Globus Medical(GMED) - 2025 Q2 - Quarterly Report

PART I. FINANCIAL INFORMATION This section presents the company's unaudited condensed consolidated financial statements, detailed notes, management's discussion, market risk disclosures, and internal controls Financial Statements This section presents Globus Medical's unaudited condensed consolidated financial statements, including Balance Sheets, Statements of Operations, Equity, and Cash Flows, for specified interim periods | Metric | June 30, 2025 (in thousands) | December 31, 2024 (in thousands) | | :--------------------------------- | :----------------------------- | :------------------------------- | | Total Assets | $4,961,089 | $5,251,750 | | Total Liabilities | $665,406 | $1,074,417 | | Total Equity | $4,295,683 | $4,177,333 | | Metric (in thousands) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :-------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Net sales | $745,342 | $629,691 | $1,343,463 | $1,236,357 | | Operating income | $76,109 | $49,622 | $173,113 | $57,619 | | Net income | $202,846 | $31,760 | $278,308 | $24,643 | | Basic EPS | $1.50 | $0.23 | $2.05 | $0.18 | | Diluted EPS | $1.49 | $0.23 | $2.01 | $0.18 | | Cash Flow Activity (in thousands) | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :-------------------------------- | :----------------------------- | :----------------------------- | | Operating Activities | $255,165 | $106,645 | | Investing Activities | $(167,723) | $(56,962) | | Financing Activities | $(660,333) | $(107,012) | | Cash & Cash Equivalents (End) | $229,446 | $410,424 | Notes to Condensed Consolidated Financial Statements (Unaudited) This section provides detailed notes to the unaudited condensed consolidated financial statements, covering accounting policies, acquisitions, and specific financial statement line items NOTE 1. BACKGROUND This note outlines Globus Medical's business as a medical device company and details the acquisition of Nevro Corp. on April 3, 2025 - Globus Medical, Inc. is a medical device company focused on developing and commercializing healthcare solutions to improve the quality of life for patients with musculoskeletal disorders, including robotic guidance and navigation systems and orthopedic trauma products[18] - On April 3, 2025, Globus Medical completed the acquisition of Nevro Corp. (Nevro Merger), with Nevro becoming a wholly-owned subsidiary, and Globus was deemed the accounting acquirer, which may impact comparability of prior period financial statements[22][23] NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES This note describes the company's financial statement preparation, revenue recognition policies, and recent accounting standard updates - The financial statements are prepared in conformity with U.S. GAAP for interim financial statements, with certain information condensed or omitted per SEC rules, and management's estimates are used for areas like revenue recognition, intangible assets, and income taxes[24][25][28][29] - Revenue is disaggregated into Musculoskeletal Solutions (implants, disposables, neuromonitoring services) and Enabling Technologies (advanced hardware and software systems), with Musculoskeletal Solutions revenue mostly recognized at a point in time, while Enabling Technologies often involve multiple performance obligations recognized as fulfilled[30][31] - The company adopted ASU No. 2023-07 (Segment Reporting) as of January 1, 2024, applied retrospectively, and is evaluating the impact of recently issued ASUs 2025-01 and 2024-03 (Expense Disaggregation Disclosures) and 2023-09 (Income Tax Disclosures)[60][61][62] NOTE 3. ASSET ACQUISITIONS AND BUSINESS COMBINATIONS This note details the Q1 2025 license agreement and the financial impact of the Nevro Merger, including the bargain purchase gain - In Q1 2025, the Company entered a license agreement for spine medical device technology patents for $5.0 million, recording it as an intangible asset with a 10.1-year useful life[64] - The Nevro Merger, completed on April 3, 2025, involved an aggregate consideration of $252.5 million, including cash for Nevro common stock and repayment of Braidwell Term Loans/Warrants, resulting in a bargain purchase gain of $110.6 million, primarily due to deferred tax assets[71][73][74][75] - Nevro contributed $94.6 million in revenues and a net loss of $50.0 million to the Company's financial statements for the period from April 3, 2025, to June 30, 2025[82] NOTE 4. NET SALES This note provides a breakdown of net sales by product category for the three and six months ended June 30, 2025 and 2024 | Product Category (in thousands) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :------------------------------ | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Musculoskeletal Solutions | $710,182 | $592,913 | $1,286,115 | $1,167,610 | | Enabling Technologies | $35,160 | $36,778 | $57,348 | $68,747 | | Total Net Sales | $745,342 | $629,691 | $1,343,463 | $1,236,357 | NOTE 5. MARKETABLE SECURITIES This note highlights the significant change in marketable securities holdings from December 31, 2024, to June 30, 2025 - As of June 30, 2025, the Company had no holdings of short-term or long-term marketable securities, a significant change from December 31, 2024, when it held $105.6 million in short-term and $66.1 million in long-term marketable securities[37][84] NOTE 6. FAIR VALUE MEASUREMENTS This note details fair value measurements for cash equivalents and business acquisition liabilities, including Level 3 inputs | Item (in thousands) | June 30, 2025 (Fair Value) | December 31, 2024 (Fair Value) | | :------------------ | :------------------------- | :----------------------------- | | Cash equivalents | $34,085 | $496,676 | | Business acquisition liabilities | $104,972 | $123,235 | - Business acquisition liabilities are measured at fair value using Level 3 unobservable inputs, including revenue risk premium (1.8%-5.8%), revenue volatility (14.0%-15.8%), and discount rate (5.1%-8.5%)[86][87] | Business Acquisition Liabilities (in thousands) | Three Months Ended June 30, 2025 | Six Months Ended June 30, 2025 | | :-------------------------------------------- | :------------------------------- | :----------------------------- | | Beginning balance | $118,055 | $123,235 | | Contingent cash payments | $(17,725) | $(23,628) | | Changes in fair value | $5,222 | $5,389 | | Ending balance | $104,972 | $104,972 | NOTE 7. INVENTORIES This note provides a breakdown of inventory categories, the Nevro Merger inventory step-up, and adjustments to cost of sales | Inventory Category (in thousands) | June 30, 2025 | December 31, 2024 | | :-------------------------------- | :------------ | :---------------- | | Raw materials | $153,311 | $121,984 | | Work in process | $60,448 | $45,775 | | Finished goods | $558,372 | $491,474 | | Total inventories | $772,131 | $659,233 | - A $17.9 million inventory step-up was recorded as part of the Nevro Merger, with $6.0 million amortized to cost of sales during the three months ended June 30, 2025, leaving a remaining balance of $11.9 million[90] - Net adjustments to cost of sales for excess and obsolete inventory were $5.0 million for Q2 2025 (vs. $6.6 million in Q2 2024) and $10.9 million for H1 2025 (vs. $10.5 million in H1 2024)[91][92] NOTE 8. PROPERTY AND EQUIPMENT This note details the composition of property and equipment, net of accumulated depreciation, and related depreciation expense | Category (in thousands) | June 30, 2025 | December 31, 2024 | | :---------------------- | :------------ | :---------------- | | Land | $9,765 | $9,731 | | Buildings & improvements| $119,793 | $100,128 | | Equipment | $234,958 | $215,100 | | Instruments, modules, cases | $764,645 | $741,125 | | Other | $60,097 | $41,611 | | Accumulated depreciation| $(601,753) | $(545,786) |\n| Total, net | $587,505 | $561,909 | | Depreciation Expense (in thousands) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :---------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Depreciation | $40,442 | $33,880 | $77,713 | $59,464 | NOTE 9. GOODWILL AND INTANGIBLE ASSETS This note presents the changes in goodwill and the net balances of various intangible assets, confirming no impairments | Goodwill (in thousands) | Amount | | :---------------------- | :----- | | December 31, 2024 | $1,432,387 | | Foreign exchange | $2,596 | | June 30, 2025 | $1,434,983 | | Intangible Assets (in thousands) | June 30, 2025 (Net) | December 31, 2024 (Net) | | :------------------------------- | :------------------ | :---------------------- | | Customer relationships & other | $261,814 | $266,467 | | Developed technology | $516,597 | $523,588 | | Patents | $8,735 | $3,966 | | Trade Names | $9,226 | $1,096 | | Total Intangible Assets | $796,372 | $795,117 | - No impairments were recorded for goodwill, finite-lived intangible assets, or in-process research and development (IPR&D) during the three and six months ended June 30, 2025[48] NOTE 10. ACCRUED EXPENSES This note provides a breakdown of accrued expenses by category as of June 30, 2025, and December 31, 2024 | Accrued Expense Category (in thousands) | June 30, 2025 | December 31, 2024 | | :-------------------------------------- | :------------ | :---------------- | | Compensation and other employee-related | $155,737 | $151,819 | | Legal and