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Globus Medical Reports Full Year and Fourth Quarter 2018 Results

Feb 21, 2019

AUDUBON, Pa., Feb. 21, 2019 (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, 2018.

Fourth Quarter:

  • Worldwide sales increased 11.3% as reported to $195.9 million
  • Fourth quarter net income was $36.8 million, or 18.8% of sales.
  • Diluted earnings per share (EPS) were $0.36
  • Non-GAAP diluted EPS were $0.43
  • Non-GAAP adjusted EBITDA was 34.1% of sales

Full Year 2018:

  • Worldwide sales increased 12.1% as reported to $713.0 million
  • Net income for the year was $156.5 million, or 21.9% of sales
  • Diluted EPS were $1.54
  • Non-GAAP diluted EPS were $1.67
  • Non-GAAP adjusted EBITDA was 34.5% of sales

“Our fourth quarter and full year results are indicative of strong momentum in several key strategic areas,” said Dave Demski, CEO. “The fourth quarter marked the fifth consecutive quarter of double digit organic revenue growth, which is particularly outstanding considering the strong comparable quarter last year. Emerging Technologies delivered $14.7 million, or 34.1% growth, a significant accomplishment given the pent up demand implicit in the fourth quarter of 2017 when we launched our robotic system. The U.S. spinal implant business grew by over 9.4% year-over-year, continuing the acceleration we saw in the third quarter, driven by robotic implant pull through and strong recruiting.”

Full year 2018 sales were $713.0 million, a 12.1% increase over 2017, and non-GAAP EPS was $1.67.  Worldwide sales for the fourth quarter were $195.9 million, an increase of 11.3% over the fourth quarter of 2017.  Revenue from Emerging Technologies was primarily due to continued demand for the ExcelsiusGPS® robotics and navigation system.

Fourth quarter sales in the U.S., including robotics, increased by 10.7% compared to the fourth quarter of 2017.  International sales increased by 14.7% over the fourth quarter of 2017 on an as-reported basis and 16.8% on a constant currency basis.

Fourth quarter GAAP net income was $36.8 million, an increase of 50.8% over the same period last year.  Diluted EPS for the fourth quarter was $0.36, as compared to $0.25 for the fourth quarter 2017.  Non-GAAP diluted EPS for the fourth quarter was $0.43, compared to $0.38 in the fourth quarter of 2018, an increase of 15.1%.

The company generated net cash provided by operating activities of $181.6 million and non-GAAP free cash flow of $121.9 million in 2018.  The Company ended the year with cash, cash equivalents and marketable securities of $602.8 million.  The company remains debt free.

2019 Annual Guidance
The company today confirmed full year 2019 guidance with sales of $770 million and non-GAAP diluted earnings per share of $1.72.

Conference Call Information
Globus Medical will hold a teleconference to discuss its 2018 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 investors.globusmedical.com.

The call will be archived until Thursday, February 21, 2019.  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 1012-6378.

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, provisions for litigation, and acquisition related costs/licensing, and net gain from the sale of assets, 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.   Net gain from sale of assets represents the gain on sale of assets and the offsetting impact of costs incurred through the sale.

In addition, for the period ended December 31, 2018 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, net gain from the sale of assets and the tax effects of such adjustments.  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, net gain from the sale of assets and the tax effects of such adjustments, which we believe are not reflective of underlying business trends.  Additionally, for the periods ended December 31, 2018 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 sales growth is calculated by translating current year sales at the same average exchange rates in effect during the applicable prior year period.  We believe constant currency sales growth 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.

Non-GAAP adjusted EBITDA, non-GAAP net income, non-GAAP diluted earnings per share, free cash flow and constant currency 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 sales growth may differ from that of other companies and therefore may not be comparable.  Additionally, we have recast prior periods for non-GAAP net income and non-GAAP diluted earnings per share.

