Globus Medical Reports Second Quarter 2022 Results

Audubon, Pennsylvania, UNITED STATES


AUDUBON, Pa., Aug. 04, 2022 (GLOBE NEWSWIRE) -- Globus Medical, Inc. (NYSE: GMED), a leading musculoskeletal solutions company, today announced its financial results for the quarter ended June 30, 2022.

  • Worldwide net sales were $263.6 million, an increase of 5.0% as reported, and an increase of 6.5% on a constant currency basis, compared to the second quarter of 2021
  • GAAP net income for the quarter was $54.6 million
  • GAAP diluted earnings per share (“EPS”) was $0.53 and non-GAAP diluted EPS was $0.56
  • Non-GAAP adjusted EBITDA was $91.9 million, or 34.9% of net sales

“Our second quarter record sales grew 6.5% on a constant currency basis and accelerated from last quarter as we continue to make market share gains, despite headwinds of a difficult prior year comparative and unfavorable foreign currency fluctuations,” commented Dan Scavilla, President and CEO. “Our Enabling Technologies business had a record-breaking quarter, increasing 41.7% to $29.4 million, driven by strong robotic systems demand, as well as the initial roll-out of our highly anticipated Excelsius3DTM imaging system. Globus Medical continues to be the innovative leader in helping patients with musculoskeletal disorders.”

Worldwide net sales for the second quarter of 2022 was $263.6 million, an as-reported increase of 5.0% over the second quarter of 2021, and an increase of 6.5% on a constant currency basis.  U.S. net sales for the second quarter of 2022, including robotics, increased by 4.7% compared to the second quarter of 2021. International net sales increased by 6.9% over the second quarter of 2021 on an as-reported basis, and an increase of 17.3% on a constant currency basis.

GAAP net income for the second quarter of 2022 was $54.6 million, an increase of 31.4% over the same period in the prior year. Diluted EPS for the second quarter was $0.53, compared to $0.40 for the second quarter of 2021. Non-GAAP diluted EPS for the second quarter of 2022 was in line with the same period in prior year at $0.56, and includes current period non-operating headwinds related to a higher effective tax rate and unfavorable foreign currency fluctuations.

Net cash provided by operating activities was $36.9 million, and non-GAAP free cash flow was $13.1 million for the second quarter of 2022. The Company remains debt free.

2022 Annual Guidance

The Company today reaffirmed its full year 2022 guidance of $1.025 billion in net sales and non-GAAP diluted earnings per share of $2.10.

Conference Call Information

Globus Medical will hold a teleconference to discuss its second quarter 2022 results with the investment community at 4:30 p.m. Eastern Time today. Participants may access the conference call live via webcast on the Investors page of Globus Medical’s website at https://www.investors.globusmedical.com/news-events/events-webcasts.

To participate via telephone, please register in advance at this link. Upon registration, all telephone participants will receive a confirmation email detailing how to join the conference call, including the dial-in number along with a unique passcode and registrant ID that can be used to access the call. The audio archive will be available after the call on the Investor page of the Globus Medical website.

About Globus Medical, Inc.

Based in Audubon, Pennsylvania, Globus Medical, Inc. 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 June 30, 2022 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 June 30, 2022 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 U.S. 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 U.S. 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 Six Months Ended
  June 30, June 30,
(In thousands, except per share amounts) 2022  2021  2022  2021 
Net sales $263,648  $251,016  $494,197  $478,360 
Cost of goods sold  68,470   63,846   127,637   118,873 
Gross profit  195,178   187,170   366,560   359,487 
             
Operating expenses:            
Research and development  17,395   15,547   34,807   30,471 
Selling, general and administrative  106,718   107,254   207,466   205,145 
Provision for litigation        2,341   (94)
Amortization of intangibles  4,393   4,623   8,905   9,397 
Acquisition related costs  (1,104)  13,870   (1,180)  14,144 
Total operating expenses  127,402   141,294   252,339   259,063 
             
Operating income/(loss)  67,776   45,876   114,221   100,424 
             
Other income/(expense), net            
Interest income/(expense), net  2,476   2,541   5,019   5,253 
Foreign currency transaction gain/(loss)   (1,107)  209    (1,498)  (71)
Other income/(expense)   1,395   307    1,696   521 
Total other income/(expense), net   2,764   3,057    5,217   5,703 
             
Income/(loss) before income taxes  70,540   48,933   119,438   106,127 
Income tax provision  15,950   7,388   26,764   19,253 
             
