When Globus Medical Inc. (GMED 0.46%) reported its third-quarter results in November, investors likely had no idea what was to come. Over the next few months, the musculoskeletal-solutions company's stock soared more than 50%, driven in part by Globus' launch of its Excelsius GPS robotic surgical system.
Globus Medical announced its fourth-quarter and full-year 2017 results after the market closed on Wednesday. Did the company's performance provide reason for more optimism? Here are the highlights from Globus Medical's fourth-quarter update.
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Globus Medical results: The raw numbers
| Metric |
Q4 2017 |
Q4 2016 |
Year-Over-Year Change |
|---|---|---|---|
|
Sales | $176.0 million | $151.6 million |
16.1% |
|
Net income from continuing operations | $24.4 million | $24.3 milllion |
0.3% |
|
Adjusted earnings per share (EPS) | $0.38 | $0.31 |
22.6% |
Data source: Globus Medical.
What happened with Globus Medical this quarter?
Globus generated 84% of its total fourth-quarter sales in the U.S. But the company's percentage revenue growth was nearly identical in both U.S. and international markets.
Drilling into the details of its revenue, though, reveals which products are driving the most growth. Globus' innovative fusion products posted fourth-quarter sales of $85.5 million, up 7.3% year over year. What the company refers to as its disruptive technology products, on the other hand, notched sales of $90.6 million in the fourth quarter, a hefty 25.8% year-over-year jump.
What products are included in the disruptive technology total? You can put Excelsius GPS high on the list. In addition, Globus Medical lumps its minimally invasive surgical products such as spacers and stabilization systems, its regenerative biologics technologies, and its interventional pain management solutions in the category.
But while Globus achieved impressive revenue growth, its bottom line -- at least on a GAAP basis -- didn't budge very much. That minimal net income increase shouldn't be concerning, though. The company recorded a one-time expense of $11 million related to U.S. tax reform during the fourth quarter. Adjusting for this expense, Globus improved its earnings quite a bit.
The biggest news of the quarter came from the first sales for Globus' new robotic surgical system. However, the company also launched nine other new spine products. In addition, Globus received FDA clearance for 10 systems in trauma.
All of this took place while Globus Medical transitioned to a new CEO. The company's founder and previous CEO, David Paul, handed the reins over to Dave Demski on Aug. 29, 2017. Demski had served as president and COO of Globus from 2008 through 2017 and was the company's CFO before then. Paul continues to serve as executive chairman.
What management had to say
Globus Medical CEO Dave Demski noted that the company increased its non-GAAP EPS significantly from the prior-year period "despite increased investments to support our robotics and trauma launches." He added, "Sales growth was strong across all parts of the business in the fourth quarter, with U.S. spine up 6.5%, international spine up 16.2%, and imaging, navigation, and robotics posting revenue for the first time."
Looking forward
In January, Globus Medical provided full-year 2018 guidance of $690 million in sales and fully diluted non-GAAP earnings per share of $1.50. The company confirmed this guidance in its fourth-quarter update. This outlook translates to an 8.5% year-over-year increase in sales and a 14.5% jump in EPS.
Investors will certainly want to keep their eyes on the rollout of the Excelsius GPS robot system in the months ahead. There could also be some additional benefits to be gained from Globus beefing up its U.S. spine sales force.
I'd especially be on the lookout for potential acquisitions. Globus reported cash, cash equivalents, and marketable securities of $429.8 million at the end of 2017. It also generated free cash flow of $107.8 million last year. The company doesn't have a penny of debt and doesn't pay a dividend, so that cash stockpile and healthy cash flow just might be used to fund one or more strategic deals in 2018.
