GMED Globus Medical Inc

Reports Record Quarterly Sales and Increases Guidance

Globus Medical, Inc. (NYSE:GMED), a leading musculoskeletal implant manufacturer, today announced its financial results for the second quarter ended June 30, 2015.

• Worldwide sales increased 17.6% to $133.6 million, or 19.1% on a constant currency basis
• Second quarter net income increased 16.5% to $24.1 million
• Fully diluted earnings per share (EPS) were $0.25
• Non-GAAP Adjusted EBITDA was 35.0% of sales
• Company increases 2015 guidance for sales to $524 million and EPS to $1.04

David Paul, Chairman and CEO said, “We are pleased to report second quarter sales of $133.6 million, a year-over-year increase of 17.6% as reported and 19.1% on a constant currency basis. Once again the Globus team achieved strong sales growth and market share gains while maintaining strong profitability, with quarterly net income of $24.1 million, or 16.5% higher than the same quarter last year. During the second quarter, we also launched 5 new products and made further progress on integrating our two most recent acquisitions. We remain confident in our long term growth prospects and our ability to sustain our industry leading profitability by the continued execution of our strategy of introducing innovative products, expanding our U.S. and international sales footprint, and controlling our expenses.”

Second quarter sales in the U.S. grew by 19.5% over the second quarter of 2014. International sales increased by 1.2% over the second quarter of 2014 on an as reported basis and 15.4% on a constant currency basis.

Second quarter net income was $24.1 million, an increase of 16.5% over $20.6 million in the second quarter 2014. Fully diluted EPS for the second quarter was $0.25, as compared to $0.22 for the second quarter 2014.

Cash, cash equivalents and marketable securities ended the quarter at $281.2 million. The company remains debt free.

2015 Annual Guidance

The company today increased guidance on sales by $10 million to $524 million and earnings per share by $0.02 to $1.04.

Conference Call Information

Globus Medical will hold a teleconference to discuss its 2015 second quarter 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 Thursday, August 13, 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 8132-2678.

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, net and other non-operating expenses, provision for income taxes, depreciation and amortization, stock-based compensation, changes in the fair value of contingent consideration in connection with business acquisitions and other acquisition related costs, and provisions for litigation, 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 June 30, 2015 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, 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. Furthermore, we define the non-GAAP measure of sales on a constant currency basis as the current and prior period sales translated at the same predetermined exchange rate. We believe that this sales on a constant currency basis 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.

Adjusted EBITDA, non-GAAP net income, non-GAAP diluted earnings per share, Free Cash Flow and sales on a constant currency basis 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, Free Cash Flow, and sales on a constant currency basis 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 Six Months Ended (In thousands, except per share amounts) June 30, 2015   June 30, 2014 June 30, 2015   June 30, 2014 Sales $ 133,570 $ 113,573 $ 265,174 $ 227,783 Cost of goods sold 32,579   26,583   64,686   51,895 Gross profit 100,991   86,990   200,488   175,888   Operating expenses: Research and development 9,081 7,694 17,737 15,137 Selling, general and administrative 54,506 46,425 106,795 93,103 Provision for litigation 374   1,318   406   3,853 Total operating expenses 63,961   55,437   124,938   112,093   Operating income 37,030 31,553 75,550 63,795 Other income, net 441   325   94   570 Income before income taxes 37,471 31,878 75,644 64,365 Income tax provision 13,417   11,231   26,942   22,579   Net income $ 24,054   $ 20,647   $ 48,702   $ 41,786   Earnings per share: Basic $ 0.25   $ 0.22   $ 0.51   $ 0.44 Diluted $ 0.25   $ 0.22   $ 0.51   $ 0.44 Weighted average shares outstanding: Basic 94,979   94,212   94,884   93,965 Diluted 96,049   95,480   95,977   95,328     GLOBUS MEDICAL, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS   (In thousands, except par value) June 30, 2015

