GlobeNewswire Inc | Feb 17, 2021 04:15PM EST

February 17, 2021

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 December31, 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 Medicals 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-reportedincreaseof10.3%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 by12.0%compared to the fourth quarter of 2019. International net sales increased by1.4%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 of16.3%over the same period last year. Diluted EPS for the fourth quarter was$0.52, compared to$0.44for the fourth quarter 2019. Non-GAAP diluted EPS for the fourth quarter of 2020 was$0.58, compared to$0.49in the fourth quarter of 2019, an increase of 19.6%.

The company generated net cash provided by operating activities of$198.8 millionand non-GAAP free cash flow of$135.1 millionin 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 Participants1-720-545-0060 International ParticipantsThere 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 SUBSIDIARIESCONDENSED CONSOLIDATED STATEMENTS OF INCOME(unaudited)

Three Months Ended Year Ended December31, December31,(In thousands,except per 2020 2019 2018 2020 2019 2018share amounts)Net sales $ 233,445 $ 211,667 $ 195,938 $ 789,042 $ 785,368 $ 712,969Cost of goods 60,859 48,760 45,954 217,463 179,975 159,410soldGross profit 172,586 162,907 149,984 571,579 605,393 553,559 Operating expenses:Research and 15,241 15,496 13,758 84,519 60,073 55,496developmentSelling,general and 92,047 92,138 83,642 354,757 354,757 311,591administrativeProvision for (188 ) 565 5,878 9 2,190 5,878litigationAmortization 4,788 3,397 3,063 16,831 13,809 9,588of intangiblesAcquisition 2,163 1,331 392 4,030 2,575 1,681related costsTotaloperating 114,051 112,927 106,733 460,146 433,404 384,234expenses Operating 58,535 49,980 43,251 111,433 171,989 169,325income/(loss) Other income, netInterestincome/ 2,953 4,452 4,167 13,952 17,406 13,278(expense), netForeigncurrency 527 (48 ) 47 (279 ) 75 360transactiongain/(loss)Other income/ 198 66 162 793 476 5,642(expense)Total otherincome/ 3,678 4,470 4,376 14,466 17,957 19,280(expense), net Income/(loss)before income 62,213 54,450 47,627 125,899 189,946 188,605taxesIncome tax 9,256 8,920 10,876 23,614 34,736 32,131provision 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 $ 1.60Diluted $ 0.52 $ 0.44 $ 0.36 $ 1.01 $ 1.52 $ 1.54Weightedaverage shares outstanding:Basic 98,958 99,601 98,516 98,580 99,150 97,884Diluted 101,414 102,933 101,627 100,971 101,998 101,316

