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Globus Medical Reports Fourth Quarter and Full Year 2020 Results

Feb 17, 2021

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:

1-855-533-7141 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 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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Source: Globus Medical

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