Financial

Globus Medical Reports First Quarter 2016 Results

AUDUBON, Pa., May 03, 2016 (GLOBE NEWSWIRE) — 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 Guidance
The company today reiterated guidance for full year 2016 sales of approximately $583 million and earnings per share of approximately $1.20.

Conference Call Information
Globus 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 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 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 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
(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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Josh Sandberg

Josh Sandberg is the President of Ortho Spine Partners and Partner for The De Angelis Group. He also serves as Co-Founder and Editor of OrthoSpineNews.

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