December 31,2014

(unaudited) ASSETS Current assets: Cash and cash equivalents $ 41,559 $ 82,265 Restricted cash 24,682 23,370 Short-term marketable securities 158,247 146,439 Accounts receivable, net of allowances of $2,211 and $1,647, respectively 73,045 75,430 Inventories 101,046 90,945 Prepaid expenses and other current assets 6,811 5,742 Income taxes receivable 6,921 5,772 Deferred income taxes 42,445   40,062   Total current assets 454,756   470,025   Property and equipment, net of accumulated depreciation of $129,105 and $118,544, respectively 99,913 69,475 Long-term marketable securities 81,380 75,347 Intangible assets, net 33,951 34,529 Goodwill 93,561 53,196 Other assets 1,102   975   Total assets $ 764,663   $ 703,547     LIABILITIES AND EQUITY Current liabilities: Accounts payable $ 18,326 $ 15,904 Accounts payable to related-party — 5,359 Accrued expenses 60,507 61,499 Income taxes payable 601 569 Business acquisition liabilities, current 12,299   6,081   Total current liabilities 91,733   89,412   Business acquisition liabilities, net of current portion 20,625 20,195 Deferred income taxes 5,787 5,166 Other liabilities 3,393   3,320   Total liabilities 121,538   118,093   Commitments and contingencies Equity: Common stock; $0.001 par value. Authorized 785,000 shares; issued and outstanding 95,067 and 94,706 shares at June 30, 2015 and December 31, 2014, respectively 95 95 Additional paid-in capital 184,243 175,242 Accumulated other comprehensive loss (1,689 ) (1,657 ) Retained earnings 460,476   411,774   Total equity 643,125   585,454   Total liabilities and equity $ 764,663   $ 703,547     GLOBUS MEDICAL, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited)   Six Months Ended (In thousands) June 30, 2015   June 30, 2014 Cash flows from operating activities: Net income $ 48,702 $ 41,786 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 11,579 10,684 Amortization of premium on marketable securities 1,370 1,566 Write-down for excess and obsolete inventories 4,730 3,535 Stock-based compensation 4,669 3,550 Excess tax benefit related to nonqualified stock options (1,317 ) (3,841 ) Allowance for doubtful accounts 717 112 Change in deferred income taxes (5,047 ) (4,231 ) (Increase)/decrease in: Restricted cash (1,312 ) — Accounts receivable 1,591 (2,491 ) Inventories (11,651 ) (9,494 ) Prepaid expenses and other assets (897 ) (384 ) Increase/(decrease) in: Accounts payable (66 ) (821 ) Accounts payable to related-party (5,359 ) 1,503 Accrued expenses and other liabilities (65 ) 385 Income taxes payable/receivable 187   (277 ) Net cash provided by operating activities 47,831   41,582     Cash flows from investing activities: Purchases of marketable securities (143,691 ) (105,015 ) Maturities of marketable securities 85,444 95,292 Sales of marketable securities 39,085 17,155 Purchases of property and equipment (25,126 ) (12,231 ) Acquisition of businesses, net of cash acquired (48,016 ) —   Net cash used in investing activities (92,304 ) (4,799 )   Cash flows from financing activities: Payment of business acquisition liabilities (600 ) (600 ) Proceeds from exercise of stock options 3,015 6,631 Excess tax benefit related to nonqualified stock options 1,317   3,841   Net cash provided by financing activities 3,732   9,872     Effect of foreign exchange rate on cash 35   (117 )   Net increase/(decrease) in cash and cash equivalents (40,706 ) 46,538 Cash and cash equivalents, beginning of period 82,265   89,962   Cash and cash equivalents, end of period $ 41,559   $ 136,500     Supplemental disclosures of cash flow information: Interest paid 9 25

Income taxes paid

$ 31,880 $ 27,122         Supplemental Financial Information   Sales by Geographic Area:   (Unaudited) Three Months Ended Six Months Ended (In thousands) June 30, 2015 June 30, 2014 June 30, 2015 June 30, 2014 United States $ 121,487 $ 101,631 $ 241,470 $ 203,336 International   12,083     11,942     23,704     24,447   Total sales $ 133,570   $ 113,573   $ 265,174   $ 227,783    

Sales by Product Category:

