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Press release content from Globe Newswire. The AP news staff was not involved in its creation.

Globus Medical Reports Third Quarter 2019 Results

November 6, 2019

AUDUBON, Pa., Nov. 06, 2019 (GLOBE NEWSWIRE) -- Globus Medical, Inc. (NYSE:GMED), a leading musculoskeletal solutions company, today announced its financial results for the third quarter ended September 30, 2019.

-- Worldwide sales were $196.2 million, an increase of 15.9% as reported

-- Third quarter net income was $38.3 million

-- Diluted earnings per share (EPS) was $0.38 and non-GAAP diluted EPS was $0.43, an increase of 9.9%

-- Non-GAAP adjusted EBITDA was 33.4% of sales

“Globus Medical had an outstanding third quarter, once again delivering above market growth and industry leading profitability,” said Dave Demski, President and CEO. “Enabling Technologies produced back-to-back strong quarters, generating $13.9 million in revenue, more than double our performance in the third quarter of last year. Musculoskeletal Solutions grew by 11.8% in the quarter, well in excess of the market across all sectors and significant geographies, driven by competitive recruiting, new product introductions and implant pull through from ExcelsiusGPS® installations. Non-GAAP EPS grew by 9.9% over third quarter of 2018 and our Adjusted EBITDA improved to 33.4% in the third quarter, compared to 31.5% for the first half of this year.”

Worldwide sales for the third quarter were $196.2 million, an increase of 15.9% over the third quarter of 2018 on an as-reported basis and 16.0% on a constant currency basis. Third quarter sales in the U.S., including robotics, increased by 17.0% compared to the third quarter of 2018. International sales increased by 11.2% over the third quarter of 2018 on an as-reported basis and 11.3% on a constant currency basis.

Third quarter GAAP net income was $38.3 million, an increase of 8.8% over the same period last year. Diluted EPS for the third quarter was $0.38, as compared to $0.35 for the third quarter 2018. Non-GAAP diluted EPS for the third quarter was $0.43, compared to $0.39 in the third quarter of 2018, an increase of 9.9%.

The Company generated net cash provided by operating activities of $55.9 million and non-GAAP free cash flow of $43.8 million in the third quarter, and ended the quarter with cash, cash equivalents and marketable securities of $660.7 million. The Company remains debt free.

2019 Annual Guidance

The Company today increased guidance for full year 2019 sales from $775 million to $783 million and reiterated guidance for non-GAAP diluted earnings per share of $1.72.

Conference Call Information

Globus Medical will hold a teleconference to discuss its 2019 second 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 Participants1-720-545-0060 International ParticipantsThere 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 Wednesday, November 13, 2019. 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 918-0587.

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, 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, 2019 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, 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, 2019 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 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, 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 SUBSIDIARIESCONDENSED CONSOLIDATED STATEMENTS OF INCOME(unaudited)

