Globus Medical Reports Fourth Quarter and Full Year 2021 Results

AUDUBON, Pa., Feb. 17, 2022 (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, 2021.

Fourth Quarter 2021:

Worldwide net sales were $250.0 million, an increase of 7.1% as compared to the fourth quarter of 2020
GAAP net income for the quarter was $15.1 million
GAAP diluted earnings per share (“EPS”) was $0.14 and non-GAAP diluted EPS was $0.49
Non-GAAP adjusted EBITDA was $85.2 million, or 34.1% of net sales

Full Year 2021:

Worldwide net sales were $958.1 million, an increase of 21.4% as compared to the full year of 2020
GAAP net income for the year was $149.2 million
GAAP diluted EPS was $1.44 and non-GAAP diluted EPS was $2.04 for the year
Non-GAAP adjusted EBITDA was $331.4 million, or 34.6% of net sales

“Our fourth quarter results topped off another record-breaking year for Globus Medical, as we continued to perform well above our peers in growth as well as profitability,” said Dave Demski, President and CEO. “The clinical superiority of ExcelsiusGPS^® continues to be the primary factor driving Enabling Technology momentum, which produced a record $25 million in revenue for the fourth quarter and $81 million for 2021, a 100% increase over 2020. Musculoskeletal Solutions also completed another outstanding year of market-share gains, led by US Spine with 18% growth, International Spine with 12% growth and Trauma with 39% growth. I want to thank all of our customers and team members for their belief and support and look forward to a very bright future together.”

Worldwide net sales for the fourth quarter were $250.0 million, an as-reported increase of 7.1% over the fourth quarter of 2020, and an increase of 7.4% on a constant currency basis. U.S. net sales for the fourth quarter of 2021, including robotics, increased by 7.2% compared to the fourth quarter of 2020. International net sales increased by 6.8% over the fourth quarter of 2020 on an as-reported basis, and an increase of 8.7% on a constant currency basis.

Worldwide net sales for the full year of 2021 were $958.1 million, an increase of 21.4% as compared to the full year of 2020. Non-GAAP diluted EPS was $2.04 for the full year of 2021.

GAAP net income for the fourth quarter was $15.1 million, a decrease of 71.5% over the same period in the prior year, driven primarily by the acquisition of in-process research and development during the fourth quarter. Diluted EPS for the fourth quarter was $0.14, compared to $0.52 for the fourth quarter of 2020. Non-GAAP diluted EPS for the fourth quarter of 2021 was $0.49, compared to $0.58 in the fourth quarter of 2020, a decrease of 16.0% driven primarily by a higher tax rate and increased stock compensation expense.

Net cash provided by operating activities was $276.3 million, and non-GAAP free cash flow was $219.4 million for the full year of 2021. The Company remains debt free.

2022 Annual Guidance

Today the Company announced full year 2022 guidance with expected net sales of $1.025 billion and non-GAAP diluted earnings per share of $2.10.

Conference Call Information

Globus Medical will hold a teleconference to discuss its 2021 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:

1-877-313-2501 United States Participants
1-929-517-0907 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 Thursday, February 24, 2022. 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 117-3696.

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, 2021 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, 2021 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)*	2021			2020			2019			2021			2020			2019
Net sales	$	250,021		$	233,445		$	211,667		$	958,102		$	789,042		$	785,368
Cost of goods sold		61,796			60,859			48,760			239,223			217,463			179,975
Gross profit		188,225			172,586			162,907			718,879			571,579			605,393

Operating expenses:
Research and development		51,022			15,241			15,496			97,346			84,519			60,073
Selling, general and administrative		106,560			92,047			92,138			408,149			354,757			354,757
Provision for litigation		5,410			(188	)		565			5,921			9			2,190
Amortization of intangibles		4,556			4,788			3,397			18,526			16,831			13,809
Acquisition related costs		2,477			2,163			1,331			16,984			4,030			2,575
Total operating expenses		170,025			114,051			112,927			546,926			460,146			433,404

Operating income/(loss)		18,200			58,535			49,980			171,953			111,433			171,989

Other income, net
Interest income/(expense), net		1,939			2,953			4,452			9,297			13,952			17,406
Foreign currency transaction gain/(loss)		(454	)		527			(48	)		(1,423	)		(279	)		75
Other income/(expense)		143			198			66			580			793			476
Total other income/(expense), net		1,628			3,678			4,470			8,454			14,466			17,957

Income/(loss) before income taxes		19,828			62,213			54,450			180,407			125,899			189,946
Income tax provision		4,722			9,256			8,920			31,216			23,614			34,736

Net income	$	15,106		$	52,957		$	45,530		$	149,191		$	102,285		$	155,210

Earnings per share:
Basic	$	0.15		$	0.54		$	0.46		$	1.48		$	1.04		$	1.57
Diluted	$	0.14		$	0.52		$	0.44		$	1.44		$	1.01		$	1.52
Weighted average shares outstanding:
Basic		101,495			98,958			99,601			100,734			98,580			99,150
Diluted		104,192			101,414			102,933			103,623			100,971			101,998

