• Globus Medical Reports Fourth Quarter and Full Year 2022 Results

    Source: Nasdaq GlobeNewswire / 21 Feb 2023 16:15:01   America/New_York

    AUDUBON, Pa., Feb. 21, 2023 (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, 2022.

    Fourth Quarter 2022:

    • Worldwide net sales were $274.5 million, an increase of 9.8%, or 11.7% on a constant currency basis
    • GAAP net income for the quarter was $50.1 million
    • GAAP diluted earnings per share (“EPS”) was $0.49 and non-GAAP diluted EPS was $0.59
    • Non-GAAP adjusted EBITDA was $90.2 million, or 32.8% of net sales

    Full Year 2022:

    • Worldwide net sales were $1,022.8 million, an increase of 6.8%, or 8.2% on a constant currency basis
    • GAAP net income for the year was $190.2 million
    • GAAP diluted EPS was $1.85 and non-GAAP diluted EPS was $2.06
    • Non-GAAP adjusted EBITDA was $339.2 million, or 33.2% of net sales

    “Globus Medical was founded twenty years ago with a small group of talented engineers who had a vision of improving care for patients with musculoskeletal disease,” said Dan Scavilla, President and CEO. “I’m proud to announce that in 2022, Globus Medical exceeded $1 billion in net sales. The journey from startup to $1 billion in sales is certainly worthy of note and particularly so at this milestone anniversary of the company’s founding. The fourth quarter of 2022 was a record-setting quarter, with record-breaking total sales, U.S. Spine sales, and Enabling Technologies sales. Our future continues to look bright as we improve the lives of patients, surgeons, employees and shareholders by working to further achieve our vision. We plan to build on our legacy of product innovation, superior customer services, and operational execution this year and in the future as we continue to help patients with musculoskeletal disease.”

    Worldwide net sales for the fourth quarter were $274.5 million, an as-reported increase of 9.8% over the fourth quarter of 2021, and an increase of 11.7% on a constant currency basis.  U.S. net sales for the fourth quarter of 2022 increased by 9.5% compared to the fourth quarter of 2021. International net sales increased by 11.4% over the fourth quarter of 2021 on an as-reported basis, and an increase of 24.2% on a constant currency basis.

    Worldwide net sales for the full year of 2022 were $1,022.8 million, an increase of 6.8% as compared to the full year of 2021, and an increase of 8.2% on a constant currency basis. U.S. net sales for the full year of 2022 increased by 6.4% compared to the full year of 2021. International net sales increased by 8.9% over the full year of 2021 on an as-reported basis, and an increase of 19.1% on a constant currency basis.

    GAAP net income for the fourth quarter was $50.1 million, an increase of 231.4% over the same period in the prior year, driven primarily by higher net sales and the acquisition of in-process research and development during the fourth quarter in 2021. Diluted EPS for the fourth quarter was $0.49, compared to $0.14 for the fourth quarter of 2021. Non-GAAP diluted EPS for the fourth quarter of 2022 was $0.59, compared to $0.49 in the fourth quarter of 2021, an increase of 20.0% driven primarily by higher net sales.

    Net cash provided by operating activities was $178.5 million, and non-GAAP free cash flow was $104.4 million for the full year of 2022. The Company remains debt free.

    2023 Annual Guidance

    The Company today announced full year stand-alone 2023 guidance with expected net sales of $1.1 billion and non-GAAP diluted earnings per share of $2.30.

    Conference Call Information

    Globus Medical will hold a teleconference to discuss its 2022 fourth quarter and full year results with the investment community at 4:30 p.m. Eastern Time today.

    Participants may access the conference call live via webcast on the Investors page of Globus Medical’s website at https://www.investors.globusmedical.com/news-events/events-webcasts.

    To participate via telephone, please register in advance at this link. Upon registration, all telephone participants will receive a confirmation email detailing how to join the conference call, including the dial-in number along with a unique passcode and registrant ID that can be used to access the call. The audio archive will be available after the call on the Investor page of the Globus Medical website.