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 successfully integrate the international operations acquired from Alphatec, both in general and on our anticipated timeline, our ability to transition Alphatec’s international customers to Globus products, our ability to realize the expected benefits to our results from the Alphatec acquisition, 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
(In thousands, except per share amounts) December 31,
 2018
  December 31,
 2017
  December 31,
 2018
  December 31,
 2017
Sales $ 195,938     $ 176,034     $ 712,969     $ 635,977  
Cost of goods sold 45,954     40,856     159,410     150,453  
Gross profit 149,984     135,178     553,559     485,524  
               
Operating expenses:              
Research and development 13,758     11,413     55,496     43,679  
Selling, general and administrative 83,642     72,958     311,591     267,817  
Provision for litigation 5,878     (112 )   5,878     2,668  
Amortization of intangibles 3,063     2,238     9,588     7,909  
Acquisition related costs 392     321     1,681     1,611  
Total operating expenses 106,733     86,818     384,234     323,684  
               
Operating income 43,251     48,360     169,325     161,840  
Other income/(expense), net 4,376     2,240     19,280     8,088  
Income before income taxes 47,627     50,600     188,605     169,928  
Income tax provision 10,876     26,224     32,131     62,580  
               
Net income $ 36,751     $ 24,376     $ 156,474     $ 107,348  
               
Earnings per share:              
Basic $ 0.37     $ 0.25     $ 1.60     $ 1.12  
Diluted $ 0.36     $ 0.25     $ 1.54     $ 1.10  
Weighted average shares outstanding:              
Basic 98,516     96,489     97,884     96,243  
Diluted 101,627     98,726     101,316     97,887  
                       

GLOBUS MEDICAL, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands, except par value) December 31,
 2018
  December 31,
 2017
       
ASSETS (unaudited)    
Current assets:      
Cash, cash equivalents, and restricted cash $ 139,747     $ 118,817  
Short-term marketable securities 199,937     254,890  
Accounts receivable, net of allowances of $4,226 and $3,963, respectively 137,067     116,676  
Inventories 131,254     108,409  
Prepaid expenses and other current assets 15,387     11,166  
Current portion of note receivable     1,667  
Income taxes receivable 7,289     8,717  
Total current assets 630,681     620,342  
Property and equipment, net of accumulated depreciation of $216,809 and $191,760, respectively 171,873     143,167  
Long-term marketable securities 263,117     56,133  
Note receivable     28,333  
Intangible assets, net 87,323     78,659  
Goodwill 123,734     123,890  
Other assets 10,364     7,947  
Deferred income taxes 13,578     20,031  
Total assets $ 1,300,670     $ 1,078,502  
       
LIABILITIES AND EQUITY      
Current liabilities:      
Accounts payable $ 25,895     $ 25,039  
Accrued expenses 59,878     52,594  
Income taxes payable 917     3,274  
Business acquisition liabilities 6,830     11,411  
Deferred revenue 2,598     755  
Total current liabilities 96,118     93,073  
Business acquisition liabilities, net of current portion 3,288     4,508  
Deferred income taxes 8,114     10,669  
Other liabilities 7,634     2,474  
Total liabilities 115,154     110,724  
Commitments and contingencies      
Equity:      
Common stock; $0.001 par value.  Authorized 785,000 shares; issued and outstanding 98,573 and 96,658 shares at December 31, 2018 and December 31, 2017, respectively 98     97  
Additional paid-in capital 299,869     238,341  
Accumulated other comprehensive loss (7,172 )   (6,907 )
Retained earnings 892,721     736,247  
Total equity 1,185,516     967,778  
Total liabilities and equity $ 1,300,670     $ 1,078,502  
               


GLOBUS MEDICAL, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)