Net income/(loss) $54,590  $41,545  $92,674  $86,874 
             
Other comprehensive income/(loss), net of tax:            
Unrealized gain/(loss) on marketable securities  (5,031)  (774)  (13,859)  (2,440)
Foreign currency translation gain/(loss)  (3,170)  1,026   (4,737)  (3,087)
Total other comprehensive income/(loss), net of tax  (8,201)  252   (18,596)  (5,527)
Comprehensive income/(loss) $46,389  $41,797  $74,078  $81,347 
             
Earnings per share:            
Basic $0.54  $0.41  $0.92  $0.87 
Diluted $0.53  $0.40  $0.90  $0.84 
Weighted average shares outstanding:            
Basic  100,671   100,449   101,136   100,159 
Diluted  102,884   103,475   103,480   102,931 
                 

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

  June 30, December 31,
(In thousands, except share and per share values) 2022  2021 
ASSETS      
Current assets:      
Cash and cash equivalents $ 150,772  $193,069 
Short-term marketable securities   257,238   250,378 
Accounts receivable, net of allowances of $4,182 and $4,962, respectively   192,814   164,436 
Inventories   266,043   237,001 
Prepaid expenses and other current assets   18,579   18,417 
Income taxes receivable   5,722   1,215 
Total current assets   891,168   864,516 
Property and equipment, net of accumulated depreciation of $321,999 and $305,575, respectively   238,882   221,076 
Long-term marketable securities   473,663   562,475 
Intangible assets, net   59,131   68,660 
Goodwill   182,702   179,708 
Other assets   34,007   36,334 
Deferred income taxes   35,159   24,494 
Total assets $ 1,914,712  $1,957,263 
       
LIABILITIES AND EQUITY      
Current liabilities:      
Accounts payable $ 34,195  $21,955 
Accrued expenses   82,543   91,168 
Income taxes payable   3,471   1,046 
Business acquisition liabilities   12,623   11,770 
Deferred revenue   13,185   12,025 
Payable to broker     2,200 
Total current liabilities   146,017   140,164 
Business acquisition liabilities, net of current portion   55,691   58,755 
Deferred income taxes   2,511   4,314 
Other liabilities   11,400   12,642 
Total liabilities   215,619   215,875 
       
Equity:      
Class A common stock; $0.001 par value. Authorized 500,000,000 shares; issued and outstanding 77,037,205 and 79,113,916 shares at June 30, 2022 and December 31, 2021, respectively   77   79 
Class B common stock; $0.001 par value. Authorized 275,000,000 shares; issued and outstanding 22,430,097 and 22,430,097 shares at June 30, 2022 and December 31, 2021, respectively   22   22 
Additional paid-in capital   581,907   553,787 
Accumulated other comprehensive income/(loss)   (25,368)  (6,772)
Retained earnings   1,142,455   1,194,272 
Total equity   1,699,093   1,741,388 
Total liabilities and equity $ 1,914,712  $1,957,263 

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

  Six Months Ended
  June 30,
(In thousands) 2022  2021 
Cash flows from operating activities:      
Net income $ 92,674  $86,874 
Adjustments to reconcile net income to net cash provided by operating activities:      
Depreciation and amortization   33,764   36,287 
Amortization of premium (discount) on marketable securities   3,208   1,131 
Write-down for excess and obsolete inventories, net   4,068   5,000 
Stock-based compensation expense   15,989   15,330 
Allowance for doubtful accounts   (528)  590 
Change in fair value of business acquisition liabilities   (1,390)  14,128 
Change in deferred income taxes   (7,939)  (1,783)
(Gain)/loss on disposal of assets, net   200   191 
Payment of business acquisition related liabilities   (1,099)   
(Increase)/decrease in:      
Accounts receivable   (30,224)  (25,587)
Inventories   (31,421)  (6,024)
Prepaid expenses and other assets   1,268   845 
Increase/(decrease) in:      
Accounts payable   12,375   2,737 
Accrued expenses and other liabilities   (7,408)  3,559 
Income taxes payable/receivable   (1,964)  (10,519)
Net cash provided by/(used in) operating activities   81,573   122,759 
Cash flows from investing activities:      
Purchases of marketable securities   (179,096)  (293,092)
Maturities of marketable securities   170,572   131,739 
Sales of marketable securities   66,655   58,154 
Purchases of property and equipment   (43,724)  (22,058)
Acquisition of businesses, net of cash acquired and purchases of intangible and other assets   (1,175)   
Net cash provided by/(used in) investing activities   13,232   (125,257)
Cash flows from financing activities:      
Payment of business acquisition liabilities   (3,553)  (3,105)
Proceeds from exercise of stock options   11,331   35,597 
Repurchase of common stock   (144,493)   
Net cash provided by/(used in) financing activities   (136,715)  32,492 
Effect of foreign exchange rates on cash   (387)  (608)
Net increase/(decrease) in cash and cash equivalents   (42,297)  29,386 
Cash and cash equivalents at beginning of period   193,069   239,397 
Cash and cash equivalents at end of period $ 150,772  $268,783 
Supplemental disclosures of cash flow information:      
Income taxes paid $ 36,696  $31,597 
Purchases of property and equipment included in accounts payable and accrued expenses $ 5,019  $3,537 