    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, and 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, 2022 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 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, 2022 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
    CONSOLIDATED STATEMENTS OF INCOME
    (unaudited)

     Three Months Ended Year Ended
     December 31, December 31,
    (In thousands, except per share amounts)2022 2021 2020 2022 2021 2020
    Net sales$ 274,498 $250,021  $233,445  $1,022,843  $958,102  $789,042 
    Cost of goods sold  70,591  61,796   60,859    263,725   239,223   217,463 
    Gross profit  203,907  188,225   172,586    759,118   718,879   571,579 
                      
    Operating expenses:                 
    Research and development  19,507  51,022   15,241    73,015   97,346   84,519 
    Selling, general and administrative  118,075  106,560   92,047    432,117   408,149   354,757 
    Provision for litigation   5,410   (188)   2,341   5,921   9 
    Amortization of intangibles  4,506  4,556   4,788    17,735   18,526   16,831 
    Acquisition related costs  7,791  2,477   2,163    5,959   16,984   4,030 
    Total operating expenses  149,879  170,025   114,051    531,167   546,926   460,146 
                      
    Operating income/(loss)  54,028  18,200   58,535    227,951   171,953   111,433 
                      
    Other income/(expense), net                 
    Interest income/(expense), net  5,315  1,939   2,953    14,233   9,297   13,952 
    Foreign currency transaction gain/(loss)  2,688  (454)  527    (1,020)  (1,423)  (279)
    Other income/(expense)  85  143   198    1,855   580   793 
    Total other income/(expense), net  8,088  1,628   3,678    15,068   8,454   14,466 
                      
    Income/(loss) before income taxes  62,116  19,828   62,213    243,019   180,407   125,899 
    Income tax provision  12,051  4,722   9,256    52,850   31,216   23,614 
                      
    Net income/(loss)$ 50,065 $15,106  $52,957  $ 190,169  $149,191  $102,285 
                      
    Other comprehensive income/(loss), net of tax:                 
    Unrealized gain/(loss) on marketable securities  4,199  (2,623)  (833)   (14,040)  (6,054)  1,402 
    Foreign currency translation gain/(loss)  3,397  (1,095)  2,631    (3,818)  (4,673)  5,451 
    Total other comprehensive income/(loss), net of tax  7,596  (3,718)  1,748    (17,858)  (10,727)  6,853 
    Comprehensive income/(loss)$ 57,661 $11,388  $54,705  $ 172,311  $138,464  $109,138 
                      
    Earnings per share:                 
    Basic$ 0.50 $0.15  $0.54  $ 1.89  $1.48  $1.04 
    Diluted$ 0.49 $0.14  $0.52  $ 1.85  $1.44  $1.01 
    Weighted average shares outstanding:                 
    Basic  99,967  101,495   98,958    100,469   100,734   98,580 
    Diluted  102,209  104,192   101,414    102,643   103,623   100,971 
                           

    GLOBUS MEDICAL, INC. AND SUBSIDIARIES
    CONSOLIDATED BALANCE SHEETS
    (unaudited)

      December 31,
    (In thousands, except share and per share values) 2022 2021
    ASSETS      
    Current assets:      
    Cash and cash equivalents $ 150,466  $193,069 
    Short-term marketable securities   295,592   250,378 
    Accounts receivable, net of allowances of $4,724 and $4,962, respectively   213,247   164,436 
    Inventories   298,981   237,001 
    Prepaid expenses and other current assets   20,997   18,417 
    Income taxes receivable   4,061   1,215 
    Total current assets   983,344   864,516 
    Property and equipment, net of accumulated depreciation of $343,036 and $305,575, respectively   243,729   221,076 
    Long-term marketable securities   495,852   562,475 
    Intangible assets, net   63,574   68,660 
    Goodwill   197,471   179,708 
    Other assets   43,311   36,334 
    Deferred income taxes   48,845   24,494 
    Total assets $ 2,076,126  $1,957,263 
           
    LIABILITIES AND EQUITY      
    Current liabilities:      
    Accounts payable $ 36,101  $21,955 
    Accrued expenses   94,705   91,168 
    Income taxes payable   990   1,046 
    Business acquisition liabilities   13,308   11,770 
    Deferred revenue   14,100   12,025 
    Payable to broker     2,200 
    Total current liabilities   159,204   140,164 
    Business acquisition liabilities, net of current portion   54,950   58,755 
    Deferred income taxes   1,779   4,314 
    Other liabilities   13,820   12,642 
    Total liabilities   229,753   215,875 
           