  Year Ended
(In thousands) December 31,
 2018
  December 31,
 2017
Cash flows from operating activities:      
Net income $ 156,474     $ 107,348  
Adjustments to reconcile net income to net cash provided by operating activities:      
Depreciation and amortization 41,630     42,067  
Amortization of premium on marketable securities 1,677     2,671  
Write-down for excess and obsolete inventories 10,475     11,519  
Stock-based compensation expense 21,899     14,686  
Allowance for doubtful accounts 957     1,718  
Change in fair value of business acquisition liabilities 985     1,240  
Impairment of intangible assets     516  
Change in deferred income taxes 971     8,292  
(Gain)/loss on disposal of assets, net (3,557 )    
(Increase)/decrease in:      
Accounts receivable (21,789 )   (24,955 )
Inventories (31,382 )   (5,277 )
Prepaid expenses and other assets (7,496 )   (4,774 )
Increase/(decrease) in:      
Accounts payable (3,008 )   9,843  
Accrued expenses and other liabilities 14,728     (2,064 )
Income taxes payable/receivable (921 )   (3,772 )
Net cash provided by operating activities 181,643     159,058  
       
Cash flows from investing activities:      
Purchases of marketable securities (537,942 )   (392,895 )
Maturities of marketable securities 278,049     240,353  
Sales of marketable securities 106,388     122,512  
Purchases of property and equipment (59,697 )   (51,303 )
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 (14,825 )   (29,944 )
Net cash used in investing activities (193,027 )   (111,277 )
       
Cash flows from financing activities:      
Payment of business acquisition liabilities (6,739 )   (10,109 )
Proceeds from exercise of stock options 39,309     11,735  
Net cash provided by financing activities 32,570     1,626  
       
Effect of foreign exchange rate on cash (256 )   1,979  
       
Net increase in cash, cash equivalents, and restricted cash 20,930     51,386  
Cash, cash equivalents, and restricted cash, beginning of period 118,817     67,431  
Cash, cash equivalents, and restricted cash, end of period $ 139,747     $ 118,817  
       
Supplemental disclosures of cash flow information:      
Interest paid 6     3  
Income taxes paid $ 30,552     $ 59,111  
               


Supplemental Financial Information


Sales by Geographic Area:

(Unaudited) Three Months Ended   Year Ended
(In thousands) December 31,
 2018
  December 31,
 2017
  December 31,
 2018
  December 31,
 2017
United States $ 163,788     $ 148,012     $ 593,878     $ 529,882  
International 32,150     28,022     119,091     106,095  
Total sales $ 195,938     $ 176,034     $ 712,969     $ 635,977  
                               

Sales by Revenue Stream:

(Unaudited) Three Months Ended   Year Ended
(In thousands) December 31,
 2018
  December 31,
 2017
  December 31,
 2018
  December 31,
 2017
Musculoskeletal Solutions products $ 181,638     $ 165,114     $ 666,040     $ 625,057  
Enabling Technologies products 14,300     10,920     46,929     10,920  
Total sales $ 195,938     $ 176,034     $ 712,969     $ 635,977  
                               


(Unaudited) Three Months Ended   Year Ended
(In thousands) December 31,
 2018
  December 31,
 2017
  December 31,
 2018
  December 31,
 2017
Spine products $ 181,254     $ 165,087     $ 665,403     $ 625,027  
Emerging Technology Products 14,684     10,947     47,566     10,950  
Total sales $ 195,938     $ 176,034     $ 712,969     $ 635,977  
                               

Liquidity and Capital Resources:

(Unaudited) December 31,
 2018
  December 31,
 2017
(In thousands)      
Cash, cash equivalents, and restricted cash $ 139,747     $ 118,817  
Short-term marketable securities 199,937     254,890  
Long-term marketable securities 263,117     56,133  
Total cash, cash equivalents, restricted cash, and marketable securities  $ 602,801     $ 429,840  
               


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

Non-GAAP Adjusted EBITDA Reconciliation Table:

       
(Unaudited) Three Months Ended   Year Ended
(In thousands, except percentages) December 31,
 2018
  December 31,
 2017
  December 31,
 2018
  December 31,
 2017
Net income $ 36,751     $ 24,376     $ 156,474     $ 107,348  
Interest income, net (4,164 )   (1,862 )   (13,278 )   (6,608 )
Provision for income taxes 10,876     26,224     32,131     62,580  
Depreciation and amortization 11,936     8,294     41,630     42,067  
EBITDA 55,399     57,032     216,957     205,387  
Stock-based compensation expense 4,821     4,027     21,899     14,686  
Provision for litigation 5,878     (112 )   5,878     2,668  
Acquisition related costs/licensing 641     553     4,488     3,391  
Net gain from sale of assets         (3,593 )    
Adjusted EBITDA $ 66,739     $ 61,500     $ 245,629     $ 226,132  
               
