AP NEWS

Globus Medical Reports Third Quarter 2018 Results

November 8, 2018

AUDUBON, Pa., Nov. 08, 2018 (GLOBE NEWSWIRE) -- Globus Medical, Inc. (NYSE:GMED), a leading musculoskeletal solutions company, today announced its financial results for the third quarter ended September 30, 2018.

-- Worldwide sales were $169.2 million, an increase of 11.5% as reported -- Third quarter net income was $35.2 million, an increase of 37.6% -- Diluted earnings per share (EPS) was $0.35 and non-GAAP diluted EPS was $0.39 -- Non-GAAP diluted EPS increased 29.2% compared to third quarter of 2017 -- Non-GAAP adjusted EBITDA was 34.1% of sales

“The third quarter marks the fourth consecutive quarter of double-digit organic growth for Globus Medical, as our U.S. Spine business continues to take market share, growing by 7.5%; our international revenue increased by 16.8%; and Emerging Technologies contributed $6.3 million,” said Dave Demski, CEO. “During the third quarter, we completed the acquisition of Surgimap®, the leading surgical planning software for spine. The addition of Surgimap® will further strengthen Globus Medical’s ExcelsiusGPS® platform by streamlining workflow and enabling superior data analytics. The level of adoption we are seeing by surgeons in accounts with our ExcelsiusGPS® robotic system continues to show positive momentum and the pipeline for potential robotic sales is robust.”

Worldwide sales for the third quarter were $169.2 million, an increase of 11.5% over the third quarter of 2017. Revenue from Emerging Technologies was primarily due to continued demand for our ExcelsiusGPS® robotics and navigation system.

Third quarter sales in the U.S., including robotics, increased by 10.5% compared to the third quarter of 2017. International sales increased by 16.8% over the third quarter of 2017 on an as-reported basis and 18.5% on a constant currency basis.

Third quarter GAAP net income was $35.2 million, an increase of 37.6% over the same period last year. Diluted EPS for the third quarter was $0.35, as compared to $0.26 for the third quarter 2017. Non-GAAP diluted EPS for the third quarter was $0.39, compared to $0.30 in the third quarter of 2017, an increase of 29.2%.

The company generated net cash provided by operating activities of $51.8 million and non-GAAP free cash flow of $36.4 million in the third quarter, and ended the quarter with cash, cash equivalents and marketable securities of $541.6 million. The company remains debt free.

2018 Annual GuidanceThe company today issued new guidance for full year 2018 sales of $705 million and non-GAAP diluted earnings per share of $1.62. 2018 guidance was previously sales of $700 million and non-GAAP diluted earnings per share of $1.55.

Conference Call InformationGlobus Medical will hold a teleconference to discuss its 2018 third quarter 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 investors.globusmedical.com.

The call will be archived until Thursday, November 15, 2018. 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 1012-6377.

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 MeasuresTo 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, provisions for litigation, and acquisition related costs/licensing, and net gain from the sale of assets, 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. Net gain from sale of assets represents the gain on sale of assets and the offsetting impact of costs incurred through the sale.

In addition, for the period ended September 30, 2018 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, net gain from the sale of assets and the tax effects of such adjustments. 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, net gain from the sale of assets and the tax effects of such adjustments, which we believe are not reflective of underlying business trends. Additionally, for the periods ended September 30, 2018 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 sales growth is calculated by translating current year sales at the same average exchange rates in effect during the applicable prior year period. We believe constant currency sales growth provides insight to the comparative increase or decrease in period 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 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 sales growth may differ from that of other companies and therefore may not be comparable. Additionally, we have recast prior periods for non-GAAP net income and non-GAAP diluted earnings per share.

