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