Three Months Ended Nine Months Ended September 30, September 30, ---------------------- -------------------- (In thousands, except per share amounts) 2019 2018 2019 2018 --------- --------- - --------- --------- Sales $ 196,215 $ 169,236 $ 573,701 $ 517,031 Cost of goods sold 45,387 37,849 131,214 113,456 - ------- - ------- - - ------- - ------- Gross profit 150,828 131,387 442,487 403,575 - ------- - ------- - - ------- - ------- Operating expenses: Research and development 14,508 15,527 44,577 41,738 Selling, general and administrative 88,455 75,131 262,618 227,949 Provision for litigation 1,625 — 1,625 — Amortization of intangibles 3,620 2,160 10,412 6,525 Acquisition related costs 559 268 1,245 1,289 - ------- - ------- - - ------- - ------- Total operating expenses 108,767 93,086 320,477 277,501 - ------- - ------- - - ------- - ------- Operating income 42,061 38,301 122,010 126,074 Other income, net Interest income/(expense), net 4,377 3,852 12,954 9,114 Foreign currency transaction gain/(loss) 145 (26 ) 123 312 Other income/(expense) 169 470 410 5,478 - ------- - ------- - - ------- - ------- Total other income/(expense), net 4,691 4,296 13,487 14,904 - ------- - ------- - - ------- - ------- Income before income taxes 46,752 42,597 135,497 140,978 Income tax provision 8,445 7,389 25,816 21,254 - ------- - ------- - - ------- - ------- Net income $ 38,307 $ 35,208 $ 109,681 $ 119,724 - ------- - ------- - - ------- - ------- Earnings per share: Basic $ 0.39 $ 0.36 $ 1.11 $ 1.23 - ------- - ------- - - ------- - ------- Diluted $ 0.38 $ 0.35 $ 1.08 $ 1.18 - ------- - ------- - - ------- - ------- Weighted average shares outstanding: Basic 99,238 98,328 98,998 97,671 Dilutive stock options 2,862 3,476 2,687 3,604 - ------- - ------- - - ------- - ------- Diluted 102,100 101,804 101,685 101,275 - ------- - ------- - - ------- - ------- Anti-dilutive stock options excluded from weighted average 5,108 1,950 4,939 1,892 calculation

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

September 30, December 31, (In thousands, except par value) 2019 2018 ------------- ------------- ASSETS Current assets: Cash, cash equivalents, and restricted cash $ 166,190 $ 139,747 Short-term marketable securities 111,402 199,937 Accounts receivable, net of allowances of $6,559 and $4,226, respectively 141,545 137,067 Inventories 187,060 131,254 Prepaid expenses and other current assets 14,835 15,387 Income taxes receivable 16,031 7,289 - --------- - - --------- - Total current assets 637,063 630,681 - --------- - - --------- - Property and equipment, net of accumulated depreciation of $237,516 and 197,098 171,873 $216,809, respectively Long-term marketable securities 383,099 263,117 Intangible assets, net 81,969 87,323 Goodwill 129,004 123,734 Other assets 15,212 10,364 Deferred income taxes 8,737 13,578 - --------- - - --------- - Total assets $ 1,452,182 $ 1,300,670 - --------- - - --------- - LIABILITIES AND EQUITY Current liabilities: Accounts payable $ 24,137 $ 25,895 Accrued expenses 60,695 59,878 Income taxes payable 357 917 Business acquisition liabilities 5,603 6,830 Deferred revenue 4,129 2,598 - --------- - - --------- - Total current liabilities 94,921 96,118 - --------- - - --------- - Business acquisition liabilities, net of current portion 3,288 3,288 Deferred income taxes 7,023 8,114 Other liabilities 8,155 7,634 - --------- - - --------- - Total liabilities 113,387 115,154 - --------- - - --------- - Commitments and contingencies (Note 13) Equity: Class A common stock; $0.001 par value. Authorized 500,000 shares; issued and outstanding 76,973 and 76,143 shares at September 30, 2019 and December 31, 77 76 2018, respectively Class B common stock; $0.001 par value. Authorized 275,000 shares; issued and outstanding 22,430 and 22,430 shares at September 30, 2019 and December 31, 22 22 2018, respectively Additional paid-in capital 339,120 299,869 Accumulated other comprehensive loss (2,826 ) (7,172 ) Retained earnings 1,002,402 892,721 - --------- - - --------- - Total equity 1,338,795 1,185,516 - --------- - - --------- - Total liabilities and equity $ 1,452,182 $ 1,300,670 - --------- - - --------- -