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

	December 31,
*(In thousands, except share and per share values)*	2021			2020
ASSETS
Current assets:
Cash, cash equivalents, and restricted cash	$	193,069		$	239,397
Short-term marketable securities		250,378			187,344
Accounts receivable, net of allowances of $4,962 and $4,408, respectively		164,436			141,676
Inventories		237,001			229,153
Prepaid expenses and other current assets		18,417			17,771
Income taxes receivable		1,215			6,424
Total current assets		864,516			821,765
Property and equipment, net of accumulated depreciation of $305,575 and $276,451, respectively		221,076			216,879
Long-term marketable securities		562,475			358,522
Intangible assets, net		68,660			86,949
Goodwill		179,708			156,716
Other assets		36,334			32,039
Deferred income taxes		24,494			6,615
Total assets	$	1,957,263		$	1,679,485

LIABILITIES AND EQUITY
Current liabilities:
Accounts payable	$	21,955		$	18,205
Accrued expenses		91,168			78,334
Income taxes payable		1,046			1,101
Business acquisition liabilities		11,770			5,777
Deferred revenue		12,025			8,125
Payable to broker		2,200			9,250
Total current liabilities		140,164			120,792
Business acquisition liabilities, net of current portion		58,755			31,493
Deferred income taxes		4,314			6,202
Other liabilities		12,642			14,701
Total liabilities		215,875			173,188

Equity:
Class A common stock; $0.001 par value. Authorized 500,000,000 shares; issued and outstanding 79,113,916 and 77,284,007 shares at December 31, 2021 and December 31, 2020, respectively		79			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, 2021 and December 31, 2020, respectively		22			22
Additional paid-in capital		553,787			457,161
Accumulated other comprehensive loss		(6,772	)		3,955
Retained earnings		1,194,272			1,045,082
Total equity		1,741,388			1,506,297
Total liabilities and equity	$	1,957,263		$	1,679,485

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

	Year Ended
	December 31,
*(In thousands)*	2021			2020			2019
Cash flows from operating activities:
Net income	$	149,191		$	102,285		$	155,210
Adjustments to reconcile net income to net cash provided by operating activities:
Acquired in-process research and development		34,312			24,418			—
Depreciation and amortization		69,867			62,874			52,734
Amortization of premium (discount) on marketable securities		2,781			587			(1,089	)
Write-down for excess and obsolete inventories, net		6,143			17,741			2,498
Stock-based compensation expense		30,586			27,073			26,085
Allowance for doubtful accounts		1,200			2,960			3,026
Change in fair value of business acquisition liabilities		16,807			2,674			1,787
Change in deferred income taxes		(17,615	)		(4,338	)		4,302
(Gain)/loss on disposal of assets, net		464			809			866
Payment of business acquisition related liabilities		(210	)		(700	)		—
(Increase)/decrease in:
Accounts receivable		(25,895	)		10,696			(18,306	)
Inventories		(11,971	)		(50,111	)		(50,018	)
Prepaid expenses and other assets		(6,178	)		(11,088	)		(12,263	)
Increase/(decrease) in:
Accounts payable		3,684			(6,352	)		773
Accrued expenses and other liabilities		17,896			17,608			7,043
Income taxes payable/receivable		5,212			1,657			(673	)
Net cash provided by/(used in) operating activities		276,274			198,793			171,975
Cash flows from investing activities:
Purchases of marketable securities		(622,359	)		(223,540	)		(346,526	)
Maturities of marketable securities		227,908			134,462			247,008
Sales of marketable securities		109,898			68,897			53,786
Purchases of property and equipment		(56,898	)		(63,658	)		(70,750	)
Acquisition of businesses, net of cash acquired and purchases of intangible and other assets		(34,488	)		(33,483	)		(23,799	)
Net cash provided by/(used in) investing activities		(375,939	)		(117,322	)		(140,281	)
Cash flows from financing activities:
Payment of business acquisition liabilities		(9,349	)		(6,316	)		(6,597	)
Proceeds from exercise of stock options		63,496			72,322			31,036
Repurchase of common stock		—			(104,669	)		—
Net cash provided by/(used in) financing activities		54,147			(38,663	)		24,439
Effect of foreign exchange rate on cash		(810	)		865			(156	)
Net increase in cash, cash equivalents, and restricted cash		(46,328	)		43,673			55,977
Cash, cash equivalents, and restricted cash at beginning of period		239,397			195,724			139,747
Cash, cash equivalents, and restricted cash at end of period	$	193,069		$	239,397		$	195,724
Supplemental disclosures of cash flow information:
Income taxes paid	$	45,027		$	25,437		$	34,139
Purchases of property and equipment included in accounts payable and accrued expenses	$	4,551		$	4,210		$	4,226

Supplemental Financial Information

Net Sales by Product Category:

