Globus Medical Reports Fourth Quarter and Full Year 2020 Results

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