    Equity:      
    Class A common stock; $0.001 par value. Authorized 500,000,000 shares; issued and outstanding 77,762,282 and 79,113,916 shares at December 31, 2022 and December 31, 2021, respectively   78   79 
    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, 2022 and December 31, 2021, respectively   22   22 
    Additional paid-in capital   630,952   553,787 
    Accumulated other comprehensive income/(loss)   (24,630)  (6,772)
    Retained earnings   1,239,951   1,194,272 
    Total equity   1,846,373   1,741,388 
    Total liabilities and equity $ 2,076,126  $1,957,263 
             

    GLOBUS MEDICAL, INC. AND SUBSIDIARIES
    CONSOLIDATED STATEMENTS OF CASH FLOWS
    (unaudited)

      Year Ended
      December 31,
    (In thousands) 2022 2021 2020
    Cash flows from operating activities:         
    Net income $ 190,169  $149,191  $102,285 
    Adjustments to reconcile net income to net cash provided by operating activities:         
    Acquired in-process research and development   150   34,312   24,418 
    Depreciation and amortization   68,252   69,867   62,874 
    Amortization of premium (discount) on marketable securities   5,389   2,781   587 
    Write-down for excess and obsolete inventories, net   6,400   6,143   17,741 
    Stock-based compensation expense   32,810   30,586   27,073 
    Allowance for doubtful accounts   (1)  1,200   2,960 
    Change in fair value of business acquisition liabilities   5,132   16,807   2,674 
    Change in deferred income taxes   (22,223)  (17,615)  (4,338)
    (Gain)/loss on disposal of assets, net   299   464   809 
    Payment of business acquisition related liabilities   (2,647)  (210)  (700)
    (Increase)/decrease in:         
    Accounts receivable   (50,843)  (25,895)  10,696 
    Inventories   (61,745)  (11,971)  (50,111)
    Prepaid expenses and other assets   (10,292)  (6,178)  (11,088)
    Increase/(decrease) in:         
    Accounts payable   14,418   3,684   (6,352)
    Accrued expenses and other liabilities   6,087   17,896   17,608 
    Income taxes payable/receivable   (2,887)  5,212   1,657 
    Net cash provided by/(used in) operating activities   178,468   276,274   198,793 
    Cash flows from investing activities:         
    Purchases of marketable securities   (419,534)  (622,359)  (223,540)
    Maturities of marketable securities   312,221   227,908   134,462 
    Sales of marketable securities   102,433   109,898   68,897 
    Purchases of property and equipment   (74,047)  (56,898)  (63,658)
    Acquisition of businesses, net of cash acquired and purchases of intangible and other assets   (31,435)  (34,488)  (33,483)
    Net cash provided by/(used in) investing activities   (110,362)  (375,939)  (117,322)
    Cash flows from financing activities:         
    Payment of business acquisition liabilities   (7,185)  (9,349)  (6,316)
    Proceeds from exercise of stock options   41,716   63,496   72,322 
    Repurchase of common stock   (144,493)     (104,669)
    Net cash provided by/(used in) financing activities   (109,962)  54,147   (38,663)
    Effect of foreign exchange rates on cash   (747)  (810)  865 
    Net increase/(decrease) in cash and cash equivalents  (42,603)  (46,328)  43,673 
    Cash and cash equivalents at beginning of period   193,069   239,397   195,724 
    Cash and cash equivalents at end of period $ 150,466  $193,069  $239,397 
    Supplemental disclosures of cash flow information:         
    Income taxes paid $ 77,823  $45,027  $25,437 
                 
    Purchases of property and equipment included in accounts payable and accrued expenses $ 7,423  $4,551  $4,210 
                 

    Supplemental Financial Information

    Net Sales by Product Category:

     Three Months Ended Year Ended
     December 31, December 31,
    (In thousands)2022 2021 2020 2022 2021 2020
    Musculoskeletal Solutions$ 244,999  $224,624  $215,361  $ 926,703  $876,780  $748,446 
    Enabling Technologies  29,499   25,397   18,084    96,140   81,322   40,596 
    Total net sales$ 274,498  $250,021  $233,445  $1,022,843  $958,102  $789,042 
                            

    Liquidity and Capital Resources:

     December 31, December 31,
    (In thousands)2022 2021
    Cash and cash equivalents$ 150,466  $193,069 
    Short-term marketable securities  295,592   250,378 
    Long-term marketable securities  495,852   562,475 
    Total cash, cash equivalents and marketable securities$ 941,910  $1,005,922 
            