Safe Harbor StatementsAll 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 successfully integrate the international operations acquired from Alphatec, both in general and on our anticipated timeline, our ability to transition Alphatec’s international customers to Globus products, our ability to realize the expected benefits to our results from the Alphatec acquisition, 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 Nine Months Ended (In thousands, except per share amounts) September 30, September 30, September 30, September 30, 2018 2017 2018 2017 ------------- ------------- ------------- ------------- Sales $ 169,236 $ 151,744 $ 517,031 $ 459,943 Cost of goods sold 37,849 36,798 113,456 109,597 --------- --- --------- --- --------- --- --------- --- Gross profit 131,387 114,946 403,575 350,346 --------- --- --------- --- --------- --- --------- --- Operating expenses: Research and development 15,527 10,887 41,738 32,266 Selling, general and administrative 75,131 63,362 227,949 194,859 Provision for litigation — 2,537 — 2,780 Amortization of intangibles 2,160 2,080 6,525 5,671 Acquisition related costs 268 285 1,289 1,290 --------- --- --------- --- --------- --- --------- --- Total operating expenses 93,086 79,151 277,501 236,866 --------- --- --------- --- --------- --- --------- --- Operating income 38,301 35,795 126,074 113,480 Other income/(expense), net 4,296 1,562 14,904 5,848 --------- --- --------- --- --------- --- --------- --- Income before income taxes 42,597 37,357 140,978 119,328 Income tax provision 7,389 11,766 21,254 36,356 --------- --- --------- --- --------- --- --------- --- Net income $ 35,208 $ 25,591 $ 119,724 $ 82,972 - ------- --- - ------- --- - ------- --- - ------- --- Earnings per share: Basic $ 0.36 $ 0.27 $ 1.23 $ 0.86 - ------- --- - ------- --- - ------- --- - ------- --- Diluted $ 0.35 $ 0.26 $ 1.18 $ 0.85 - ------- --- - ------- --- - ------- --- - ------- --- Weighted average shares outstanding: Basic 98,328 96,318 97,671 96,160 --------- --- --------- --- --------- --- --------- --- Diluted 101,804 97,849 101,275 97,607 --------- --- --------- --- --------- --- --------- ---

GLOBUS MEDICAL, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS (In thousands, except par value) September 30, December 31, 2018 2017 ------------- ------------- ASSETS (unaudited) Current assets: Cash and cash equivalents $ 145,295 $ 118,817 Short-term marketable securities 227,466 254,890 Accounts receivable, net of allowances of $3,655 and $3,963, respectively 118,847 116,676 Inventories 124,372 108,409 Prepaid expenses and other current assets 13,951 11,166 Current portion of note receivable 3,333 1,667 Income taxes receivable 13,137 8,717 Total current assets 646,401 620,342 ----------- - ----------- - Property and equipment, net of accumulated depreciation of $210,120 and $191,760, 161,768 143,167 respectively Long-term marketable securities 168,850 56,133 Note receivable 25,833 28,333 Intangible assets, net 89,522 78,659 Goodwill 124,015 123,890 Other assets 6,726 7,947 Deferred income taxes 15,391 20,031 ----------- - Total assets $ 1,238,506 $ 1,078,502 - --------- - - --------- - LIABILITIES AND EQUITY Current liabilities: Accounts payable $ 23,061 $ 25,039 Accrued expenses 47,764 52,594 Income taxes payable 2,322 3,274 Business acquisition liabilities 6,693 11,411 Deferred revenue 1,878 755 Total current liabilities 81,718 93,073 ----------- - ----------- - Business acquisition liabilities, net of current portion 3,378 4,508 Deferred income taxes 9,623 10,669 Other liabilities 2,670 2,474 ----------- - ----------- - Total liabilities 97,389 110,724 ----------- - ----------- - Commitments and contingencies Equity: Common stock; $0.001 par value. Authorized 785,000 shares; issued and outstanding 98,450 and 96,658 shares at September 30, 2018 and December 31, 2017, 99 97 respectively Additional paid-in capital 291,875 238,341 Accumulated other comprehensive loss (6,828 ) (6,907 ) Retained earnings 855,971 736,247 ----------- - ----------- - Total equity 1,141,117 967,778 Total liabilities and equity $ 1,238,506 $ 1,078,502 - --------- - - --------- -