	Three Months Ended						Year Ended
	December 31,						December 31,
*(In thousands)*	2021		2020		2019		2021		2020		2019
Musculoskeletal Solutions	$	224,623	$	215,361	$	197,757	$	876,780	$	748,446	$	738,377
Enabling Technologies		25,398		18,084		13,910		81,322		40,596		46,991
Total net sales	$	250,021	$	233,445	$	211,667	$	958,102	$	789,042	$	785,368

Liquidity and Capital Resources:

	December 31,		December 31,
*(In thousands)*	2021		2020
Cash, cash equivalents, and restricted cash	$	193,069	$	239,397
Short-term marketable securities		250,378		187,344
Long-term marketable securities		562,475		358,522
Total cash, cash equivalents, restricted cash and marketable securities	$	1,005,922	$	785,263

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)*	2021			2020			2019			2021			2020			2019
Net income/(loss)	$	15,106		$	52,957		$	45,530		$	149,191		$	102,285		$	155,210
Interest (income)/expense, net		(1,939	)		(2,953	)		(4,452	)		(9,297	)		(13,952	)		(17,406	)
Provision for income taxes		4,722			9,256			8,920			31,216			23,614			34,736
Depreciation and amortization		16,829			16,904			14,046			69,867			62,874			52,734
EBITDA		34,718			76,164			64,044			240,977			174,821			225,274
Stock-based compensation expense		7,805			5,935			6,437			30,586			27,073			26,085
Provision for litigation		5,410			(188	)		565			5,921			9			2,190
Acquisition related costs/licensing		2,934			2,698			1,652			19,622			5,877			3,664
Acquisition of in-process research and development		34,312			—			—			34,312			24,418			—
Adjusted EBITDA	$	85,179		$	84,609		$	72,698		$	331,418		$	232,198		$	257,213

*Net income/(loss) as a percentage of net sales*		6.0	%		22.7	%		21.5	%		15.6	%		13.0	%		19.8	%
Adjusted EBITDA as a percentage of net sales		34.1	%		36.2	%		34.3	%		34.6	%		29.4	%		32.8	%

Non-GAAP Net Income Reconciliation Table:

	Three Months Ended									Year Ended
	December 31,									December 31,
*(In thousands)*	2021			2020			2019			2021			2020			2019
Net income/(loss)	$	15,106		$	52,957		$	45,530		$	149,191		$	102,285		$	155,210
Provision for litigation		5,410			(188	)		565			5,921			9			2,190
Amortization of intangibles		4,556			4,788			3,397			18,526			16,831			13,809
Acquisition related costs/licensing		2,934			2,698			1,652			19,622			5,877			3,664
Acquisition of in-process research and development		34,312			—			—			34,312			24,418			—
Tax effect of adjusting items		(11,245	)		(1,086	)		(920	)		(16,151	)		(4,504	)		(3,581	)
Non-GAAP net income/(loss)	$	51,073		$	59,169		$	50,224		$	211,421		$	144,916		$	171,292

Non-GAAP Diluted Earnings Per Share Reconciliation Table:

	Three Months Ended									Year Ended
	December 31,									December 31,
*(In thousands)*	2021			2020			2019			2021			2020			2019
Diluted earnings per share, as reported	$	0.14		$	0.52		$	0.44		$	1.44		$	1.01		$	1.52
Provision for litigation		0.06			—			0.01			0.06			—			0.02
Amortization of intangibles		0.04			0.05			0.03			0.18			0.17			0.14
Acquisition related costs/licensing		0.03			0.03			0.02			0.19			0.06			0.04
Acquisition of in-process research and development		0.33			—			—			0.33			0.24			—
Tax effect of adjusting items		(0.11	)		(0.01	)		(0.01	)		(0.16	)		(0.04	)		(0.04	)
Non-GAAP diluted earnings per share	$	0.49		$	0.58		$	0.49		$	2.04		$	1.44		$	1.68
*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)*	2021			2020			2019			2021			2020			2019
Net cash provided by operating activities	$	76,253		$	80,184		$	54,266		$	276,274		$	198,793		$	171,975
Purchases of property and equipment		(17,045	)		(14,063	)		(15,793	)		(56,898	)		(63,658	)		(70,750	)
Free cash flow	$	59,208		$	66,121		$	38,473		$	219,376		$	135,135		$	101,225

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)*	2021		2020		Growth	Period Net Sales			Growth
United States	$	212,963	$	198,749	7.2%	$	—		7.2%
International		37,058		34,696	6.8%		645		8.7%
Total net sales	$	250,021	$	233,445	7.1%	$	645		7.4%


	Year Ended				Reported	Currency Impact on			Constant Currency
	December 31,				Net Sales	Current			Net Sales
*(In thousands, except percentages)*	2021		2020		Growth	Period Net Sales			Growth
United States	$	819,571	$	664,454	23.3%	$	—		23.3%
International		138,531		124,588	11.2%		(1,613	)	9.9%
Total net sales	$	958,102	$	789,042	21.4%	$	(1,613	)	21.2%

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

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