AUDUBON, Pa., Feb. 21, 2019 (GLOBE NEWSWIRE) -- Globus Medical, Inc. (NYSE:GMED), a leading musculoskeletal solutions company, today announced its financial results for the fourth quarter and year ended December 31, 2018.

Fourth Quarter:

  • Worldwide sales increased 11.3% as reported to $195.9 million
  • Fourth quarter net income was $36.8 million, or 18.8% of sales.
  • Diluted earnings per share (EPS) were $0.36
  • Non-GAAP diluted EPS were $0.43
  • Non-GAAP adjusted EBITDA was 34.1% of sales

Full Year 2018:

  • Worldwide sales increased 12.1% as reported to $713.0 million
  • Net income for the year was $156.5 million, or 21.9% of sales
  • Diluted EPS were $1.54
  • Non-GAAP diluted EPS were $1.67
  • Non-GAAP adjusted EBITDA was 34.5% of sales

“Our fourth quarter and full year results are indicative of strong momentum in several key strategic areas,” said Dave Demski, CEO. “The fourth quarter marked the fifth consecutive quarter of double digit organic revenue growth, which is particularly outstanding considering the strong comparable quarter last year. Emerging Technologies delivered $14.7 million, or 34.1% growth, a significant accomplishment given the pent up demand implicit in the fourth quarter of 2017 when we launched our robotic system. The U.S. spinal implant business grew by over 9.4% year-over-year, continuing the acceleration we saw in the third quarter, driven by robotic implant pull through and strong recruiting.”

Full year 2018 sales were $713.0 million, a 12.1% increase over 2017, and non-GAAP EPS was $1.67.  Worldwide sales for the fourth quarter were $195.9 million, an increase of 11.3% over the fourth quarter of 2017.  Revenue from Emerging Technologies was primarily due to continued demand for the ExcelsiusGPS® robotics and navigation system.

Fourth quarter sales in the U.S., including robotics, increased by 10.7% compared to the fourth quarter of 2017.  International sales increased by 14.7% over the fourth quarter of 2017 on an as-reported basis and 16.8% on a constant currency basis.

Fourth quarter GAAP net income was $36.8 million, an increase of 50.8% over the same period last year.  Diluted EPS for the fourth quarter was $0.36, as compared to $0.25 for the fourth quarter 2017.  Non-GAAP diluted EPS for the fourth quarter was $0.43, compared to $0.38 in the fourth quarter of 2018, an increase of 15.1%.

The company generated net cash provided by operating activities of $181.6 million and non-GAAP free cash flow of $121.9 million in 2018.  The Company ended the year with cash, cash equivalents and marketable securities of $602.8 million.  The company remains debt free.

2019 Annual Guidance
The company today confirmed full year 2019 guidance with sales of $770 million and non-GAAP diluted earnings per share of $1.72.

Conference Call Information
Globus Medical will hold a teleconference to discuss its 2018 fourth quarter and full year 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 investors.globusmedical.com.

The call will be archived until Thursday, February 21, 2019.  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 1012-6378.

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, and acquisition related costs/licensing, and net gain from the sale of assets, 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.   Net gain from sale of assets represents the gain on sale of assets and the offsetting impact of costs incurred through the sale.

In addition, for the period ended December 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, net gain from the sale of assets and the tax effects of such adjustments.  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, net gain from the sale of assets and the tax effects of such adjustments, which we believe are not reflective of underlying business trends.  Additionally, for the periods ended December 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 Year Ended
(In thousands, except per share amounts)December 31,
 2018
 December 31,
 2017
 December 31,
 2018
 December 31,
 2017
Sales$195,938  $176,034  $712,969  $635,977 
Cost of goods sold45,954  40,856  159,410  150,453 
Gross profit149,984  135,178  553,559  485,524 
        
Operating expenses:       
Research and development13,758  11,413  55,496  43,679 
Selling, general and administrative83,642  72,958  311,591  267,817 
Provision for litigation5,878  (112) 5,878  2,668 
Amortization of intangibles3,063  2,238  9,588  7,909 
Acquisition related costs392  321  1,681  1,611 
Total operating expenses106,733  86,818  384,234  323,684 
        
Operating income43,251  48,360  169,325  161,840 
Other income/(expense), net4,376  2,240  19,280  8,088 
Income before income taxes47,627  50,600  188,605  169,928 
Income tax provision10,876  26,224  32,131  62,580 
        
Net income$36,751  $24,376  $156,474  $107,348 
        
Earnings per share:       
Basic$0.37  $0.25  $1.60  $1.12 
Diluted$0.36  $0.25  $1.54  $1.10 
Weighted average shares outstanding:       
Basic98,516  96,489  97,884  96,243 
Diluted101,627  98,726  101,316  97,887 
            