GLOBUS MEDICAL, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited) Nine Months Ended September September (In thousands) 30, 30, 2018 2017 ----------- ---------- Cash flows from operating activities: Net income $ 119,724 $ 82,972 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 29,694 33,773 Amortization of premium on marketable securities 1,808 2,258 Write-down for excess and obsolete inventories 8,326 8,158 Stock-based compensation expense 17,078 10,659 Allowance for doubtful accounts 388 1,135 Change in fair value of business acquisition liabilities 592 1,011 Change in deferred income taxes 1,606 815 (Gain)/loss on disposal of assets, net (3,694 ) — (Increase)/decrease in: Accounts receivable (2,900 ) (2,200 ) Inventories (23,042 ) (6,956 ) Prepaid expenses and other assets (81 ) (974 ) Increase/(decrease) in: Accounts payable (4,858 ) (344 ) Accrued expenses and other liabilities (1,965 ) (9,377 ) Income taxes payable/receivable (5,324 ) (6,709 ) --------- - -------- - Net cash provided by operating activities 137,352 114,221 --------- - -------- - Cash flows from investing activities: Purchases of marketable securities (382,347 ) (227,699 ) Maturities of marketable securities 210,066 168,418 Sales of marketable securities 85,234 34,751 Purchases of property and equipment (42,538 ) (37,878 ) Proceeds from sale of assets 4,000 — Acquisition of businesses, net of cash acquired, and purchases of intangible and other (14,825 ) (31,501 ) assets --------- - -------- - Net cash used in investing activities (140,410 ) (93,909 ) --------- - -------- - Cash flows from financing activities: Payment of business acquisition liabilities (6,513 ) (5,234 ) Proceeds from exercise of stock options 36,245 6,943 Net cash (used in)/provided by financing activities 29,732 1,709 --------- - -------- - Effect of foreign exchange rate on cash (196 ) 778 --------- - -------- - Net increase in cash, cash equivalents, and restricted cash 26,478 22,799 Cash, cash equivalents, and restricted cash, beginning of period 118,817 67,431 --------- - -------- - Cash, cash equivalents, and restricted cash, end of period $ 145,295 $ 90,230 - ------- - - ------ - Supplemental disclosures of cash flow information: Interest paid — 34 Income taxes paid $ 24,894 $ 49,008

Supplemental Financial Information Sales by Geographic Area: (Unaudited) Three Months Ended Nine Months Ended (In thousands) September 30, September 30, September 30, September 30, 2018 2017 2018 2017 ------------- ------------- ------------- ------------- United States $ 139,097 $ 125,933 $ 429,823 $ 381,870 International 30,139 25,811 87,208 78,073 --------- --- --------- --- --------- --- --------- --- Total sales $ 169,236 $ 151,744 $ 517,031 $ 459,943 - ------- --- - ------- --- - ------- --- - ------- ---

Sales by Revenue Stream: (Unaudited) Three Months Ended Nine Months Ended (In thousands) September 30, September 30, September 30, September 30, 2018 2017 2018 2017 ------------- ------------- ------------- ------------- Spine products $ 162,952 $ 151,744 $ 484,149 $ 459,943 Emerging Technology products 6,284 — 32,882 — --------- --- --------- --- --------- --- --------- --- Total sales $ 169,236 $ 151,744 $ 517,031 $ 459,943 - ------- --- - ------- --- - ------- --- - ------- ---

Liquidity and Capital Resources: (Unaudited) September 30, December 31, 2018 2017 ------------- ------------ (In thousands) Cash and cash equivalents $ 145,295 $ 118,817 Short-term marketable securities 227,466 254,890 Long-term marketable securities 168,850 56,133 --------- --- --------- -- Total cash, cash equivalents and marketable securities $ 541,611 $ 429,840 - ------- --- - ------- --

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

Non-GAAP Adjusted EBITDA Reconciliation Table: (Unaudited) Three Months Ended Nine Months Ended September September September September (In thousands, except percentages) 30, 30, 30, 30, 2018 2017 2018 2017 ---------- ---------- ----------- ----------- Net income $ 35,208 $ 25,591 $ 119,724 $ 82,972 Interest income, net (3,852 ) (1,738 ) (9,114 ) (4,746 ) Provision for income taxes 7,389 11,766 21,254 36,356 Depreciation and amortization 10,461 10,838 29,694 33,773 -------- - -------- - --------- - --------- - EBITDA 49,206 46,457 161,558 148,355 Stock-based compensation expense 5,545 3,596 17,078 10,659 Provision for litigation — 2,537 — 2,780 Acquisition related costs/licensing 2,169 784 3,847 2,838 Net gain from sale of assets 764 — (3,593 ) — -------- - --------- - Adjusted EBITDA $ 57,684 $ 53,374 $ 178,890 $ 164,632 - ------ - - ------ - - ------- - - ------- - Net income as a percentage of sales 20.8 % 16.9 % 23.2 % 18.0 % Adjusted EBITDA as a percentage of sales 34.1 % 35.2 % 34.6 % 35.8 %

