Record Sales and Profits
Globus Medical, Inc. (NYSE:GMED), a leading musculoskeletal
implant manufacturer, today announced its financial results for the
third quarter ended September 30, 2014.
- Worldwide sales were $117.8 million, a
9.9% increase over the third quarter of 2013
- Third quarter net income was $23.1
million, compared to $20.3 million in the third quarter of
2013
- Fully diluted earnings per share (EPS)
were $0.24 in the quarter, compared to $0.22 in 2013
- Quarterly Non-GAAP Adjusted EBITDA was
35.6% of sales, an increase over the 33.4% in 2013
David Paul, Chairman and CEO said, "We are very pleased with our
record sales in the third quarter. This result can be attributed to
consistent, steady execution of our growth strategy over the past
several quarters, primarily the introduction of innovative
technology and the expansion of our sales footprint, both in the
U.S. and abroad. EPS was also a record this quarter, as we continue
to see operating leverage in all facets of the business, while
maintaining our disciplined approach to spending. Lastly, we are
excited by the potential of our recently announced acquisition of
Transplant Technologies of Texas."
Third quarter net sales were $117.8 million, as compared to
$107.2 million last year, representing a 9.9% increase. Sales in
the US and international grew by 8.7% and 23.2%, respectively, over
the same quarter in 2013. Third quarter International sales
represent 9.5% of total sales.
Non-GAAP Adjusted EBITDA for the quarter was 35.6% of net sales,
compared to 33.4% for the third quarter last year. GAAP net income
for the quarter was $23.1 million, or $0.24 per diluted share, as
compared to $20.3 million, or $0.22 per diluted share, in the third
quarter of 2013.
Cash, cash equivalents and marketable securities ended the
quarter at $345.8 million, increasing by $32.8 million during the
quarter. The company remains debt free.
The Company also announced the resignation of Rick Baron, Senior
Vice President and Chief Financial Officer. Mr. Baron, who is
resigning to pursue other interests, will remain with the Company
to assist with the transition during the search for his
replacement. As part of the Company’s transition plan, Mr. Baron
will step down as the Company’s Chief Financial Officer, effective
on November 3, 2014, to allow him to focus on issues related to the
transition. Dave Demski, the Company’s President and Chief
Operating Officer, will also assume the role of the Company’s Chief
Financial Officer on an interim basis until the new Chief Financial
Officer is hired. Mr. Demski previously served as the Company’s
Chief Financial Officer from 2003 until his promotion to President
and Chief Operating Officer in 2008.
Conference Call Information
Globus Medical will hold a teleconference to discuss its 2014
third quarter results and the recently announced acquisition 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 Thursday, November 13, 2014. 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 pass code for the audio
replay is 2863-3214.
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)/expense, net and other non-operating expenses, provision
for income taxes, depreciation and amortization, stock-based
compensation, changes in the fair value of acquisition-related
contingent consideration, provision for litigation and provision
for litigation - cost of goods sold, 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 September 30, 2014 and for other comparative
periods, we are presenting non-GAAP net income and non-GAAP diluted
earnings per share, which represent net income and diluted earnings
per share, respectively, before provisions for litigation, which is
net of the tax effects of such provisions. We believe these
non-GAAP measures are also useful indicators of our operating
performance, and particularly as additional measures of comparative
operative performance from period to period as they remove the
effects of litigation, which we believe are not reflective of
underlying business trends. We also define the non-GAAP measure of
Free Cash Flow as the net cash provided by operating activities
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.