GLOBUS MEDICAL, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands, except par value)December 31,
 2018
 December 31,
 2017
    
ASSETS(unaudited)  
Current assets:   
Cash, cash equivalents, and restricted cash$139,747  $118,817 
Short-term marketable securities199,937  254,890 
Accounts receivable, net of allowances of $4,226 and $3,963, respectively137,067  116,676 
Inventories131,254  108,409 
Prepaid expenses and other current assets15,387  11,166 
Current portion of note receivable  1,667 
Income taxes receivable7,289  8,717 
Total current assets630,681  620,342 
Property and equipment, net of accumulated depreciation of $216,809 and $191,760, respectively171,873  143,167 
Long-term marketable securities263,117  56,133 
Note receivable  28,333 
Intangible assets, net87,323  78,659 
Goodwill123,734  123,890 
Other assets10,364  7,947 
Deferred income taxes13,578  20,031 
Total assets$1,300,670  $1,078,502 
    
LIABILITIES AND EQUITY   
Current liabilities:   
Accounts payable$25,895  $25,039 
Accrued expenses59,878  52,594 
Income taxes payable917  3,274 
Business acquisition liabilities6,830  11,411 
Deferred revenue2,598  755 
Total current liabilities96,118  93,073 
Business acquisition liabilities, net of current portion3,288  4,508 
Deferred income taxes8,114  10,669 
Other liabilities7,634  2,474 
Total liabilities115,154  110,724 
Commitments and contingencies   
Equity:   
Common stock; $0.001 par value.  Authorized 785,000 shares; issued and outstanding 98,573 and 96,658 shares at December 31, 2018 and December 31, 2017, respectively98  97 
Additional paid-in capital299,869  238,341 
Accumulated other comprehensive loss(7,172) (6,907)
Retained earnings892,721  736,247 
Total equity1,185,516  967,778 
Total liabilities and equity$1,300,670  $1,078,502 
        


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

 Year Ended
(In thousands)December 31,
 2018
 December 31,
 2017
Cash flows from operating activities:   
Net income$156,474  $107,348 
Adjustments to reconcile net income to net cash provided by operating activities:   
Depreciation and amortization41,630  42,067 
Amortization of premium on marketable securities1,677  2,671 
Write-down for excess and obsolete inventories10,475  11,519 
Stock-based compensation expense21,899  14,686 
Allowance for doubtful accounts957  1,718 
Change in fair value of business acquisition liabilities985  1,240 
Impairment of intangible assets  516 
Change in deferred income taxes971  8,292 
(Gain)/loss on disposal of assets, net(3,557)  
(Increase)/decrease in:   
Accounts receivable(21,789) (24,955)
Inventories(31,382) (5,277)
Prepaid expenses and other assets(7,496) (4,774)
Increase/(decrease) in:   
Accounts payable(3,008) 9,843 
Accrued expenses and other liabilities14,728  (2,064)
Income taxes payable/receivable(921) (3,772)
Net cash provided by operating activities181,643  159,058 
    
Cash flows from investing activities:   
Purchases of marketable securities(537,942) (392,895)
Maturities of marketable securities278,049  240,353 
Sales of marketable securities106,388  122,512 
Purchases of property and equipment(59,697) (51,303)
Collections/(issuance) of note receivable30,000   
Proceeds from sale of assets5,000   
Acquisition of businesses, net of cash acquired, and purchases of intangible and other assets(14,825) (29,944)
Net cash used in investing activities(193,027) (111,277)
    
Cash flows from financing activities:   
Payment of business acquisition liabilities(6,739) (10,109)
Proceeds from exercise of stock options39,309  11,735 
Net cash provided by financing activities32,570  1,626 
    
Effect of foreign exchange rate on cash(256) 1,979 
    
Net increase in cash, cash equivalents, and restricted cash20,930  51,386 
Cash, cash equivalents, and restricted cash, beginning of period118,817  67,431 
Cash, cash equivalents, and restricted cash, end of period$139,747  $118,817 
    
Supplemental disclosures of cash flow information:   
Interest paid6  3 
Income taxes paid$30,552  $59,111 
        


Supplemental Financial Information


Sales by Geographic Area:

(Unaudited)Three Months Ended Year Ended
(In thousands)December 31,
 2018
 December 31,
 2017
 December 31,
 2018
 December 31,
 2017
United States$163,788  $148,012  $593,878  $529,882 
International32,150  28,022  119,091  106,095 
Total sales$195,938  $176,034  $712,969  $635,977 
                

Sales by Revenue Stream:

(Unaudited)Three Months Ended Year Ended
(In thousands)December 31,
 2018
 December 31,
 2017
 December 31,
 2018
 December 31,
 2017
Musculoskeletal Solutions products$181,638  $165,114  $666,040  $625,057 
Enabling Technologies products14,300  10,920  46,929  10,920 
Total sales$195,938  $176,034  $712,969  $635,977 
                


