• Globus Medical Reports Fourth Quarter and Full Year 2020 Results

    Source: Nasdaq GlobeNewswire / 17 Feb 2021 15:15:01   America/Chicago

    AUDUBON, Pa., Feb. 17, 2021 (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, 2020.

    Fourth Quarter 2020:

    • Worldwide net sales were $233.4 million, an increase of 10.3% as compared to the fourth quarter of 2019
    • GAAP net income for the quarter was $53.0 million, or 22.7% of net sales
    • GAAP diluted earnings per share (“EPS”) was $0.52 and non-GAAP diluted EPS was $0.58
    • Non-GAAP adjusted EBITDA was 36.2% of net sales

    Full Year 2020:

    • Worldwide net sales were $789.0 million, an increase of 0.5% as compared to the full year of 2019
    • GAAP net income for the year was $102.3 million, or 13.0% of net sales
    • GAAP diluted EPS was $1.01 and non-GAAP diluted EPS was $1.44 for the year
    • Non-GAAP adjusted EBITDA was 29.4% of net sales

    “Globus Medical’s fourth quarter growth of 10% was led by Enabling Technologies at $18 million, up 30% in the quarter, and US Spine, which grew by 12%, even though COVID-related cancellations caused an estimated drag of about five percentage points,” said Dave Demski, President and CEO. “Our 2020 second half performance, which produced almost $450 million in revenue; 10% overall growth; 14% growth in US Spine; $1.07 in Adjusted EPS; and 35.5% in Adjusted EBITDA is a testament to our team members’ perseverance, grit and unrelenting focus on our customers and their patients.”

    Worldwide net sales for the fourth quarter were $233.4 million, an as-reported increase of 10.3% over the fourth quarter of 2019, and an increase of 9.9% on a constant currency basis.  U.S. net sales for the fourth quarter of 2020, including robotics, increased by 12.0% compared to the fourth quarter of 2019. International net sales increased by 1.4% over the fourth quarter of 2019 on an as-reported basis, and was slightly down on a constant currency basis.

    Worldwide net sales for the full year of 2020 were $789.0 million, an increase of 0.5% as compared to the full year of 2019. Non-GAAP diluted EPS was $1.44 for the full year of 2020.

    GAAP net income for the fourth quarter was $53.0 million, an increase of 16.3% over the same period last year. Diluted EPS for the fourth quarter was $0.52, compared to $0.44 for the fourth quarter 2019. Non-GAAP diluted EPS for the fourth quarter of 2020 was $0.58, compared to $0.49 in the fourth quarter of 2019, an increase of 19.6%.

    The company generated net cash provided by operating activities of $198.8 million and non-GAAP free cash flow of $135.1 million in 2020. The Company ended the year with cash, cash equivalents and marketable securities of $785.3 million. The company remains debt free.

    2021 Annual Guidance

    Today the Company announced full year 2021 guidance with expected net sales of $880 million and non-GAAP diluted earnings per share of $1.83.

    Conference Call Information

    Globus Medical will hold a teleconference to discuss its 2020 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:

    1-855-533-7141United 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 Wednesday, February 24, 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 107-2757.

    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, 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 December 31, 2020 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, 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 December 31, 2020 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 Year Ended
     December 31, December 31,
    (In thousands, except per share amounts)2020  2019  2018 2020  2019 2018
    Net sales$ 233,445  $211,667  $195,938 $ 789,042  $785,368 $712,969
    Cost of goods sold  60,859   48,760   45,954   217,463   179,975  159,410
    Gross profit  172,586   162,907   149,984   571,579   605,393  553,559
                      
    Operating expenses:                 
    Research and development  15,241   15,496   13,758   84,519   60,073  55,496
    Selling, general and administrative  92,047   92,138   83,642   354,757   354,757  311,591
    Provision for litigation  (188)  565   5,878   9   2,190  5,878
    Amortization of intangibles  4,788   3,397   3,063   16,831   13,809  9,588
    Acquisition related costs  2,163   1,331   392   4,030   2,575  1,681
    Total operating expenses  114,051   112,927   106,733   460,146   433,404  384,234
                      