Adjusted EBITDA, non-GAAP net income, non-GAAP diluted earnings
per share and Free Cash Flow 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, non-GAAP net income, non-GAAP
diluted earnings per share and Free Cash Flow 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 Nine Months Ended (In
thousands, except per share amounts) September 30,
2014 September 30, 2013 September
30, 2014 September 30, 2013
Sales $ 117,787 $ 107,187
$
345,570 $ 319,214 Cost of goods sold
27,686 25,315
79,581 72,309 Provision for litigation - cost of goods sold
— —
— 1,260
Gross profit
90,101 81,872
265,989 245,645
Operating expenses: Research and development
8,146
6,568
23,283 20,452 Selling, general and administrative
46,986 45,702
140,089 136,849 Provision for
litigation
46 99
3,899 18,418
Total operating expenses 55,178 52,369
167,271 175,719
Operating income
34,923 29,503
98,718 69,926 Other income/(expense),
net
(124 ) 197
446 255
Income
before income taxes 34,799 29,700
99,164 70,181
Income tax provision
11,738 9,390
34,317 22,554
Net income $
23,061 $ 20,310
$ 64,847
$ 47,627
Earnings per share: Basic
$
0.24 $ 0.22
$ 0.69 $ 0.52
Diluted
$ 0.24 $ 0.22
$
0.68 $ 0.51
Weighted average shares
outstanding: Basic
94,399 93,028
94,111 92,418 Diluted
95,475 94,422
95,378 94,044
GLOBUS MEDICAL,
INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS
(In thousands, except par value) September 30, 2014
December 31, 2013 (unaudited) ASSETS
Current assets: Cash and cash equivalents
$
169,449 $ 89,962 Short-term marketable securities
129,302 148,962 Accounts receivable, net of allowances of
$1,733 and $1,581, respectively
62,598 62,414 Inventories
77,430 70,350 Prepaid expenses and other current assets
6,183 5,080 Income taxes receivable
2,101 2,723
Deferred income taxes
37,750 37,317
Total
current assets 484,813 416,808 Property
and equipment, net of accumulated depreciation of $113,868 and
$99,910, respectively
66,062 64,150 Long-term marketable
securities
47,028 36,528 Intangible assets, net
29,139 29,537 Goodwill
18,372 18,372 Other assets
1,025 909
Total assets $
646,439 $ 566,304
LIABILITIES AND
EQUITY Current liabilities: Accounts payable
9,703 10,073 Accounts payable to related party
3,945
2,656 Accrued expenses
55,606 51,125 Income taxes payable
2,062 2,358 Business acquisition liabilities, current
1,443 1,730
Total current liabilities
72,759 67,942 Business acquisition
liabilities, net of current portion
15,348 15,528 Deferred
income taxes
1,734 6,385 Other liabilities
2,790
4,089
Total liabilities 92,631
93,944
Commitments and contingencies Equity:
Common stock; $0.001 par value. Authorized 785,000 shares; issued
and outstanding 94,464 and 93,443 shares at September 30, 2014 and
December 31, 2013, respectively
94 93 Additional paid-in
capital
170,885 153,987 Accumulated other comprehensive loss
(1,307 ) (1,009 ) Retained earnings
384,136
319,289
Total equity 553,808
472,360
Total liabilities and equity $
646,439 $ 566,304
GLOBUS MEDICAL,
INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH
FLOWS (unaudited) Nine Months Ended (In
thousands) September 30, 2014 September
30, 2013 Cash flows from operating activities:
Net income
$ 64,847 $ 47,627 Adjustments to reconcile
net income to net cash provided by operating activities:
Depreciation and amortization
16,057 14,211 Amortization of
premium on marketable securities
2,073 1,476 Provision for
excess and obsolete inventories
5,439 6,405 Stock-based
compensation
5,211 3,865 Allowance for doubtful accounts
236 234 Change in deferred income taxes
(5,115
) (11,138 ) (Increase)/decrease in: Accounts receivable
(886 ) (2,143 ) Inventories
(12,535 )
(15,715 ) Prepaid expenses and other assets
(1,325 )
(3,587 ) Increase/(decrease) in: Accounts payable
(2,253
) 1,022 Accounts payable to related party
1,289 730
Accrued expenses and other liabilities
3,855 19,639 Income
taxes payable/receivable
334 (1,813 )
Net cash
provided by operating activities 77,227 60,813
Cash flows from investing activities:
Purchases of marketable securities
(161,149 )
(186,748 ) Maturities of marketable securities
144,207
19,000 Sales of marketable securities
24,028 4,979 Purchases
of property and equipment
(15,659 ) (18,475 )
Net
cash used in investing activities (8,573 )
(181,244 )
Cash flows from financing activities:
Payment of business acquisition liabilities
(900 )
(1,000 ) Proceeds from issuance of common stock
7,644 6,221
Excess tax benefit related to nonqualified stock options
4,044 4,519
Net cash provided by financing
activities 10,788 9,740 Effect of
foreign exchange rate on cash
45 198
Net increase/(decrease) in cash and cash equivalents
79,487 (110,493 ) Cash and cash equivalents, beginning of
period
89,962 212,400
Cash and cash
equivalents, end of period $ 169,449 $
101,907 Supplemental disclosures of cash flow
information: Interest paid
32 42 Income taxes paid
$
36,362 $ 30,956
The following tables reconcile GAAP to
Non-GAAP financial measures.
