GMED Globus Medical Inc

Record Sales and Profits

Globus Medical, Inc. (NYSE:GMED), a leading musculoskeletal implant manufacturer, today announced its financial results for the fourth quarter and year ended December 31, 2014.

Fourth Quarter:

• Worldwide sales were $128.8 million, an 11.8% increase from the fourth quarter of 2013
• Fourth quarter net income was $27.6 million
• Earnings per fully diluted share were $0.29
• Non-GAAP Adjusted EBITDA was 36.7% of sales
• Non-GAAP Adjusted diluted earnings per share were $0.30

Full Year 2014:

• Worldwide sales were $474.4 million, up 9.2% over 2013
• Net income for the year was $92.5 million
• Fully diluted earnings per share were $0.97
• Non-GAAP Adjusted EBITDA was 36.1% of sales
• Non-GAAP Adjusted diluted earnings per share were $1.01

“2014 was a great year for Globus Medical. Sales grew by 9.2%, reaching $474.4 million, and full year Non-GAAP Adjusted EBITDA increased by 140 basis points to 36.1% of sales. We launched 16 new products, made steady progress on our robotics project, and successfully completed the acquisition of Transplant Technologies of Texas,” commented David Paul, Chairman and CEO. “This performance was the result of continued execution of our strategy of robust product innovation, sales force expansion, and disciplined expense control. I am very proud of the performance of our team in 2014 and remain confident in our ability to produce industry leading growth and outstanding profitability.”

Dave Demski, President and COO, added, “Our fourth quarter sales performance capped a strong year of profitable growth. Fourth quarter worldwide sales were a record $128.8 million, an increase of 11.8% over the fourth quarter of 2013. Non-GAAP Adjusted EBITDA remained strong at 36.7% of sales.”

Net income for the year ending December 31, 2014 was $92.5 million, or $0.97 per diluted share, as compared to $68.6 million, or $0.73 per diluted share, for 2013. Non-GAAP net income for the year ending December 31, 2014 was $96.2 million, or $1.01 per diluted share, as compared to $84.4 million, or $0.90 per diluted share, for 2013. For the quarter ending December 31, 2014, net income was $27.6 million, or $0.29 per diluted share, as compared to $21.0 million, or $0.22 per diluted share, for 2013. Non-GAAP net income for the quarter ending December 31, 2014 was $28.8 million, or $0.30 per diluted share, as compared to $24.0 million, or $0.25 per diluted share, for 2013. The fourth quarter EPS was positively impacted by $0.01 per share due to the extension of the R&D tax credit for fiscal year 2014.

Non-GAAP Adjusted EBITDA for the year and quarter ending December 31, 2014 were 36.1% and 36.7% of sales, respectively. This compares to non-GAAP Adjusted EBITDA of 34.7% and 37.3% of sales for year and quarter ending December 31, 2013, respectively.

Cash, cash equivalents and marketable securities ended the year at $304.1 million, increasing by $28.6 million during year. The company remains debt free.

As previously announced, the company expects 2015 sales to be approximately $510 million and earnings per fully diluted share to be approximately $1.01 per share.

Conference Call Information

Globus Medical will hold a teleconference to discuss its 2014 fourth quarter and full year results with the investment community at 5:30 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.

If you are unable to participate during the live teleconference, the call will be archived until Wednesday, March 11, 2015. 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 2863-3216.

About Globus Medical, Inc.

Globus Medical, Inc. is a leading musculoskeletal implant 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.

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, Adjusted EBITDA, which represents net income before interest (income)/expense, net and other non-operating expenses, provision for income taxes, depreciation and amortization, stock-based compensation, changes in the fair value of acquisition-related contingent consideration in connection with business acquisitions and other acquisition related costs, provision for litigation and provision for litigation - cost of goods sold, 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 Adjusted EBITDA for planning purposes, including the preparation of our annual operating budget and financial projections. In addition, for the periods ended December 31, 2014 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, respectively, before provisions for litigation and provision for litigation - cost of goods sold, net of the tax effects of such provisions. We believe these non-GAAP measures are also useful indicators of our operating performance, and particularly as additional measures of comparative operative performance from period to period as they remove the effects of litigation, which we believe are not reflective of underlying business trends. 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.