Supplemental Financial Information

Net Sales by Product Category:

  Three Months Ended Six Months Ended
  June 30, June 30,
(In thousands) 2022 2021 2022 2021
Musculoskeletal Solutions $234,242 $230,263 $451,644 $442,679
Enabling Technologies  29,406  20,753  42,553  35,681
Total net sales $263,648 $251,016 $494,197 $478,360

Liquidity and Capital Resources:

  June 30, December 31,
(In thousands) 2022 2021
Cash and cash equivalents $150,772 $193,069
Short-term marketable securities  257,238  250,378
Long-term marketable securities  473,663  562,475
Total cash, cash equivalents and marketable securities $881,673 $1,005,922

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

Non-GAAP Adjusted EBITDA Reconciliation Table:

 Three Months Ended Six Months Ended
 June 30, June 30,
(In thousands, except percentages)2022  2021  2022  2021 
Net income/(loss)$54,590  $41,545  $92,674  $86,874 
Interest (income)/expense, net (2,476)  (2,541)  (5,019)  (5,253)
Provision for income taxes 15,950   7,388   26,764   19,253 
Depreciation and amortization 16,927   19,130   33,764   36,287 
EBITDA 84,991   65,522   148,183   137,161 
Stock-based compensation expense 7,837   7,632   15,989   15,330 
Provision for litigation       2,341   (94)
Acquisition related costs/licensing (943)  14,624   (286)  15,507 
Adjusted EBITDA$91,885  $87,778  $166,227  $167,904 
            
Net income/(loss) as a percentage of net sales 20.7%  16.6%  18.8%  18.2%
Adjusted EBITDA as a percentage of net sales 34.9%  35.0%  33.6%  35.1%

Non-GAAP Net Income Reconciliation Table:

 Three Months Ended Six Months Ended
 June 30, June 30,
(In thousands)2022  2021  2022  2021 
Net income/(loss)$54,590  $41,545  $92,674  $86,874 
Provision for litigation       2,341   (94)
Amortization of intangibles 4,393   4,623   8,905   9,397 
Acquisition related costs/licensing (943)  14,624   (286)  15,507 
Tax effect of adjusting items (780)  (2,906)  (2,441)  (4,060)
Non-GAAP net income/(loss)$57,260  $57,886  $101,192  $107,624 

Non-GAAP Diluted Earnings Per Share Reconciliation Table:

 Three Months Ended Six Months Ended
 June 30, June 30,
(In thousands)2022  2021  2022  2021 
Diluted earnings per share, as reported$0.53  $0.40  $0.90  $0.84 
Provision for litigation       0.02    
Amortization of intangibles 0.05   0.04   0.09   0.09 
Acquisition related costs/licensing (0.01)  0.14   (0.00)  0.15 
Tax effect of adjusting items 0.00   (0.03)  (0.02)  (0.04)
Non-GAAP diluted earnings per share$0.56  $0.56  $0.98  $1.05 

*amounts might not add due to rounding

Non-GAAP Free Cash Flow Reconciliation Table:

 Three Months Ended Six Months Ended
 June 30, June 30,
(In thousands)2022  2021  2022  2021 
Net cash provided by operating activities$36,883  $59,189  $81,573  $122,759 
Purchases of property and equipment (23,753)  (8,386)  (43,724)  (22,058)
Free cash flow$13,130  $50,803  $37,849  $100,701 

Non-GAAP Net Sales on a Constant Currency Basis Comparative Table:

              
  Three Months Ended Reported Currency
Impact on 
 Constant
Currency
  June 30, Net Sales Current Net Sales
(In thousands, except percentages) 2022 2021 Growth Period Net Sales   Growth
United States $225,280 $215,119 4.7% $  4.7%
International  38,368  35,897 6.9%  (3,750) 17.3%
Total net sales $263,648 $251,016 5.0% $(3,750) 6.5%


              
  Six Months Ended Reported Currency
Impact on 
 Constant
Currency
  June 30, Net Sales Current Net Sales
(In thousands, except percentages) 2022 2021 Growth Period Net Sales   Growth
United States $421,683 $408,436 3.2% $  3.2%
International  72,514  69,924 3.7%  (4,838) 10.6%
Total net sales $494,197 $478,360 3.3% $(4,838) 4.3%

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