    Operating income/(loss)  58,535   49,980   43,251   111,433   171,989  169,325
                      
    Other income, net                 
    Interest income/(expense), net  2,953   4,452   4,167   13,952   17,406  13,278
    Foreign currency transaction gain/(loss)  527   (48)  47   (279)  75  360
    Other income/(expense)  198   66   162   793   476  5,642
    Total other income/(expense), net  3,678   4,470   4,376   14,466   17,957  19,280
                      
    Income/(loss) before income taxes  62,213   54,450   47,627   125,899   189,946  188,605
    Income tax provision  9,256   8,920   10,876   23,614   34,736  32,131
                      
    Net income$ 52,957  $45,530  $36,751 $ 102,285  $155,210 $156,474
                      
    Earnings per share:                 
    Basic$ 0.54  $0.46  $0.37 $ 1.04  $1.57 $1.60
    Diluted$ 0.52  $0.44  $0.36 $ 1.01  $1.52 $1.54
    Weighted average shares outstanding:                 
    Basic  98,958   99,601   98,516   98,580   99,150  97,884
    Diluted  101,414   102,933   101,627   100,971   101,998  101,316
                         


    GLOBUS MEDICAL, INC. AND SUBSIDIARIES
    CONDENSED CONSOLIDATED BALANCE SHEETS
    (unaudited)
           
      December 31,
    (In thousands, except par value) 2020 2019
    ASSETS      
    Current assets:      
    Cash, cash equivalents, and restricted cash $ 239,397 $195,724 
    Short-term marketable securities   187,344  115,763 
    Accounts receivable, net of allowances of $4,408 and $5,599, respectively   141,676  154,326 
    Inventories   229,153  196,314 
    Prepaid expenses and other current assets   17,771  17,243 
    Income taxes receivable   6,424  8,098 
    Total current assets   821,765  687,468 
    Property and equipment, net of accumulated depreciation of $276,451 and $243,732, respectively   216,879  199,841 
    Long-term marketable securities   358,522  409,514 
    Intangible assets, net   86,949  78,812 
    Goodwill   156,716  128,775 
    Other assets   32,039  21,741 
    Deferred income taxes   6,615  5,926 
    Total assets $ 1,679,485 $1,532,077 
           
    LIABILITIES AND EQUITY      
    Current liabilities:      
    Accounts payable $ 18,205 $24,614 
    Accrued expenses   78,334  63,283 
    Income taxes payable   1,101  1,057 
    Business acquisition liabilities   5,777  6,727 
    Deferred revenue   8,125  5,402 
    Payable to broker   9,250  10,320 
    Total current liabilities   120,792  111,403 
    Business acquisition liabilities, net of current portion   31,493  2,822 
    Deferred income taxes   6,202  6,023 
    Other liabilities   14,701  9,377 
    Total liabilities   173,188  129,625 
           
    Equity:      
    Class A common stock; $0.001 par value. Authorized 500,000,000 shares; issued and outstanding
    77,284,007 and 77,394,983 shares at December 31, 2020 and December 31, 2019, respectively
       77  77 
    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 December 31, 2020 and December 31, 2019, respectively
       22  22 
    Additional paid-in capital   457,161  357,320 
    Accumulated other comprehensive loss   3,955  (2,898)
    Retained earnings   1,045,082  1,047,931 
    Total equity   1,506,297  1,402,452 
    Total liabilities and equity $ 1,679,485 $1,532,077 
            


    GLOBUS MEDICAL, INC. AND SUBSIDIARIES
    CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
    (unaudited)
              