Adjusted EBITDA, non-GAAP net income, non-GAAP diluted earnings per share and Free Cash Flow 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 Adjusted EBITDA, non-GAAP net income, non-GAAP diluted earnings per share and Free Cash Flow 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, 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 CONSOLIDATED STATEMENTS OF INCOME (unaudited)   Three Months Ended Year Ended (In thousands, except per share amounts) December 31, 2014   December 31, 2013 December 31, 2014   December 31, 2013 Sales $ 128,801 $ 115,245 $ 474,371 $ 434,459 Cost of goods sold 31,276   26,774   110,857   100,343 Gross profit 97,525   88,471   363,514   334,116   Operating expenses: Research and development 8,404 6,418 31,687 26,870 Selling, general and administrative 47,709 45,669 187,798 182,518 Provision for litigation 1,768   4,637   5,667   23,055 Total operating expenses 57,881   56,724   225,152   232,443   Operating income 39,644 31,747 138,362 101,673 Other income/(expense), net (166 ) 73   280   328 Income before income taxes 39,478 31,820 138,642 102,001 Income tax provision 11,840   10,835   46,157   33,389   Net income $ 27,638   $ 20,985   $ 92,485   $ 68,612   Earnings per share: Basic $ 0.29   $ 0.22   $ 0.98   $ 0.74 Diluted $ 0.29   $ 0.22   $ 0.97   $ 0.73 Weighted average shares outstanding: Basic 94,573   93,327   94,227   92,647 Diluted 95,670   94,629   95,457   94,192     GLOBUS MEDICAL, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (unaudited)   December 31, December 31,

(In thousands, except par value)

2014 2013 ASSETS Current assets: Cash and cash equivalents $ 82,265 $ 89,962 Restricted cash 23,370 — Short-term marketable securities 146,439 148,962 Accounts receivable, net of allowances of $1,647 and $1,581, respectively 75,430 62,414 Inventories 90,945 70,350 Prepaid expenses and other current assets 5,742 5,080 Income taxes receivable 5,772 2,723 Deferred income taxes 40,062   37,317   Total current assets 470,025   416,808   Property and equipment, net of accumulated depreciation of $118,544 and $99,910, respectively 69,475 64,150 Long-term marketable securities 75,347 36,528 Intangible assets, net 34,529 29,537 Goodwill 53,196 18,372 Other assets 975   909   Total assets $ 703,547   $ 566,304     LIABILITIES AND EQUITY Current liabilities: Accounts payable 15,904 10,073 Accounts payable to related-party 5,359 2,656 Accrued expenses 61,499 51,125 Income taxes payable 569 2,358 Business acquisition liabilities, current 6,081   1,730   Total current liabilities 89,412   67,942   Business acquisition liabilities, net of current portion 20,195 15,528 Deferred income taxes 5,166 6,385 Other liabilities 3,320   4,089   Total liabilities 118,093   93,944   Commitments and contingencies Equity: Common stock; $0.001 par value. Authorized 785,000 shares; issued and outstanding 94,706 and 93,443 shares at December 31, 2014 and December 31, 2013, respectively 95 93 Additional paid-in capital 175,242 153,987 Accumulated other comprehensive loss (1,657 ) (1,009 ) Retained earnings 411,774   319,289   Total equity 585,454   472,360   Total liabilities and equity $ 703,547   $ 566,304     GLOBUS MEDICAL, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited)   Year Ended December 31,   December 31,

(In thousands)