    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)2022 2021 2020 2022 2021 2020
    Net income/(loss)$ 50,065  $15,106  $52,957  $ 190,169  $149,191  $102,285 
    Interest (income)/expense, net  (5,315)  (1,939)  (2,953)   (14,233)  (9,297)  (13,952)
    Provision for income taxes  12,051   4,722   9,256    52,850   31,216   23,614 
    Depreciation and amortization  16,911   16,829   16,904    68,252   69,867   62,874 
    EBITDA  73,712   34,718   76,164    297,038   240,977   174,821 
    Stock-based compensation expense  8,507   7,805   5,935    32,810   30,586   27,073 
    Provision for litigation    5,410   (188)   2,341   5,921   9 
    Acquisition related costs/licensing  7,791   2,934   2,698    6,854   19,622   5,877 
    Acquisition of in-process research and development  150   34,312       150   34,312   24,418 
    Adjusted EBITDA$ 90,160  $85,179  $84,609  $ 339,193  $331,418  $232,198 
                      
    Net income/(loss) as a percentage of net sales 18.2%  6.0%  22.7%  18.6%  15.6%  13.0%
    Adjusted EBITDA as a percentage of net sales 32.8%  34.1%  36.2%  33.2%  34.6%  29.4%
                            

    Non-GAAP Net Income Reconciliation Table:

     Three Months Ended Year Ended
     December 31, December 31,
    (In thousands)2022 2021 2020 2022 2021 2020
    Net income/(loss)$ 50,065  $15,106  $52,957  $ 190,169  $149,191  $102,285 
    Provision for litigation    5,410   (188)   2,341   5,921   9 
    Amortization of intangibles  4,506   4,556   4,788    17,735   18,526   16,831 
    Acquisition related costs/licensing  7,791   2,934   2,698    6,854   19,622   5,877 
    Acquisition of in-process research and development  150   34,312       150   34,312   24,418 
    Tax effect of adjusting items  (2,415)  (11,245)  (1,086)   (5,695)  (16,151)  (4,504)
    Non-GAAP net income/(loss)$ 60,097  $51,073  $59,169  $ 211,554  $211,421  $144,916 
                            

    Non-GAAP Diluted Earnings Per Share Reconciliation Table:

     Three Months Ended Year Ended
     December 31, December 31,
    (In thousands)2022 2021 2020 2022 2021 2020
    Diluted earnings per share, as reported$ 0.49  $0.14  $0.52  $ 1.85  $1.44  $1.01 
    Provision for litigation    0.06       0.02   0.06    
    Amortization of intangibles  0.04   0.04   0.05    0.17   0.18   0.17 
    Acquisition related costs/licensing  0.08   0.03   0.03    0.07   0.19   0.06 
    Acquisition of in-process research and development  0.00   0.33       0.00   0.33   0.24 
    Tax effect of adjusting items  (0.02)  (0.11)  (0.01)   (0.06)  (0.16)  (0.04)
    Non-GAAP diluted earnings per share$ 0.59  $0.49  $0.58  $ 2.06  $2.04  $1.44 
                            

    *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)2022 2021 2020 2022 2021 2020
    Net cash provided by operating activities$ 63,975  $76,253  $80,184  $ 178,468  $276,274  $198,793 
    Purchases of property and equipment  (18,340)  (17,045)  (14,063)   (74,047)  (56,898)  (63,658)
    Free cash flow$ 45,635  $59,208  $66,121  $ 104,421  $219,376  $135,135 
                      

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

     Three Months Ended
    December 31,
     Reported
    Net Sales
     Currency
    Impact on Current Period
     Constant
    Currency
    Net Sales
    (In thousands, except percentages)2022 2021 Growth  Net Sales   Growth
    United States$ 233,232  $212,963  9.5% $  9.5%
    International  41,266   37,058  11.4%  (4,765) 24.2%
    Total net sales$ 274,498  $250,021  9.8% $(4,765) 11.7%
                      


     Year Ended
    December 31,
     Reported
    Net Sales
     Currency
    Impact on Current Period
     Constant
    Currency
    Net Sales
    (In thousands, except percentages)2022 2021 Growth Net Sales   Growth
    United States$ 871,939  $819,571  6.4% $  6.4%
    International  150,904   138,531  8.9%  (14,048) 19.1%
    Total net sales$ 1,022,843  $958,102  6.8% $(14,048) 8.2%
                      

    Contact:
    Brian Kearns
    Senior Vice President, Business Development and Investor Relations
    Phone: (610) 930-1800
    Email: investors@globusmedical.com
    www.globusmedical.com


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