      Year Ended
      December 31,
    (In thousands) 2020
     2019
     2018
    Cash flows from operating activities:         
    Net income $ 102,285  $155,210  $156,474 
    Adjustments to reconcile net income to net cash provided by operating activities:         
    Acquired in-process research and development   24,418       
    Depreciation and amortization   62,874   52,734   41,630 
    Amortization of premium (discount) on marketable securities   587   (1,089)  1,677 
    Write-down for excess and obsolete inventories, net   17,741   2,498   10,475 
    Stock-based compensation expense   27,073   26,085   21,899 
    Allowance for doubtful accounts   2,960   3,026   957 
    Change in fair value of business acquisition liabilities   2,674   1,787   985 
    Change in deferred income taxes   (4,338)  4,302   971 
    (Gain)/loss on disposal of assets, net   809   866   (3,557)
    Payment of business acquisition related liabilities   (700)      
    (Increase)/decrease in:         
    Accounts receivable   10,696   (18,306)  (21,789)
    Inventories   (50,111)  (50,018)  (31,382)
    Prepaid expenses and other assets   (11,088)  (12,263)  (7,496)
    Increase/(decrease) in:         
    Accounts payable   (6,352)  773   (3,008)
    Accrued expenses and other liabilities   17,608   7,043   14,728 
    Income taxes payable/receivable   1,657   (673)  (921)
    Net cash provided by operating activities   198,793   171,975   181,643 
    Cash flows from investing activities:         
    Purchases of marketable securities   (223,540)  (346,526)  (537,942)
    Maturities of marketable securities   134,462   247,008   278,049 
    Sales of marketable securities   68,897   53,786   106,388 
    Purchases of property and equipment   (63,658)  (70,750)  (59,697)
    Collections/(issuance) of note receivable        30,000 
    Proceeds from sale of assets        5,000 
    Acquisition of businesses, net of cash acquired and purchases of intangible and other assets   (33,483)  (23,799)  (14,825)
    Net cash used in investing activities   (117,322)  (140,281)  (193,027)
    Cash flows from financing activities:         
    Payment of business acquisition liabilities   (6,316)  (6,597)  (6,739)
    Proceeds from exercise of stock options   72,322   31,036   39,309 
    Repurchase of common stock   (104,669)      
    Net cash used in/provided by financing activities   (38,663)  24,439   32,570 
    Effect of foreign exchange rate on cash   865   (156)  (256)
    Net increase in cash, cash equivalents, and restricted cash  43,673   55,977   20,930 
    Cash, cash equivalents, and restricted cash at beginning of period   195,724   139,747   118,817 
    Cash, cash equivalents, and restricted cash at end of period $ 239,397  $195,724  $139,747 
    Supplemental disclosures of cash flow information:         
    Income taxes paid $ 25,437  $34,139  $30,552 
    Purchases of property and equipment included in accounts payable and accrued expenses $ 4,210  $4,226  $10,084 
                 


    Supplemental Financial Information
     
    Net Sales by Geographic Area:
     
      Three Months Ended Year Ended
      December 31, December 31,
    (In thousands) 2020 2019 2018 2020 2019 2018
    United States $ 198,749 $177,459 $163,788 $ 664,454 $647,683 $593,878
    International   34,696  34,208  32,150   124,588  137,685  119,091
    Total net sales $ 233,445 $211,667 $195,938 $ 789,042 $785,368 $712,969


    Net Sales by Product Category:
                 
      Three Months Ended Year Ended
      December 31, December 31,
    (In thousands) 2020 2019 2018 2020 2019 2018
    Musculoskeletal Solutions $ 215,361 $197,757 $181,638 $ 748,446 $738,377 $666,040
    Enabling Technologies   18,084  13,910  14,300   40,596  46,991  46,929
    Total net sales $ 233,445 $211,667 $195,938 $ 789,042 $785,368 $712,969


    Liquidity and Capital Resources: 
           
      December 31, December 31,
    (In thousands) 2020 2019
    Cash, cash equivalents, and restricted cash $ 239,397 $195,724
    Short-term marketable securities   187,344  115,763
    Long-term marketable securities   358,522  409,514
    Total cash, cash equivalents, restricted cash and marketable securities $ 785,263 $721,001
           


    The following tables reconcile GAAP to Non-GAAP financial measures.
     
    Non-GAAP Adjusted EBITDA Reconciliation Table:
     
     Three Months Ended Year Ended
     December 31, December 31,
    (In thousands, except percentages)2020  2019  2018  2020  2019  2018 
    Net income/(loss)$ 52,957  $45,530  $36,751  $ 102,285  $155,210  $156,474 
    Interest (income)/expense, net  (2,953)  (4,452)  (4,164)   (13,952)  (17,406)  (13,278)
    Provision for income taxes  9,256   8,920   10,876    23,614   34,736   32,131 
    Depreciation and amortization  16,904   14,046   11,936    62,874   52,734   41,630 
    EBITDA  76,164   64,044   55,399    174,821   225,274   216,957 
    Stock-based compensation expense  5,935   6,437   4,821    27,073   26,085   21,899 
    Provision for litigation  (188)  565   5,878    9   2,190   5,878 
    Acquisition related costs/licensing  2,698   1,652   641    5,877   3,664   4,488 
    Acquisition of in-process research and development           24,418       
    Net (gain) loss from sale of assets                (3,593)
    Adjusted EBITDA$ 84,609  $72,698  $66,739  $ 232,198  $257,213  $245,629 
                      