Net income as a percentage of sales 18.8 %   13.8 %   21.9 %   16.9 %
Adjusted EBITDA as a percentage of sales 34.1 %   34.9 %   34.5 %   35.6 %
                       

Non-GAAP Net Income Reconciliation Table:

       
(Unaudited) Three Months Ended   Year Ended
(In thousands) December 31,
 2018
  December 31,
 2017
  December 31,
 2018
  December 31,
 2017
Net income $ 36,751     $ 24,376     $ 156,474     $ 107,348  
Provision for litigation 5,878     (112 )   5,878     2,668  
Amortization of intangibles 3,063     2,238     9,588     7,909  
Acquisition related costs/licensing 641     553     4,488     3,391  
Net gain from sale of assets         (3,593 )    
Tax reform impact      11,014         11,014  
Tax effect of adjusting items (2,189 )   (796 )   (3,437 )   (4,239 )
Non-GAAP net income $ 44,144     $ 37,273     $ 169,398     $ 128,091  
                               


Non-GAAP Diluted Earnings Per Share Reconciliation Table:

       
(Unaudited) Three Months Ended   Year Ended
(Per share amounts) December 31,
 2018
  December 31,
 2017
  December 31,
 2018
  December 31,
 2017
Diluted earnings per share, as reported $ 0.36     $ 0.25     $ 1.54     $ 1.10  
Provision for litigation 0.06         0.06     0.03  
Amortization of intangibles 0.03     0.02     0.09     0.08  
Acquisition related costs/licensing 0.01     0.01     0.05     0.03  
Net gain from sale of assets         (0.04 )    
Tax reform impact

 
    0.11         0.11  
Tax effect of adjusting items (0.02 )   (0.01 )   (0.03 )   (0.04 )
Non-GAAP diluted earnings per share $ 0.43     $ 0.38     $ 1.67     $ 1.31  
* amounts might not add due to rounding              
               

Non-GAAP Free Cash Flow Reconciliation Table:

       
(Unaudited) Three Months Ended   Year Ended
(In thousands) December 31,
 2018
  December 31,
 2017
  December 31,
 2018
  December 31,
 2017
Net cash provided by operating activities $ 44,291     $ 44,837     $ 181,643     $ 159,058  
Purchases of property and equipment (17,159 )   (13,425 )   (59,697 )   (51,303 )
Non-GAAP free cash flow $ 27,132     $ 31,412     $ 121,946     $ 107,755  
                               


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

               
(Unaudited) Three Months Ended   Reported Growth   Currency Impact on 2018 Sales

 
  Constant Currency Sales Growth

 
(In thousands, except percentages) December 31,
 2018
  December 31,
 2017
     
United States $ 163,788     $ 148,012     10.7 %       10.7 %
International 32,150     28,022     14.7 %   $ 570     16.8 %
Total sales $ 195,938     $ 176,034     11.3 %   $ 570     11.6 %
                                   


(Unaudited) Year Ended   Reported Growth   Currency Impact on 2018 Sales

 
  Constant Currency Sales Growth

 
(In thousands, except percentages) December 31,
 2018
  December 31,
 2017
     
United States $ 593,878     $ 529,882     12.1 %       12.1 %
International 119,091     106,095     12.2 %   $ (1,494 )   10.8 %
Total sales $ 712,969     $ 635,977     12.1 %   $ (1,494 )   11.9 %


Contact:
Brian Kearns
Vice President, Business Development and Investor Relations
Phone: (610) 930-1800
Email: investors@globusmedical.com
www.globusmedical.com

 

globus medical.jpg

Source: Globus Medical

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