Non-GAAP Net Income Reconciliation Table: (Unaudited) Three Months Ended Nine Months Ended September September September September (In thousands) 30, 30, 30, 30, 2018 2017 2018 2017 ---------- ---------- ----------- ---------- Net income $ 35,208 $ 25,591 $ 119,724 $ 82,972 Provision for litigation — 2,537 — 2,780 Amortization of intangibles 2,160 2,080 6,525 5,671 Acquisition related costs/licensing 2,169 784 3,847 2,838 Net gain from sale of assets 764 — (3,593 ) — Tax effect of adjusting items (884 ) (1,677 ) (1,248 ) (3,443 ) -------- - -------- - --------- - -------- - Non-GAAP net income $ 39,417 $ 29,315 $ 125,255 $ 90,818 - ------ - - ------ - - ------- - - ------ -

Non-GAAP Diluted Earnings Per Share Reconciliation Table: (Unaudited) Three Months Ended Nine Months Ended September September September September (Per share amounts) 30, 30, 30, 30, 2018 2017 2018 2017 -------- -------- -------- -------- Diluted earnings per share, as reported $ 0.35 $ 0.26 $ 1.18 $ 0.85 Provision for litigation — 0.03 — 0.03 Amortization of intangibles 0.02 0.02 0.06 0.06 Acquisition related costs/licensing 0.02 0.01 0.04 0.03 Net gain from sale of assets 0.01 — (0.04 ) — Tax effect of adjusting items (0.01 ) (0.02 ) (0.01 ) (0.04 ) Non-GAAP diluted earnings per share $ 0.39 $ 0.30 $ 1.24 $ 0.93 - ---- - - ---- - - ---- - - ---- - * amounts might not add due to rounding

Non-GAAP Free Cash Flow Reconciliation Table: (Unaudited) Three Months Ended Nine Months Ended September September September September (In thousands) 30, 30, 30, 30, 2018 2017 2018 2017 ---------- ---------- ----------- ----------- Net cash provided by operating activities $ 51,788 $ 34,795 $ 137,352 $ 114,221 Adjustment for impact of restricted cash — — — — Purchases of property and equipment (15,371 ) (12,817 ) (42,538 ) (37,878 ) -------- - -------- - --------- - --------- - Non-GAAP free cash flow $ 36,417 $ 21,978 $ 94,814 $ 76,343 - ------ - - ------ - - ------- - - ------- -

(Unaudited) Three Months Ended ---------------------------- Currency Constan September 30, September 30, Reporte Impact on t d Current Currenc (In thousands, except percentages) Growth Period y 2018 2017 Growth ------------- ---------- ------ --------- ------ United States $ 139,097 $ 125,933 10.5 % — 10.5 % International 30,139 25,811 16.8 % $ (436 ) 18.5 % --------- --- --------- --- - ----- - Total sales $ 169,236 $ 151,744 11.5 % $ (436 ) 11.8 % - ------- --- - ------- --- - ----- - (Unaudited) Nine Months Ended ---------------------------- Currency Constan September 30, September 30, Reporte Impact on t d Current Currenc (In thousands, except percentages) Growth Period y 2018 2017 Growth ------------- ---------- ------ --------- ------ United States $ 429,823 $ 381,870 12.6 % — 12.6 % International 87,208 78,073 11.7 % $ 2,061 9.1 % --------- --- --------- --- - ----- - Total sales $ 517,031 $ 459,943 12.4 % $ 2,061 12 % - ------- --- - ------- --- - ----- -

Contact:Brian KearnsVice President, Business Development and Investor RelationsPhone: (610) 930-1800Email: investors@globusmedical.comwww.globusmedical.com

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