cash flows from financing activities:            
Payment of business acquisition related liabilities     (1,537 )     (566 )
Proceeds from exercise of stock options     9,101       5,763  
Repurchase of common stock           (73,864 )
Net cash used in/provided by financing activities     7,564       (68,667 )
Effect of foreign exchange rates on cash     (569 )     (16 )
Net increase in cash, cash equivalents, and restricted cash     (54,549 )     (28,982 )
Cash, cash equivalents, and restricted cash at beginning of period     239,397       195,724  
Cash, cash equivalents, and restricted cash at end of period   $ 184,848     $ 166,742  
Supplemental disclosures of cash flow information:            
Income taxes paid   $ 570     $ 1,791  
Purchases of property and equipment included in accounts payable and accrued expenses   $ 2,620     $ 5,287  

Supplemental Financial Information

Net Sales by Geographic Area:

    Three Months Ended
    March 31,
(In thousands)   2021   2020
United States   $ 193,317   $ 158,447
International     34,027     32,130
Total net sales   $ 227,344   $ 190,577
             

Net Sales by Product Category:

    Three Months Ended
    March 31,
(In thousands)   2021   2020
Musculoskeletal Solutions   $ 212,416   $ 182,542
Enabling Technologies     14,928     8,035
Total net sales   $ 227,344   $ 190,577
             

Liquidity and Capital Resources:

    March 31,   December 31,
(In thousands)   2021   2020
Cash, cash equivalents, and restricted cash   $ 184,848   $ 239,397
Short-term marketable securities     218,711     187,344
Long-term marketable securities     434,877     358,522
Total cash, cash equivalents, restricted cash and marketable securities   $ 838,436   $ 785,263
             

The following tables reconcile GAAP to Non-GAAP financial measures.

Non-GAAP Adjusted EBITDA Reconciliation Table:

    Three Months Ended
    March 31,
(In thousands, except percentages)   2021     2020  
Net income/(loss)   $ 45,329     $ 25,949  
Interest income/(expense), net     (2,712 )     (4,324 )
Provision for income taxes     11,865       6,549  
Depreciation and amortization     17,157       14,568  
EBITDA     71,639       42,742  
Stock-based compensation expense     7,698       6,807  
Provision for litigation     (94 )      
Acquisition related costs/licensing     883       957  
Adjusted EBITDA   $ 80,126     $ 50,506  
             
Net income as a percentage of net sales     19.9 %     13.6 %
Adjusted EBITDA as a percentage of net sales     35.2 %     26.5 %

Non-GAAP Net Income Reconciliation Table:

    Three Months Ended
    March 31,
(In thousands)   2021     2020  
Net income/(loss)   $ 45,329     $ 25,949  
Provision for litigation     (94 )      
Amortization of intangibles     4,774       3,776  
Acquisition related costs/licensing     883       957  
Tax effect of adjusting items     (1,154 )     (956 )
Non-GAAP net income   $ 49,738     $ 29,726  
                 

Non-GAAP Diluted Earnings Per Share Reconciliation Table:

    Three Months Ended
    March 31,
(Per share amounts)   2021     2020  
Diluted earnings per share, as reported   $ 0.44     $ 0.25  
Provision for litigation            
Amortization of intangibles     0.05       0.04  
Acquisition related costs/licensing     0.01       0.01  
Tax effect of adjusting items     (0.01 )     (0.01 )
Non-GAAP diluted earnings per share   $ 0.49     $ 0.29  
                 

* Amounts might not add due to rounding

Non-GAAP Free Cash Flow Reconciliation Table:

    Three Months Ended
    March 31,
(In thousands)   2021     2020  
Net cash provided by operating activities   $ 63,570     $ 42,293  
Purchases of property and equipment     (13,672 )     (22,314 )
Free cash flow   $ 49,898     $ 19,979  
                 

Net Sales on a Constant Currency Basis Comparative Table:

    Three Months Ended   Reported   Currency
Impact on 
  Constant
Currency
    March 31,   Net Sales   Current   Net Sales
(In thousands, except percentages)   2021   2020   Growth   Period Net Sales   Growth
United States   $ 193,317   $ 158,447   22.0 %   $   22.0 %
International     34,027     32,130   5.9 %     1,208   2.1 %
Total net sales   $ 227,344   $ 190,577   19.3 %   $ 1,208   18.7 %
                               

Contact:
Brian Kearns
Senior Vice President, Business Development and Investor Relations
Phone: (610) 930-1800
Email: investors@globusmedical.com 
www.globusmedical.com 


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