Globus Medical, Inc. (NYSE:GMED), a leading musculoskeletal implant
manufacturer, today announced its financial results for the first
quarter ended March 31, 2016.
- Worldwide sales increased 5.8% as reported to $139.3 million,
or 6.2% on a constant currency basis
- First quarter net income increased 13.6% to $28.0 million
- Fully diluted earnings per share (EPS) increased 13.2% to
$0.29
- Non-GAAP Adjusted EBITDA was 38.2% of sales
- Company reiterates 2016 guidance for sales of $583 million and
EPS of $1.20
David Paul, Chairman and CEO said, “First
quarter sales were $139.3 million, a year-over-year increase of
roughly 6%. The Globus team continued to take market share
while maintaining industry leading profitability, with quarterly
EPS of $0.29, which was 13.2% higher than the same quarter last
year. Our non-GAAP Adjusted EBITDA for the quarter was 38.2%
of sales, compared to 35.2% in the first quarter of 2015, marking
the eighth consecutive year of mid-thirties EBITDA margin.
During the first quarter, we also launched 6 new products and made
further progress 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.”
First quarter sales in the U.S. grew by 6.3%
over the first quarter of 2015. International sales increased
by 0.7% over the first quarter of 2015 on an as reported basis and
5.3% on a constant currency basis.
First quarter net income was $28.0 million, an
increase of 13.6% over the same period last year. Fully
diluted EPS for the first quarter was $0.29, as compared to $0.26
for the first quarter 2015.
The company generated non-GAAP free cash flow of
$30.0 million in the first quarter. Cash, cash equivalents
and marketable securities ended the quarter at $377.1
million. The company remains debt free.
2016 Annual GuidanceThe company
today reiterated guidance for full year 2016 sales of approximately
$583 million and earnings per share of approximately $1.20.
Conference Call
InformationGlobus Medical will hold a teleconference to
discuss its 2016 first 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 Tuesday, May 17,
2016. 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 9354-8448.
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 MeasuresTo 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 March 31, 2016 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, 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 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, 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, 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 StatementsAll 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 |
(In thousands,
except per share amounts) |
March 31, 2016 |
|
March 31, 2015 |
Sales |
$ |
139,264 |
|
|
$ |
131,604 |
|
Cost of goods sold |
31,644 |
|
|
32,107 |
|
Gross profit |
107,620 |
|
|
99,497 |
|
|
|
|
|
Operating
expenses: |
|
|
|
Research and development |
10,199 |
|
|
8,656 |
|
Selling, general and
administrative |
54,570 |
|
|
52,289 |
|
Provision for litigation |
— |
|
|
32 |
|
Total operating
expenses |
64,769 |
|
|
60,977 |
|
|
|
|
|
Operating
income |
42,851 |
|
|
38,520 |
|
Other income/(expense), net |
760 |
|
|
(347 |
) |
Income before income
taxes |
43,611 |
|
|
38,173 |
|
Income tax
provision |
15,601 |
|
|
13,525 |
|
|
|
|
|
Net
income |
$ |
28,010 |
|
|
$ |
24,648 |
|
|
|
|
|
Earnings per
share: |
|
|
|
Basic |
$ |
0.29 |
|
|
$ |
0.26 |
|
Diluted |
$ |
0.29 |
|
|
$ |
0.26 |
|
Weighted
average shares outstanding: |
|
|
|
Basic |
95,398 |
|
|
94,788 |
|
Diluted |
96,293 |
|
|
95,905 |
|
|
|
|
|
|
|
|
GLOBUS MEDICAL, INC. AND
SUBSIDIARIES |
CONSOLIDATED BALANCE SHEETS |
(unaudited) |
|
(In thousands,
except par value) |
March 31, 2016 |
|
December 31, 2015 |
|
|
|
|
ASSETS |
