AUDUBON, Pa., May 02, 2018 (GLOBE NEWSWIRE) -- Globus Medical, Inc. (NYSE:GMED), a leading musculoskeletal solutions company, today announced its financial results for the first quarter ended March 31, 2018.

  • Worldwide sales were $174.4 million, an increase of 11.9% as reported, or 10.8% in constant currency
  • First quarter net income was $39.5 million, or 22.7% of sales
  • Diluted earnings per share (EPS) were $0.39
  • Non-GAAP diluted EPS were $0.41
  • Non-GAAP adjusted EBITDA was 35.4% of sales

“We had a strong first quarter with worldwide sales up 11.9% over the first quarter of 2017 at $174 million," said CEO Dave Demski.  "We also realized $0.41 in non-GAAP diluted EPS in the first quarter, an increase of 31%.  We had $12.8 million in revenue from Emerging Technologies, primarily due to robust demand for our ExcelsiusGPS® robotics and navigation system.  On a day-adjusted basis, our U.S. Spine business grew at 4.0% over last year.”

“We are pleased with our first quarter performance - not only the continued excitement among surgeons and hospitals about ExcelsiusGPS®, but also the above market growth we achieved in the U.S. with our core spine business and the solid operational improvements we saw in several important International markets.  I’m very proud of our team’s ability to capitalize on our growth opportunities while maintaining fiscal discipline, as our bottom line grew as fast as our top line, even though we continue to invest heavily in Imaging, Navigation and Robotics as well as Trauma."

First quarter sales in the U.S. increased by 12.3% compared to the first quarter of 2017.  International sales increased by 10.1% over the first quarter of 2017 on an as-reported basis and 3.5% on a constant currency basis.

First quarter GAAP net income was $39.5 million, an increase of 37.7% over the same period last year.  Diluted EPS for the first quarter was $0.39, as compared to $0.30 for the first quarter 2017.  Non-GAAP diluted EPS for the first quarter was $0.41, compared to $0.32 in the first quarter of 2017.

The company generated net cash provided by operating activities of $52.3 million and non-GAAP free cash flow of $39.9 million in the first quarter.  Cash, cash equivalents and marketable securities ended the quarter at $473.6 million.  The company remains debt free.

2018 Annual Guidance
The company increased guidance for full year 2018 sales to $695 million from $690 million and non-GAAP fully diluted earnings per share to $1.52 from $1.50.

Conference Call Information
Globus Medical will hold a teleconference to discuss its 2018 first quarter 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
1-216-562-0037          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 investors.globusmedical.com.

The call will be archived until Wednesday, May 9, 2018.  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 1012-6349.

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, provisions for litigation, technology in-licensing fee, and acquisition related costs, 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.

In addition, for the period ended March 31, 2018 and for other comparative periods, we are presenting non-GAAP net income and non-GAAP diluted earnings per share, which represents net income and diluted earnings per share excluding the provision for litigation, amortization of intangibles, acquisition related costs/licensing, prior period adjustment and the tax effects of such adjustments.  Prior period adjustments represent the cumulative impact of prior year adjustments related to depreciation, scrap and provision for excess and obsolete inventory, none of which were individually material to the related year's financial position or results of operations.  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, prior period adjustments and the tax effects of such adjustments, which we believe are not reflective of underlying business trends.  Additionally, for the periods ended March 31, 2018 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 sales growth is calculated by translating current year sales at the same average exchange rates in effect during the applicable prior year period.  We believe constant currency sales growth provides insight to the comparative increase or decrease in period 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 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 sales growth may differ from that of other companies and therefore may not be comparable.  Additionally, we have recast prior periods for non-GAAP net income and non-GAAP diluted earnings per share.