GLOBUS MEDICAL, INC. AND SUBSIDIARIESCONDENSED CONSOLIDATED BALANCE SHEETS(unaudited) December31,(In thousands, except par value) 2020 2019ASSETS 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 141,676 154,326 $4,408 and $5,599, respectivelyInventories 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 accumulateddepreciation of $276,451 and $243,732, 216,879 199,841 respectivelyLong-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 31,493 2,822 current portionDeferred 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 andoutstanding 77 77 77,284,007 and 77,394,983 shares atDecember31, 2020 and December31, 2019,respectivelyClass B common stock; $0.001 par value.Authorized 275,000,000 shares; issued andoutstanding 22 22 22,430,097 and 22,430,097 shares atDecember31, 2020 and December31, 2019,respectivelyAdditional 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 SUBSIDIARIESCONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS(unaudited) Year Ended December31,(In thousands) 2020 2019 2018Cash flows from operating activities:Net income $ 102,285 $ 155,210 $ 156,474 Adjustments to reconcile netincome to net cash provided by operating activities:Acquired in-process research and 24,418 ? ? developmentDepreciation and amortization 62,874 52,734 41,630 Amortization of premium (discount) 587 (1,089 ) 1,677 on marketable securitiesWrite-down for excess and obsolete 17,741 2,498 10,475 inventories, netStock-based compensation expense 27,073 26,085 21,899 Allowance for doubtful accounts 2,960 3,026 957 Change in fair value of business 2,674 1,787 985 acquisition liabilitiesChange in deferred income taxes (4,338 ) 4,302 971 (Gain)/loss on disposal of assets, 809 866 (3,557 )netPayment of business acquisition (700 ) ? ? related liabilities(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 17,608 7,043 14,728 liabilitiesIncome taxes payable/receivable 1,657 (673 ) (921 )Net cash provided by operating 198,793 171,975 181,643 activitiesCash flows from investing activities:Purchases of marketable securities (223,540 ) (346,526 ) (537,942 )Maturities of marketable 134,462 247,008 278,049 securitiesSales of marketable securities 68,897 53,786 106,388 Purchases of property and (63,658 ) (70,750 ) (59,697 )equipmentCollections/(issuance) of note ? ? 30,000 receivableProceeds from sale of assets ? ? 5,000 Acquisition of businesses, net ofcash acquired and purchases of (33,483 ) (23,799 ) (14,825 )intangible and other assetsNet cash used in investing (117,322 ) (140,281 ) (193,027 )activitiesCash flows from financing activities:Payment of business acquisition (6,316 ) (6,597 ) (6,739 )liabilitiesProceeds from exercise of stock 72,322 31,036 39,309 optionsRepurchase of common stock (104,669 ) ? ? Net cash used in/provided by (38,663 ) 24,439 32,570 financing activitiesEffect of foreign exchange rate on 865 (156 ) (256 )cashNet increase in cash, cash 43,673 55,977 20,930 equivalents, and restricted cashCash, cash equivalents, andrestricted cash at beginning of 195,724 139,747 118,817 periodCash, cash equivalents, and $ 239,397 $ 195,724 $ 139,747 restricted cash at end of periodSupplemental disclosures of cash flow information:Income taxes paid $ 25,437 $ 34,139 $ 30,552 Purchases of property andequipment included in accounts $ 4,210 $ 4,226 $ 10,084 payable and accrued expenses

Supplemental Financial Information

Net Sales by Geographic Area:

Three Months Ended Year Ended December31, December31,(In thousands) 2020 2019 2018 2020 2019 2018United States $ 198,749 $ 177,459 $ 163,788 $ 664,454 $ 647,683 $ 593,878International 34,696 34,208 32,150 124,588 137,685 119,091Total net $ 233,445 $ 211,667 $ 195,938 $ 789,042 $ 785,368 $ 712,969sales

Net Sales by Product Category: Three Months Ended Year Ended December31, December31,(In thousands) 2020 2019 2018 2020 2019 2018Musculoskeletal $ 215,361 $ 197,757 $ 181,638 $ 748,446 $ 738,377 $ 666,040SolutionsEnabling 18,084 13,910 14,300 40,596 46,991 46,929TechnologiesTotal net sales $ 233,445 $ 211,667 $ 195,938 $ 789,042 $ 785,368 $ 712,969

Liquidity and Capital Resources: December31, December31,(In thousands) 2020 2019Cash, cash equivalents, and restricted cash $ 239,397 $ 195,724Short-term marketable securities 187,344 115,763Long-term marketable securities 358,522 409,514Total cash, cash equivalents, restricted cash $ 785,263 $ 721,001and marketable securities

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

Non-GAAP Adjusted EBITDA Reconciliation Table:

Three Months Ended Year Ended December31, December31,(Inthousands, 2020 2019 2018 2020 2019 2018 exceptpercentages)Net income/ $ 52,957 $ 45,530 $ 36,751 $ 102,285 $ 155,210 $ 156,474 (loss)Interest(income)/ (2,953 ) (4,452 ) (4,164 ) (13,952 ) (17,406 ) (13,278 )expense, netProvisionfor income 9,256 8,920 10,876 23,614 34,736 32,131 taxesDepreciationand 16,904 14,046 11,936 62,874 52,734 41,630 amortizationEBITDA 76,164 64,044 55,399 174,821 225,274 216,957 Stock-basedcompensation 5,935 6,437 4,821 27,073 26,085 21,899 expenseProvisionfor (188 ) 565 5,878 9 2,190 5,878 litigationAcquisitionrelated 2,698 1,652 641 5,877 3,664 4,488 costs/licensingAcquisitionofin-process ? ? ? 24,418 ? ? research anddevelopmentNet (gain)loss from ? ? ? ? ? (3,593 )sale ofassetsAdjusted $ 84,609 $ 72,698 $ 66,739 $ 232,198 $ 257,213 $ 245,629 EBITDA Net income/(loss) as a 22.7 % 21.5 % 18.8 % 13.0 % 19.8 % 21.9 %percentageof net salesAdjustedEBITDA as a 36.2 % 34.3 % 34.1 % 29.4 % 32.8 % 34.5 %percentageof net sales

Non-GAAP Net Income Reconciliation Table:

Three Months Ended Year Ended December31, December31,(In 2020 2019 2018 2020 2019 2018 thousands)Net income/ $ 52,957 $ 45,530 $ 36,751 $ 102,285 $ 155,210 $ 156,474 (loss)Provisionfor (188 ) 565 5,878 9 2,190 5,878 litigationAmortizationof 4,788 3,397 3,063 16,831 13,809 9,588 intangiblesAcquisitionrelated 2,698 1,652 641 5,877 3,664 4,488 costs/licensingAcquisitionofin-process ? ? ? 24,418 ? ? research anddevelopmentNet (gain)loss from ? ? ? ? ? (3,593 )sale ofassetsTax effectof adjusting (1,086 ) (920 ) (2,189 ) (4,504 ) (3,581 ) (3,437 )itemsNon-GAAP netincome/ $ 59,169 $ 50,224 $ 44,144 $ 144,916 $ 171,292 $ 169,398 (loss)

Non-GAAP Diluted Earnings Per Share Reconciliation Table:

Three Months Ended Year Ended December31, December31,(In 2020 2019 2018 2020 2019 2018 thousands)Dilutedearnings per $ 0.52 $ 0.44 $ 0.36 $ 1.01 $ 1.52 $ 1.54 share, asreportedProvisionfor ? 0.01 0.06 ? 0.02 0.06 litigationAmortizationof 0.05 0.03 0.03 0.17 0.14 0.09 intangiblesAcquisitionrelated 0.03 0.02 0.01 0.06 0.04 0.05 costs/licensingAcquisitionofin-process ? ? ? 0.24 ? ? research anddevelopmentNet (gain)loss from ? ? ? ? ? (0.04 )sale ofassetsTax effectof adjusting (0.01 ) (0.01 ) (0.02 ) (0.04 ) (0.04 ) (0.03 )itemsNon-GAAPdiluted $ 0.58 $ 0.49 $ 0.43 $ 1.44 $ 1.68 $ 1.67 earnings pershare*amountsmight not add due torounding

Non-GAAP Free Cash Flow Reconciliation Table:

Three Months Ended Year Ended December31, December31,(In 2020 2019 2018 2020 2019 2018 thousands)Net cashprovidedby $ 80,184 $ 54,266 $ 44,291 $ 198,793 $ 171,975 $ 181,643 operatingactivitiesPurchasesofproperty (14,063 ) (15,793 ) (17,159 ) (63,658 ) (70,750 ) (59,697 )andequipmentFree cash $ 66,121 $ 38,473 $ 27,132 $ 135,135 $ 101,225 $ 121,946 flow

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

Three Months Ended Reported Currency Constant Impact on Currency December31, Net Current Net Sales Sales(In thousands, 2020 2019 Growth Period Net Growthexcept percentages) SalesUnited 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 Constant Impact on Currency December31, Net Current Net Sales Sales(In thousands, 2020 2019 Growth Period Net Growthexcept percentages) SalesUnited 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 KearnsSenior Vice President, Business Development and Investor RelationsPhone: (610) 930-1800Email: investors@globusmedical.comwww.globusmedical.com