    Net income/(loss) as a percentage of net sales 22.7%  21.5%  18.8%  13.0%  19.8%  21.9%
    Adjusted EBITDA as a percentage of net sales 36.2%  34.3%  34.1%  29.4%  32.8%  34.5%
                            


    Non-GAAP Net Income Reconciliation Table:
     
     Three Months Ended Year Ended
     December 31, December 31,
    (In thousands)2020  2019  2018  2020  2019  2018 
    Net income/(loss)$ 52,957  $45,530  $36,751  $ 102,285  $155,210  $156,474 
    Provision for litigation  (188)  565   5,878    9   2,190   5,878 
    Amortization of intangibles  4,788   3,397   3,063    16,831   13,809   9,588 
    Acquisition related costs/licensing  2,698   1,652   641    5,877   3,664   4,488 
    Acquisition of in-process research and development           24,418       
    Net (gain) loss from sale of assets                (3,593)
    Tax effect of adjusting items  (1,086)  (920)  (2,189)   (4,504)  (3,581)  (3,437)
    Non-GAAP net income/(loss)$ 59,169  $50,224  $44,144  $ 144,916  $171,292  $169,398 


    Non-GAAP Diluted Earnings Per Share Reconciliation Table:
     
     Three Months Ended Year Ended
     December 31, December 31,
    (In thousands)2020  2019  2018  2020  2019  2018 
    Diluted earnings per share, as reported$ 0.52  $0.44  $0.36  $ 1.01  $1.52  $1.54 
    Provision for litigation    0.01   0.06      0.02   0.06 
    Amortization of intangibles  0.05   0.03   0.03    0.17   0.14   0.09 
    Acquisition related costs/licensing  0.03   0.02   0.01    0.06   0.04   0.05 
    Acquisition of in-process research and development           0.24       
    Net (gain) loss from sale of assets                (0.04)
    Tax effect of adjusting items  (0.01)  (0.01)  (0.02)   (0.04)  (0.04)  (0.03)
    Non-GAAP diluted earnings per share$ 0.58  $0.49  $0.43  $ 1.44  $1.68  $1.67 
    *amounts might not add due to rounding                       


    Non-GAAP Free Cash Flow Reconciliation Table:
     
     Three Months Ended Year Ended
     December 31, December 31,
    (In thousands)2020  2019  2018  2020  2019  2018 
    Net cash provided by operating activities$ 80,184  $54,266  $44,291  $ 198,793  $171,975  $181,643 
    Purchases of property and equipment  (14,063)  (15,793)  (17,159)   (63,658)  (70,750)  (59,697)
    Free cash flow$ 66,121  $38,473  $27,132  $ 135,135  $101,225  $121,946 
                      


    Non-GAAP Net Sales on a Constant Currency Basis Comparative Table:
     
      Three Months Ended Reported Currency
    Impact on 
     Constant
    Currency
      December 31, Net Sales Current Net Sales
    (In thousands, except percentages) 2020 2019 Growth Period Net Sales   Growth
    United States $ 198,749 $177,459 12.0% $  12.0%
    International   34,696  34,208 1.4%  (779) (0.9%)
    Total net sales $ 233,445 $211,667 10.3% $(779) 9.9%
                  
                  
                  
      Year Ended Reported Currency
    Impact on 
     Constant
    Currency
      December 31, Net Sales Current Net Sales
    (In thousands, except percentages) 2020 2019 Growth Period Net Sales   Growth
    United States $ 664,454 $647,683 2.6% $  2.6%
    International   124,588  137,685 (9.5%)  (564) (9.9%)
    Total net sales $ 789,042 $785,368 0.5% $(564) 0.4%
                     

    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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