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, 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 successfully integrate the international operations acquired from Alphatec, both in general and on our anticipated timeline, our ability to transition Alphatec’s international customers to Globus products, our ability to realize the expected benefits to our results from the Alphatec acquisition, 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
(In thousands, except per share amounts)March 31,
 2018
 March 31,
 2017
Sales$174,411  $155,809 
Cost of goods sold37,970  35,600 
Gross profit136,441  120,209 
    
Operating expenses:   
Research and development12,689  10,666 
Selling, general and administrative75,694  67,059 
Amortization of intangibles2,187  1,782 
Acquisition related costs238  388 
Total operating expenses90,808  79,895 
    
Operating income45,633  40,314 
Other income, net2,444  2,100 
Income before income taxes48,077  42,414 
Income tax provision8,539  13,700 
    
Net income$39,538  $28,714 
    
Earnings per share:   
Basic$0.41  $0.30 
Diluted$0.39  $0.30 
Weighted average shares outstanding:   
Basic96,840  95,996 
Diluted100,496  97,148 
      


 
GLOBUS MEDICAL, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
 
(In thousands, except par value)March 31,
 2018
 December 31,
 2017
ASSETS(unaudited)  
Current assets:   
Cash and cash equivalents$119,836  $118,817 
Short-term marketable securities249,341  254,890 
Accounts receivable, net of allowances of $4,129 and $3,963, respectively122,581  116,676 
Inventories107,580  108,409 
Prepaid expenses and other current assets12,998  11,166 
Current portion of note receivable2,500  1,667 
Income taxes receivable89  8,717 
Total current assets614,925  620,342 
Property and equipment, net of accumulated depreciation of $196,921 and $191,760, respectively149,193  143,167 
Long-term marketable securities104,399  56,133 
Note receivable27,500  28,333 
Intangible assets, net78,935  78,659 
Goodwill124,780  123,890 
Other assets7,454  7,947 
Deferred income taxes20,474  20,031 
Total assets$1,127,660  $1,078,502 
    
LIABILITIES AND EQUITY   
Current liabilities:   
Accounts payable$28,161  $25,039 
Accrued expenses43,975  52,594 
Income taxes payable2,178  3,274 
Business acquisition liabilities6,659  11,411 
Deferred revenue1,579  755 
Total current liabilities82,552  93,073 
Business acquisition liabilities, net of current portion4,195  4,508 
Deferred income taxes11,504  10,669 
Other liabilities2,541  2,474 
Total liabilities100,792  110,724 
Commitments and contingencies   
Equity:   
Common stock; $0.001 par value.  Authorized 785,000 shares; issued and outstanding 97,164 and 96,658 shares at March 31, 2018 and December 31, 2017, respectively97  97 
Additional paid-in capital253,758  238,341 
Accumulated other comprehensive loss(2,772) (6,907)
Retained earnings775,785  736,247 
Total equity1,026,868  967,778 
Total liabilities and equity$1,127,660  $1,078,502 
        


 
GLOBUS MEDICAL, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
 
 Three Months Ended
(In thousands)March 31,
 2018
 March 31,
 2017
Cash flows from operating activities:   
Net income$39,538  $28,714 
Adjustments to reconcile net income to net cash provided by operating activities:   
Depreciation and amortization9,476  12,240 
Amortization of premium on marketable securities785  1,008 
Write-down for excess and obsolete inventories2,483  1,671 
Stock-based compensation expense6,053  3,491 
Allowance for doubtful accounts217  794 
Change in fair value of business acquisition liabilities234  478 
Change in deferred income taxes(124) (2,399)
(Increase)/decrease in:   
Accounts receivable(5,080) (2,225)
Inventories(1,206) (2,102)
Prepaid expenses and other assets(1,234) 8,628 
Increase/(decrease) in:   
Accounts payable728  (172)
Accrued expenses and other liabilities(7,072) (10,170)
Income taxes payable/receivable7,497  13,493 
Net cash provided by operating activities52,295  53,449 
    
Cash flows from investing activities:   
Purchases of marketable securities(118,403) (70,305)
Maturities of marketable securities73,330  55,405 
Sales of marketable securities1,333  15,505 
Purchases of property and equipment(12,374) (11,533)
Net cash used in investing activities(56,114) (10,928)
    