|
|
|
Current
assets: |
|
|
|
Cash and cash
equivalents |
$ |
81,275 |
|
|
$ |
60,152 |
|
Restricted cash |
10,451 |
|
|
26,119 |
|
Short-term marketable
securities |
236,856 |
|
|
220,877 |
|
Accounts receivable,
net of allowances of $2,563 and $2,513, respectively |
75,527 |
|
|
77,681 |
|
Inventories |
105,147 |
|
|
105,260 |
|
Prepaid expenses and
other current assets |
5,961 |
|
|
7,351 |
|
Income taxes
receivable |
281 |
|
|
8,672 |
|
Deferred income
taxes |
— |
|
|
38,687 |
|
Total current
assets |
515,498 |
|
|
544,799 |
|
Property and equipment,
net of accumulated depreciation of $145,642 and $139,144,
respectively |
115,105 |
|
|
114,743 |
|
Long-term marketable
securities |
58,943 |
|
|
48,762 |
|
Intangible assets,
net |
32,849 |
|
|
33,242 |
|
Goodwill |
91,964 |
|
|
91,964 |
|
Other assets |
306 |
|
|
590 |
|
Deferred income
taxes |
25,323 |
|
|
— |
|
Total assets |
$ |
839,988 |
|
|
$ |
834,100 |
|
|
|
|
|
LIABILITIES AND
EQUITY |
|
|
|
Current
liabilities: |
|
|
|
Accounts payable |
$ |
12,124 |
|
|
$ |
15,971 |
|
Accrued expenses |
42,190 |
|
|
53,769 |
|
Income taxes
payable |
6,390 |
|
|
763 |
|
Business acquisition
liabilities, current |
11,633 |
|
|
12,188 |
|
Total current
liabilities |
72,337 |
|
|
82,691 |
|
Business acquisition
liabilities, net of current portion |
17,056 |
|
|
21,126 |
|
Deferred income
taxes |
— |
|
|
13,260 |
|
Other liabilities |
1,710 |
|
|
1,699 |
|
Total
liabilities |
91,103 |
|
|
118,776 |
|
Commitments and
contingencies |
|
|
|
Equity: |
|
|
|
Common stock; $0.001 par
value. Authorized 785,000 shares; issued and outstanding
95,498 and 95,320 shares at March 31, 2016 and December 31, 2015,
respectively |
95 |
|
|
95 |
|
Additional paid-in capital |
197,875 |
|
|
192,629 |
|
Accumulated other comprehensive
loss |
(1,653 |
) |
|
(1,958 |
) |
Retained earnings |
552,568 |
|
|
524,558 |
|
Total equity |
748,885 |
|
|
715,324 |
|
Total liabilities and
equity |
$ |
839,988 |
|
|
$ |
834,100 |
|
|
|
|
|
|
|
|
|
|
GLOBUS MEDICAL, INC. AND
SUBSIDIARIES |
CONSOLIDATED STATEMENTS OF CASH
FLOWS |
(unaudited) |
|
|
Three Months Ended |
(In
thousands) |
March 31, 2016 |
|
March 31, 2015 |
Cash flows from
operating activities: |
|
|
|
Net income |
$ |
28,010 |
|
|
$ |
24,648 |
|
Adjustments to
reconcile net income to net cash provided by operating activities:
|
|
|
|
Depreciation and amortization |
6,676 |
|
|
5,674 |
|
Amortization of premium on
marketable securities |
953 |
|
|
640 |
|
Write-down for excess and obsolete
inventories |
2,225 |
|
|
2,529 |
|
Stock-based compensation
expense |
2,770 |
|
|
2,131 |
|
Excess tax benefit related to
nonqualified stock options |
(510 |
) |
|
(684 |
) |
Allowance for doubtful
accounts |
88 |
|
|
47 |
|
Change in deferred income
taxes |
391 |
|
|
(2,217 |
) |
(Increase)/decrease in: |
|
|
|
Restricted cash |
15,668 |
|
|
— |
|
Accounts receivable |
2,201 |
|
|
1,888 |
|
Inventories |
(2,252 |
) |
|
(7,361 |
) |
Prepaid expenses and other
assets |
1,209 |
|
|
896 |
|
Increase/(decrease) in: |
|
|
|
Accounts payable |
(1,238 |
) |
|
835 |
|
Accounts payable to
related-party |
— |
|
|
(5,359 |
) |
Accrued expenses and other
liabilities |
(15,661 |
) |
|
(3,904 |
) |
Income taxes
payable/receivable |
14,517 |
|
|
14,907 |
|
Net cash
provided by operating activities |
55,047 |
|
|
34,670 |
|
|
|
|
|
Cash flows from
investing activities: |
|
|
|
Purchases of marketable
securities |
(104,208 |
) |
|
(72,874 |
) |
Maturities of marketable
securities |
69,656 |
|
|
64,574 |
|
Sales of marketable securities |
7,798 |
|
|
19,764 |
|
Purchases of property and
equipment |
(9,366 |
) |
|
(7,228 |
) |
Acquisition of businesses, net of
cash acquired |
— |
|
|
(48,015 |
) |
Net cash used
in investing activities |