(Unaudited)Three Months Ended Year Ended
(In thousands)December 31,
 2018
 December 31,
 2017
 December 31,
 2018
 December 31,
 2017
Spine products$181,254  $165,087  $665,403  $625,027 
Emerging Technology Products14,684  10,947  47,566  10,950 
Total sales$195,938  $176,034  $712,969  $635,977 
                

Liquidity and Capital Resources:

(Unaudited)December 31,
 2018
 December 31,
 2017
(In thousands)   
Cash, cash equivalents, and restricted cash$139,747  $118,817 
Short-term marketable securities199,937  254,890 
Long-term marketable securities263,117  56,133 
Total cash, cash equivalents, restricted cash, and marketable securities $602,801  $429,840 
        


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

Non-GAAP Adjusted EBITDA Reconciliation Table:

    
(Unaudited)Three Months Ended Year Ended
(In thousands, except percentages)December 31,
 2018
 December 31,
 2017
 December 31,
 2018
 December 31,
 2017
Net income$36,751  $24,376  $156,474  $107,348 
Interest income, net(4,164) (1,862) (13,278) (6,608)
Provision for income taxes10,876  26,224  32,131  62,580 
Depreciation and amortization11,936  8,294  41,630  42,067 
EBITDA55,399  57,032  216,957  205,387 
Stock-based compensation expense4,821  4,027  21,899  14,686 
Provision for litigation5,878  (112) 5,878  2,668 
Acquisition related costs/licensing641  553  4,488  3,391 
Net gain from sale of assets    (3,593)  
Adjusted EBITDA$66,739  $61,500  $245,629  $226,132 
        
Net income as a percentage of sales18.8% 13.8% 21.9% 16.9%
Adjusted EBITDA as a percentage of sales34.1% 34.9% 34.5% 35.6%
            

Non-GAAP Net Income Reconciliation Table:

    
(Unaudited)Three Months Ended Year Ended
(In thousands)December 31,
 2018
 December 31,
 2017
 December 31,
 2018
 December 31,
 2017
Net income$36,751  $24,376  $156,474  $107,348 
Provision for litigation5,878  (112) 5,878  2,668 
Amortization of intangibles3,063  2,238  9,588  7,909 
Acquisition related costs/licensing641  553  4,488  3,391 
Net gain from sale of assets    (3,593)  
Tax reform impact   11,014    11,014 
Tax effect of adjusting items(2,189) (796) (3,437) (4,239)
Non-GAAP net income$44,144  $37,273  $169,398  $128,091 
                


Non-GAAP Diluted Earnings Per Share Reconciliation Table:

    
(Unaudited)Three Months Ended Year Ended
(Per share amounts)December 31,
 2018
 December 31,
 2017
 December 31,
 2018
 December 31,
 2017
Diluted earnings per share, as reported$0.36  $0.25  $1.54  $1.10 
Provision for litigation0.06    0.06  0.03 
Amortization of intangibles0.03  0.02  0.09  0.08 
Acquisition related costs/licensing0.01  0.01  0.05  0.03 
Net gain from sale of assets    (0.04)  
Tax reform impact

 
  0.11    0.11 
Tax effect of adjusting items(0.02) (0.01) (0.03) (0.04)
Non-GAAP diluted earnings per share$0.43  $0.38  $1.67  $1.31 
* amounts might not add due to rounding       
        

Non-GAAP Free Cash Flow Reconciliation Table:

    
(Unaudited)Three Months Ended Year Ended
(In thousands)December 31,
 2018
 December 31,
 2017
 December 31,
 2018
 December 31,
 2017
Net cash provided by operating activities$44,291  $44,837  $181,643  $159,058 
Purchases of property and equipment(17,159) (13,425) (59,697) (51,303)
Non-GAAP free cash flow$27,132  $31,412  $121,946  $107,755 
                


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

        
(Unaudited)Three Months Ended Reported Growth Currency Impact on 2018 Sales

 
 Constant Currency Sales Growth

 
(In thousands, except percentages)December 31,
 2018
 December 31,
 2017
   
United States$163,788  $148,012  10.7%   10.7%
International32,150  28,022  14.7% $570  16.8%
Total sales$195,938  $176,034  11.3% $570  11.6%
                  


(Unaudited)Year Ended Reported Growth Currency Impact on 2018 Sales

 
 Constant Currency Sales Growth

 
(In thousands, except percentages)December 31,
 2018
 December 31,
 2017
   
United States$593,878  $529,882  12.1%   12.1%
International119,091  106,095  12.2% $(1,494) 10.8%
Total sales$712,969  $635,977  12.1% $(1,494) 11.9%


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