  (Unaudited) Three Months Ended Six Months Ended (In thousands) June 30, 2015 June 30, 2014 June 30, 2015 June 30, 2014 Innovative Fusion $ 71,571 $ 65,860 $ 141,941 $ 132,630 Disruptive Technology   61,999     47,713     123,233     95,153   Total sales $ 133,570   $ 113,573   $ 265,174   $ 227,783    

Liquidity and Capital Resources:

  (Unaudited) June 30, 2015 December 31, 2014 (In thousands) Cash and cash equivalents $ 41,559 $ 82,265 Short-term marketable securities 158,247 146,439 Long-term marketable securities   81,380     75,347   Total cash, cash equivalents and marketable securities $ 281,186   $ 304,051     Available borrowing capacity under revolving credit facility 50,000 50,000 Working capital $ 363,023 $ 380,613  

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

 

Non-GAAP Adjusted EBITDA Reconciliation Table:

  (Unaudited) Three Months Ended Six Months Ended (In thousands, except percentages) June 30, 2015 June 30, 2014 June 30, 2015 June 30, 2014 Net income $ 24,054 $ 20,647 $ 48,702 $ 41,786 Interest income, net (278 ) (195 ) (556 ) (396 ) Provision for income taxes 13,417 11,231 26,942 22,579 Depreciation and amortization   5,905     5,387     11,579     10,684   EBITDA 43,098 37,070 86,667 74,653 Stock-based compensation 2,538 1,623 4,669 3,550 Provision for litigation 374 1,318 406 3,853 Change in fair value of contingent consideration and other acquisition related costs   730     143     1,314     153   Adjusted EBITDA $ 46,740   $ 40,154   $ 93,056   $ 82,209   Adjusted EBITDA as a percentage of sales 35.0 % 35.4 % 35.1 % 36.1 %  

Non-GAAP Net Income Reconciliation Table:

  (Unaudited) Three Months Ended Six Months Ended (In thousands) June 30, 2015 June 30, 2014 June 30, 2015 June 30, 2014 Net income $ 24,054 $ 20,647 $ 48,702 $ 41,786 Provision for litigation, net of taxes   240     854     261     2,497   Non-GAAP net income $ 24,294   $ 21,501   $ 48,963   $ 44,283    

Non-GAAP Diluted Earnings Per Share Reconciliation Table:

  (Unaudited) Three Months Ended Six Months Ended (Per share amounts) June 30, 2015 June 30, 2014 June 30, 2015 June 30, 2014 Diluted earnings per share, as reported $ 0.25 $ 0.22 $ 0.51 $ 0.44 Provision for litigation, net of taxes   —     0.01     —     0.02   Non-GAAP diluted earnings per share $ 0.25   $ 0.23   $ 0.51   $ 0.46    

Non-GAAP Free Cash Flow Reconciliation Table:

  (Unaudited) Three Months Ended Six Months Ended (In thousands) June 30, 2015 June 30, 2014 June 30, 2015 June 30, 2014 Net cash provided by operating activities $ 13,161 $ 12,350 $ 47,831 $ 41,582 Adjustment for impact of restricted cash   1,312       —     1,312     —   Purchases of property and equipment   (17,898 )     (6,067 )   (25,126 )   (12,231 ) Non-GAAP free cash flow $ (3,425 )   $ 6,283   $ 24,017   $ 29,351    

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

  (Unaudited) Three Months Ended Percent Change (In thousands, except percentages) June 30, 2015 June 30, 2014 Reported

ConstantCurrency

United States $ 121,487 $ 101,631 19.5 % 19.5 % International   12,083     11,942   1.2 % 15.4 % Total sales $ 133,570   $ 113,573   17.6 % 19.1 %   (Unaudited) Six Months Ended Percent Change (In thousands, except percentages) June 30, 2015 June 30, 2014 Reported

ConstantCurrency

United States $ 241,470 $ 203,336 18.8 % 18.8 % International   23,704     24,447   (3.0 %) 9.3 % Total sales $ 265,174   $ 227,783   16.4 % 17.8 %

View source version on businesswire.com: http://www.businesswire.com/news/home/20150730006608/en/

Globus Medical, Inc.Daniel ScavillaSenior Vice President, Chief Financial Officer610-930-1800investors@globusmedical.comwww.globusmedical.com