2014 2013 Cash flows from operating activities: Net income $ 92,485 $ 68,612 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 21,754 19,397 Amortization of premium on marketable securities 2,680 2,358 Provision for excess and obsolete inventories 6,962 8,212 Stock-based compensation 7,111 5,177 Allowance for doubtful accounts 318 693 Change in deferred income taxes (4,379 ) (14,858 ) (Increase)/decrease in: Restricted cash (23,370 ) — Accounts receivable (12,667 ) (9,612 ) Inventories (18,001 ) (16,678 ) Prepaid expenses and other assets (249 ) (2,955 ) Increase/(decrease) in: Accounts payable 4,628 1,840 Accounts payable to related party 2,703 100 Accrued expenses and other liabilities 4,018 26,963 Income taxes payable/receivable (4,821 ) 4,222   Net cash provided by operating activities 79,172   93,471     Cash flows from investing activities: Purchases of marketable securities (251,422 ) (240,892 ) Maturities of marketable securities 184,567 40,560 Sales of marketable securities 27,737 13,637 Purchases of property and equipment (24,754 ) (23,680 ) Acquisition of businesses (36,128 ) (16,775 ) Net cash used in investing activities (100,000 ) (227,150 )   Cash flows from financing activities: Payment of business acquisition liabilities (1,200 ) (1,300 ) Proceeds from issuance of common stock 9,738 7,555 Excess tax benefit related to nonqualified stock options 4,408   4,756   Net cash provided by financing activities 12,946   11,011     Effect of foreign exchange rate on cash 185   230     Net decrease in cash and cash equivalents (7,697 ) (122,438 ) Cash and cash equivalents, beginning of period 89,962   212,400   Cash and cash equivalents, end of period $ 82,265   $ 89,962     Supplemental disclosures of cash flow information: Interest paid 32 96 Income taxes paid $ 51,096 $ 38,719    

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

  Non-GAAP Adjusted EBITDA Reconciliation Table:  

(Unaudited)

Three Months Ended Year Ended December 31,   December 31, December 31,   December 31,

(In thousands, except percentages)

2014 2013 2014 2013 Net income $ 27,638 $ 20,985 $ 92,485 $ 68,612 Interest income, net (228 ) (131 ) (805 ) (467 ) Provision for income taxes 11,840 10,835 46,157 33,389 Depreciation and amortization 5,697   5,186   21,754   19,397   EBITDA 44,947 36,875 159,591 120,931 Stock-based compensation 1,900 1,312 7,111 5,177 Provision for litigation 1,768 4,637 5,667 23,055 Provision for litigation - cost of goods sold — — — 1,260 Change in fair value of acquisition-related contingent consideration (1,353 ) 110   (937 ) 120   Adjusted EBITDA $ 47,262   $ 42,934   $ 171,432   $ 150,543   Adjusted EBITDA as a percentage of sales 36.7 % 37.3 % 36.1 % 34.7 %    

Non-GAAP Net Income Reconciliation Table:

  (Unaudited) Three Months Ended Year Ended (In thousands) December 31, 2014   December 31, 2013 December 31, 2014   December 31, 2013 Net income $ 27,638 $ 20,985 $ 92,485 $ 68,612 Provision for litigation, net of taxes 1,138 3,037 3,665 14,934 Provision for litigation - cost of goods sold, net of taxes —   —   —   816 Non-GAAP Net Income $ 28,776   $ 24,022   $ 96,150   $ 84,362    

Non-GAAP Diluted Earnings Per Share Reconciliation Table:

  (Unaudited) Three Months Ended Year Ended (Per share amounts) December 31, 2014   December 31, 2013 December 31, 2014   December 31, 2013 Diluted earnings per share, as reported $ 0.29 $ 0.22 $ 0.97 $ 0.73 Provision for litigation, net of taxes 0.01 0.03 0.04 0.16 Provision for litigation - cost of goods sold, net of taxes —   —   —   0.01 Non-GAAP diluted earnings per share $ 0.30   $ 0.25   $ 1.01   $ 0.90    

Non-GAAP Free Cash Flow Reconciliation Table:

  (Unaudited) Three Months Ended Year Ended (In thousands) December 31, 2014   December 31, 2013 December 31, 2014   December 31, 2013 Net cash provided by operating activities $ 1,945 $ 32,658 $ 79,172 $ 93,471 Adjustment for impact of restricted cash 23,370 — 23,370 — Purchases of property and equipment (9,095 ) (5,205 ) (24,754 ) (23,680 ) Non-GAAP free cash flow $ 16,220   $ 27,453   $ 77,788   $ 69,791      

Liquidity and Capital Resources:

  (Unaudited) December 31, 2014 December 31, 2013 (In thousands) Cash and cash equivalents $ 82,265 $ 89,962 Short-term marketable securities 146,439 148,962 Long-term marketable securities 75,347   36,528 Total cash, cash equivalents and marketable securities $ 304,051   $ 275,452   Available borrowing capacity under revolving credit facility 50,000 50,000 Working capital $ 380,613 $ 348,866

Globus Medical, Inc.Ed JoyceDirector, Investor Relations610-930-1800investors@globusmedical.comwww.globusmedical.com