Cash flows from financing activities:   
Payment of business acquisition liabilities(5,440) (5,001)
Proceeds from exercise of stock options9,307  1,990 
Net cash (used in)/provided by financing activities3,867  (3,011)
    
Effect of foreign exchange rate on cash971  321 
    
Net increase in cash, cash equivalents, and restricted cash1,019  39,831 
Cash, cash equivalents, and restricted cash, beginning of period118,817  67,431 
Cash, cash equivalents, and restricted cash, end of period$119,836  $107,262 
    
Supplemental disclosures of cash flow information:   
Interest paid  8 
Income taxes paid$1,197  $2,656 
        



Supplemental Financial Information

 
Sales by Geographic Area:
 
(Unaudited)Three Months Ended
(In thousands)March 31,
 2018
 March 31,
 2017
United States$145,618  $129,663 
International28,793  26,146 
Total sales$174,411  $155,809 


 
Sales by Revenue Stream:
 
(Unaudited)Three Months Ended
(In thousands)March 31,
 2018
 March 31,
 2017
Spine products$161,627  $155,809 
Emerging Technology products12,784   
Total sales$174,411  $155,809 


 
Liquidity and Capital Resources:
 
(Unaudited)March 31,
 2018
 December 31,
 2017
(In thousands)   
Cash and cash equivalents$119,836  $118,817 
Short-term marketable securities249,341  254,890 
Long-term marketable securities104,399  56,133 
Total cash, cash equivalents and marketable securities$473,576  $429,840 
        


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

 
Non-GAAP Adjusted EBITDA Reconciliation Table:
 
(Unaudited)Three Months Ended
(In thousands, except percentages)March 31,
 2018
 March 31,
 2017
Net income$39,538  $28,714 
Interest income, net(2,291) (1,418)
Provision for income taxes8,539  13,700 
Depreciation and amortization9,476  12,240 
EBITDA55,262  53,236 
Stock-based compensation expense6,053  3,491 
Acquisition related costs392  1,086 
Adjusted EBITDA$61,707  $57,813 
    
Net income as a percentage of sales22.7% 18.4%
Adjusted EBITDA as a percentage of sales35.4% 37.1%


 
Non-GAAP Net Income Reconciliation Table:
 
(Unaudited)Three Months Ended
(In thousands)March 31,
 2018
 March 31,
 2017
Net income$39,538  $28,714 
Amortization of intangibles2,187  1,782 
Acquisition related costs392  1,086 
Tax effect of adjusting items(459) (926)
Non-GAAP net income$41,658  $30,656 


 
Non-GAAP Diluted Earnings Per Share Reconciliation Table:
 
(Unaudited)Three Months Ended
(Per share amounts)March 31,
 2018
 March 31,
 2017
Diluted earnings per share, as reported$0.39  $0.30 
Amortization of intangibles0.02  0.02 
Acquisition related costs  0.01 
Tax effect of adjusting items  (0.01)
Non-GAAP diluted earnings per share$0.41  $0.32 


 
Non-GAAP Free Cash Flow Reconciliation Table:
 
(Unaudited)Three Months Ended
(In thousands)March 31,
 2018
 March 31,
 2017
Net cash provided by operating activities$52,295  $53,449 
Purchases of property and equipment(12,374) (11,533)
Non-GAAP free cash flow$39,921  $41,916 


 
Non-GAAP Sales on a Constant Currency Basis Comparative Table:
 
(Unaudited)Three Months Ended Reported
Growth
 Currency
Impact on
Current Period
 Constant
Currency
Growth
(In thousands, except percentages)March 31,
 2018
 March 31,
 2017
   
United States$145,618  $129,663  12.3%    12.3% 
International28,793  26,146  10.1%  $1,726  3.5% 
Total sales$174,411  $155,809  11.9%  $1,726  10.8% 
                  

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