Globus Medical reported a worldwide sales increase for the third quarter of 2014.
Here are 11 key facts from the financial report:
1. Worldwide sales were $117.8 million, a 9.9 percent increase over the third quarter last year. Sales in the United States were up 8.7 percent and international sales were up 23.2 percent. The company traditionally has seen sluggish procedural growth between the second and third quarters. "The strength in 2014 is indicative of the continued solid execution of our business model, namely, new product introductions and expansion of our sales footprint," said Dave Demski, President and COO of Globus Medical, in the conference call reported by Seeking Alpha.
2. International sales were 9.5 percent of total sales for the quarter. "We are pleased with the progress being made in expanding our penetration within our existing international markets and further the steady improvements of the contribution to our bottom line," said Mr. Demski.
3. Net income for the quarter was $23.1 million, compared to $20.3 million in the third quarter last year.
4. Cash, cash equivalents and marketable securities ended the quarter at $345.8 million, increasing by $32.8 million in the quarter. However the company remains debt-free.
5. Senior Vice President and CFO Rick Baron resigned during the third quarter to pursue other interests. Dave Demski, Globus Medical's President and COO will become CFO on an interim basis until a new CFO is hired.
6. Gross profit was $90 million for the quarter, up from $81.8 million over the same period last year. For the nine months end, the company reported $265.9 million gross profit. The increase reflects a favorable product sales mix and the company's ability for ongoing leverage in the OUS sales model.
7. Physician-owned distributorships were a hot topic for the month, with Stryker's CEO Kevin Lobo commenting on them during their third quarter conference call. Mr. Demski addressed them as well, with the Department of Justice's civil and criminal actions against a POD and affiliated physicians. "While we saw no direct impact as a result of these events, we are hopeful that continued scrutiny and publicity from DOJ will convince those involved with PODs, particularly hospitals that they should discontinue doing business under the POD model," he said.
8. Globus Medical acquired allograft tissue processing and manufacturer Transplant Technologies of Texas for $35 million upfront and $15 million in milestone payments over the next three years. "It is important strategically, as they bring a long track record of profitable selling biologics," said Mr. Demski. He expects the acquisition to drive value in these ways:
• Sales for existing TTOT customers
• Currently sold Globus product sourcing
• Current TTOT product sales by the Globus sales force
• New product development for sales through both Globus and TTOT
The purchase is expected to contribute around $2 million in additional sales for the fourth quarter.
9. Innovative fusion sales increased 8.2 percent to $67.7 million over last year's quarter. Disruptive technology sales also increased 12.3 percent to $50.1 million.
10. Research and development expenses for the quarter were $8.1 million. They were 6.9 percent of sales compared to 6.1 percent over the same period last year. Expenditures associated with the company's robotics project were the prominent driver in this increase.
11. Annual sales are now expected to reach $462 million to $467 million.