Non-GAAP Adjusted EBITDA Reconciliation Table:
(Unaudited) Three Months Ended Nine Months
Ended (In thousands, except percentages) September
30, 2014 September 30, 2013
September 30, 2014 September 30,
2013 Net income
$ 23,061 $ 20,310
$
64,847 $ 47,627 Interest income, net
(181 )
(146 )
(577 ) (336 ) Provision for income taxes
11,738 9,390
34,317 22,554 Depreciation and
amortization
5,373 4,859
16,057
14,211 EBITDA
39,991 34,413
114,644 84,056
Stock-based compensation
1,661 1,387
5,211 3,865
Provision for litigation
46 99
3,899 18,418 Provision
for litigation - cost of goods sold
— —
— 1,260
Change in fair value of acquisition-related contingent
consideration
263 (134 )
416 10
Adjusted EBITDA
$ 41,961 $ 35,765
$ 124,170 $ 107,609 Adjusted EBITDA as
a percentage of sales
35.6 % 33.4 %
35.9
% 33.7 %
Non-GAAP Net Income Reconciliation
Table:
(Unaudited) Three Months Ended Nine Months
Ended (In thousands) September 30, 2014
September 30, 2013 September 30,
2014 September 30, 2013 Net income
$ 23,061 $ 20,310
$ 64,847 $ 47,627
Provision for litigation, net of taxes
30 65
2,527
11,897 Provision for litigation - cost of goods sold, net of taxes
— —
— 816 Non-GAAP Net Income
$ 23,091 $ 20,375
$
67,374 $ 60,340
Non-GAAP Diluted Earnings Per Share
Reconciliation Table:
(Unaudited) Three Months Ended Nine Months
Ended (Per share amounts) September 30,
2014 September 30, 2013 September
30, 2014 September 30, 2013 Diluted
earnings per share, as reported
$ 0.24 $ 0.22
$ 0.68 $ 0.51 Provision for litigation, net of taxes
— —
0.03 0.12 Provision for litigation - cost of
goods sold, net of taxes
— —
—
0.01 Non-GAAP diluted earnings per share
$ 0.24
$ 0.22
$ 0.71 $ 0.64
Non-GAAP Free Cash Flow Reconciliation
Table:
(Unaudited) Three Months Ended Nine Months
Ended (In thousands) September 30, 2014
September 30, 2013 September 30,
2014 September 30, 2013 Net cash
provided by operating activities
$ 35,645 $ 33,557
$ 77,227 $ 60,813 Purchases of property and equipment
(3,428 ) (5,519 )
(15,659 ) (18,475 )
Non-GAAP free cash flow
$ 32,217 $ 28,038
$ 61,568 $ 42,338
Liquidity and Capital
Resources:
(In thousands) September 30, 2014
December 31, 2013 (unaudited) Cash and cash
equivalents
$ 169,449 $ 89,962 Short-term marketable
securities
129,302 148,962 Long-term marketable securities
47,028 36,528 Total cash, cash equivalents and
marketable securities
$ 345,779 $ 275,452
Available borrowing capacity under revolving credit facility
50,000 50,000 Working capital
$ 412,054 $
348,866
Globus Medical, Inc.Ed JoyceDirector, Investor
Relations610-930-1800investors@globusmedical.comwww.globusmedical.com
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