(36,120 |
) |
|
(43,779 |
) |
|
|
|
|
Cash flows from
financing activities: |
|
|
|
Payment of business acquisition
liabilities |
(300 |
) |
|
(300 |
) |
Proceeds from exercise of stock
options |
1,895 |
|
|
1,425 |
|
Excess tax benefit related to
nonqualified stock options |
510 |
|
|
684 |
|
Net cash
provided by financing activities |
2,105 |
|
|
1,809 |
|
|
|
|
|
Effect of foreign
exchange rate on cash |
91 |
|
|
41 |
|
|
|
|
|
Net decrease in
cash and cash equivalents |
21,123 |
|
|
(7,259 |
) |
Cash and cash
equivalents, beginning of period |
60,152 |
|
|
82,265 |
|
Cash and cash
equivalents, end of period |
$ |
81,275 |
|
|
$ |
75,006 |
|
|
|
|
|
Supplemental
disclosures of cash flow information: |
|
|
|
Interest paid |
1 |
|
|
— |
|
Income taxes paid |
$ |
774 |
|
|
$ |
509 |
|
|
|
|
|
|
|
|
|
|
Supplemental Financial
Information |
|
Sales by Geographic Area: |
|
(Unaudited) |
Three Months Ended |
(In thousands)
|
March 31, 2016 |
|
March 31, 2015 |
United States |
$ |
127,560 |
|
|
$ |
119,983 |
|
International |
11,704 |
|
|
11,621 |
|
Total sales |
$ |
139,264 |
|
|
$ |
131,604 |
|
|
|
|
|
|
|
|
|
|
Sales by Product Category: |
|
(Unaudited) |
Three Months Ended |
(In
thousands) |
March 31, 2016 |
|
March 31, 2015 |
Innovative Fusion |
$ |
70,046 |
|
|
$ |
70,370 |
|
Disruptive Technology
|
69,218 |
|
|
61,234 |
|
Total sales |
$ |
139,264 |
|
|
$ |
131,604 |
|
|
|
|
|
|
|
|
|
|
Liquidity and Capital Resources: |
|
(Unaudited) |
March 31, 2016 |
|
December 31, 2015 |
(In
thousands) |
|
|
|
Cash and cash
equivalents |
$ |
81,275 |
|
|
$ |
60,152 |
|
Short-term marketable
securities |
236,856 |
|
|
220,877 |
|
Long-term marketable
securities |
58,943 |
|
|
48,762 |
|
Total cash, cash
equivalents and marketable securities |
$ |
377,074 |
|
|
$ |
329,791 |
|
|
|
|
|
Available borrowing
capacity under revolving credit facility |
50,000 |
|
|
50,000 |
|
Working capital |
$ |
443,161 |
|
|
$ |
462,108 |
|
|
|
|
|
|
|
|
|
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, 2016 |
|
March 31, 2015 |
Net income |
$ |
28,010 |
|
|
$ |
24,648 |
|
Interest income,
net |
(496 |
) |
|
(278 |
) |
Provision for income
taxes |
15,601 |
|
|
13,525 |
|
Depreciation and
amortization |
6,676 |
|
|
5,674 |
|
EBITDA |
49,791 |
|
|
43,569 |
|
Stock-based
compensation expense |
2,770 |
|
|
2,131 |
|
Provision for
litigation |
— |
|
|
32 |
|
Change in fair value of
contingent consideration and other acquisition related costs
|
674 |
|
|
584 |
|
Adjusted EBITDA |
$ |
53,235 |
|
|
$ |
46,316 |
|
Adjusted EBITDA as a
percentage of sales |
38.2 |
% |
|
35.2 |
% |
|
|
|
|
|
|
|
Non-GAAP Free Cash Flow Reconciliation
Table: |
|
(Unaudited) |
Three Months Ended |
(In
thousands) |
March 31, 2016 |
|
March 31, 2015 |
Net cash provided by
operating activities |
$ |
55,047 |
|
|
$ |
34,670 |
|
Adjustment for impact
of restricted cash |
(15,668 |
) |
|
— |
|
Purchases of property
and equipment |
(9,366 |
) |
|
(7,228 |
) |
Non-GAAP free cash
flow |
$ |
30,013 |
|
|
$ |
27,442 |
|
|
|
|
|
|
|
|
|
|
Non-GAAP Sales on a Constant Currency Basis
Comparative Table: |
|
(Unaudited) |
Three Months Ended |
|
Percent Change |
(In thousands,
except percentages) |
March 31, 2016 |
|
March 31, 2015 |
|
Reported |
|
Constant Currency |
United States |
$ |
127,560 |
|
|
$ |
119,983 |
|
|
6.3 |
% |
|
6.3 |
% |
International |
11,704 |
|
|
11,621 |
|
|
0.7 |
% |
|
5.3 |
% |
Total sales |
$ |
139,264 |
|
|
$ |
131,604 |
|
|
5.8 |
% |
|
6.2 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Contact:
Daniel Scavilla
Senior Vice President, Chief Financial Officer
Phone: (610) 930-1800
Email: investors@globusmedical.com
www.globusmedical.com
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