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

Nine Months Ended September 30, -------------------------- (In thousands) 2019 2018 ------------ ------------ Cash flows from operating activities: Net income $ 109,681 $ 119,724 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 38,688 29,694 Amortization of premium (discount) on marketable securities (1,008 ) 1,808 Write-down for excess and obsolete inventories 1,939 8,326 Stock-based compensation expense 19,647 17,078 Allowance for doubtful accounts 2,732 388 Change in fair value of business acquisition liabilities 579 592 Change in deferred income taxes 2,434 1,606 (Gain)/loss on disposal of assets, net 518 (3,694 ) (Increase)/decrease in: Accounts receivable (5,367 ) (2,900 ) Inventories (40,869 ) (23,042 ) Prepaid expenses and other assets (3,044 ) (81 ) Increase/(decrease) in: Accounts payable (158 ) (4,858 ) Accrued expenses and other liabilities 1,225 (1,965 ) Income taxes payable/receivable (9,331 ) (5,324 ) - -------- - - -------- - Net cash provided by operating activities 117,666 137,352 - -------- - - -------- - Cash flows from investing activities: Purchases of marketable securities (277,446 ) (382,347 ) Maturities of marketable securities 205,818 210,066 Sales of marketable securities 46,474 85,234 Purchases of property and equipment (54,957 ) (42,538 ) Proceeds from sale of assets — 4,000 Acquisition of businesses, net of cash acquired and purchases of intangible and (24,135 ) (14,825 ) other assets - -------- - - -------- - Net cash used in investing activities (104,246 ) (140,410 ) - -------- - - -------- - Cash flows from financing activities: Payment of business acquisition liabilities (6,096 ) (6,513 ) Proceeds from exercise of stock options 19,350 36,245 - -------- - - -------- - Net cash provided by financing activities 13,254 29,732 - -------- - - -------- - Effect of foreign exchange rate on cash (231 ) (196 ) - -------- - - -------- - Net increase in cash, cash equivalents, and restricted cash 26,443 26,478 Cash, cash equivalents, and restricted cash at beginning of period 139,747 118,817 - -------- - - -------- - Cash, cash equivalents, and restricted cash at end of period $ 166,190 $ 145,295 - -------- - - -------- - Supplemental disclosures of cash flow information: Interest paid 57 — Income taxes paid $ 34,056 $ 24,894

Supplemental Financial Information

Sales by Geographic Area:

Three Months Ended Nine Months Ended September 30, September 30, -------------------- -------------------- (In thousands) 2019 2018 2019 2018 --------- --------- --------- --------- United States $ 162,697 $ 139,097 $ 470,224 $ 429,823 International 33,518 30,139 103,477 87,208 - ------- - ------- - ------- - ------- Total Sales $ 196,215 $ 169,236 $ 573,701 $ 517,031 - ------- - ------- - ------- - -------

Sales by Revenue Stream:

Three Months Ended Nine Months Ended September 30, September 30, -------------------- -------------------- (In thousands) 2019 2018 2019 2018 --------- --------- --------- --------- Musculoskeletal Solutions products $ 182,324 $ 163,068 $ 540,620 $ 484,400 Enabling Technologies products 13,891 6,168 33,081 32,631 - ------- - ------- - ------- - ------- Total Sales $ 196,215 $ 169,236 $ 573,701 $ 517,031 - ------- - ------- - ------- - -------

Liquidity and Capital Resources:

September December 30, 31, (In thousands) 2019 2018 --------- --------- Cash, cash equivalents, and restricted cash $ 166,190 $ 139,747 Short-term marketable securities 111,402 199,937 Long-term marketable securities 383,099 263,117 - ------- - ------- Total cash, cash equivalents, restricted cash and marketable securities $ 660,691 $ 602,801 - ------- - -------

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

Non-GAAP Adjusted EBITDA Reconciliation Table:

Three Months Ended Nine Months Ended September 30, September 30, ---------------------- ------------------------ (In thousands, except percentages) 2019 2018 2019 2018 -------- - -------- - --------- - --------- - Net income $ 38,307 $ 35,208 $ 109,681 $ 119,724 Interest income, net (4,377 ) (3,852 ) (12,954 ) (9,114 ) Provision for income taxes 8,445 7,389 25,816 21,254 Depreciation and amortization 13,575 10,461 38,688 29,694 - ------ - - ------ - - ------- - - ------- - EBITDA 55,950 49,206 161,231 161,558 Stock-based compensation expense 6,898 5,545 19,647 17,078 Provision for litigation 1,625 — 1,625 — Acquisition related costs/licensing 1,040 2,169 2,011 3,847 Net (gain) loss from sale of assets — 764 — (3,593 ) - ------ - - ------ - - ------- - - ------- - Adjusted EBITDA $ 65,513 $ 57,684 $ 184,514 $ 178,890 - ------ - - ------ - - ------- - - ------- - Net income as a percentage of sales 19.5 % 20.8 % 19.1 % 23.2 % Adjusted EBITDA as a percentage of sales 33.4 % 34.1 % 32.2 % 34.6 %

Non-GAAP Net Income Reconciliation Table:

Three Months Ended Nine Months Ended September 30, September 30, ---------------------- ------------------------ (In thousands) 2019 2018 2019 2018 -------- - -------- - --------- - --------- - Net income $ 38,307 $ 35,208 $ 109,681 $ 119,724 Provision for litigation 1,625 — 1,625 — Amortization of intangibles 3,620 2,160 10,412 6,525 Acquisition related costs/licensing 1,040 2,169 2,011 3,847 Net (gain) loss from sale of assets — 764 — (3,593 ) Tax effect of adjusting items (1,135 ) (884 ) (2,659 ) (1,248 ) - ------ - - ------ - - ------- - - ------- - Non-GAAP net income $ 43,457 $ 39,417 $ 121,070 $ 125,255

Non-GAAP Diluted Earnings Per Share Reconciliation Table:

Three Months Ended Nine Months Ended September 30, September 30, -------------------- -------------------- (In thousands) 2019 2018 2019 2018 ------- - ------- - ------- - ------- - Diluted earnings per share, as reported $ 0.38 $ 0.35 $ 1.08 $ 1.18 Provision for litigation 0.02 — 0.02 — Amortization of intangibles 0.04 0.02 0.10 0.06 Acquisition related costs/licensing 0.01 0.02 0.02 0.04 Net (gain) loss from sale of assets — 0.01 — (0.04 ) Tax effect of adjusting items (0.01 ) (0.01 ) (0.03 ) (0.01 ) - ----- - - ----- - - ----- - - ----- - Non-GAAP diluted earnings per share $ 0.43 $ 0.39 $ 1.19 $ 1.24

Non-GAAP Free Cash Flow Reconciliation Table:

Three Months Ended Nine Months Ended September 30, September 30, ------------------------ ------------------------ (In thousands) 2019 2018 2019 2018 --------- - --------- - --------- - --------- - Net cash provided by operating activities $ 55,866 $ 51,788 $ 117,666 $ 137,352 Purchases of property and equipment (12,062 ) (15,371 ) (54,957 ) (42,538 ) - ------- - - ------- - - ------- - - ------- - Free cash flow $ 43,804 $ 36,417 $ 62,709 $ 94,814 - ------- - - ------- - - ------- - - ------- -

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

Currency Constant Three Months Ended Reported Impact Currency on September 30, Sales Current Sales -------------------- (In thousands, except percentages) 2019 2018 Growth Period Growth Sales --------- --------- -------- ------- -------- United States $ 162,697 $ 139,097 17.0% $ — 17.0% International 33,518 30,139 11.2% (37 ) 11.3% - ------- - ------- - --- - Total Sales $ 196,215 $ 169,236 15.9% $ (37 ) 16.0% - ------- - ------- - --- -

Nine Months Ended Reported Currency Constant Impact on Currency September 30, Sales Current Sales -------------------- (In thousands, except percentages) 2019 2018 Growth Period Growth Sales --------- --------- -------- ---------- -------- United States $ 470,224 $ 429,823 9.3% $ — 9.3% International 103,477 87,208 19.0% (2,408 ) 21.8% - ------- - ------- - ------ - Total Sales $ 573,701 $ 517,031 11.0% $ (2,408 ) 11.4% - ------- - ------- - ------ -

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