other settlements | $7,689 | $6,746 | | Accrued non-income taxes | $38,860 | $34,088 | | Royalties | $9,065 | $10,612 | | Rebates | $38,199 | $33,105 | | Other | $32,197 | $24,221 | | Total Accrued Expenses | $281,747 | $260,591 | NOTE 11. DEBT This note details the company's revolving credit facility, the payoff of senior convertible notes, and outstanding warrants - The Company has an unsecured revolving credit facility of up to $400.0 million, with no outstanding borrowings as of June 30, 2025, and is in compliance with all covenants[98] - The $450.0 million 0.375% Senior Convertible Notes due 2025 were paid off on March 15, 2025, resulting in no outstanding convertible senior notes as of June 30, 2025[100] - The 2025 Warrants, exercisable into Class A Common stock, have 3,075,210 shares still outstanding with a strike price of $170.45, expiring between July and October 2025[102] NOTE 12. EQUITY This note covers the expansion of the share repurchase program, details on common stock classes, and earnings per share - The share repurchase program was expanded by an additional $500.0 million on May 15, 2025, with the Company repurchasing 0.4 million shares for $25.0 million in Q2 2025 and 2.8 million shares for $215.4 million in H1 2025[104] - Class A Common Stock holders have one vote per share, while Class B Common Stock holders have 10 votes per share, with Class B shares convertible to Class A and voting together as one class[107] | EPS Metric | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :--------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Basic EPS | $1.50 | $0.23 | $2.05 | $0.18 | | Diluted EPS| $1.49 | $0.23 | $2.01 | $0.18 | NOTE 13. STOCK-BASED AWARDS This note summarizes stock option activity, intrinsic value of exercised options, and total stock-based compensation costs | Stock Options Activity (thousands) | Shares | Weighted Average Exercise Price | | :--------------------------------- | :----- | :------------------------------ | | Outstanding at Dec 31, 2024 | 10,959 | $55.47 | | Granted | 1,898 | $87.99 | | Exercised | (386) | $41.41 | | Forfeited | (320) | $63.58 | | Outstanding at June 30, 2025 | 12,151 | $60.75 | - Total intrinsic value of stock options exercised was $1.2 million for Q2 2025 (vs. $7.1 million in Q2 2024) and $13.5 million for H1 2025 (vs. $9.9 million in H1 2024)[117] | Stock-Based Compensation (in thousands) | Three Months Ended June 30, 2025 | Six Months Ended June 30, 2025 | | :-------------------------------------- | :------------------------------- | :----------------------------- | | Stock-based compensation expense | $13,617 | $26,823 | | Stock-based compensation in Acquisition-Related Costs | $27,192 | $27,192 | | Net capitalized into inventory | $(226) | $(345) | | Total stock-based compensation cost | $40,583 | $53,670 | NOTE 14. INCOME TAXES This note presents the effective income tax rates and explains the factors contributing to their decrease in 2025 | Effective Income Tax Rate | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :------------------------ | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Rate | (7.8%) | 33.2% | 4.6% | 36.9% | - The decrease in the effective tax rate for Q2 and H1 2025 was primarily due to a $34.8 million state valuation allowance release and the $110.6 million non-taxable bargain purchase gain from the Nevro Merger[125] NOTE 15. RESTRUCTURING AND OTHER COSTS This note details employee termination benefits and restructuring costs incurred under the 2024 Synergy and 2025 Strategic Integration Plans - The Company recorded employee termination benefits under the 2024 Synergy Plan and 2025 Strategic Integration Plan to optimize organizational structure and streamline operations[126][127] | Restructuring Costs (in thousands) | Three Months Ended June 30, 2025 | Six Months Ended June 30, 2025 | | :--------------------------------- | :------------------------------- | :----------------------------- | | 2024 Synergy Plan | $3,419 | $3,573 | | 2025 Strategic Integration Plan | $10,489 | $10,489 | | Total Restructuring Costs | $13,908 | $14,062 | NOTE 16. LEASES This note provides a breakdown of lease liabilities and expenses, along with weighted-average lease terms and discount rates | Lease Liabilities (in thousands) | June 30, 2025 | December 31, 2024 | | :------------------------------- | :------------ | :---------------- | | Operating lease liability (current) | $13,179 | $10,249 | | Finance lease liability (current) | $132 | $233 | | Operating lease liability (long-term) | $107,925 | $83,588 | | Finance lease liability (long-term) | $173 | $298 | | Total Lease Liabilities | $121,409 | $94,368 | | Lease Expense (in thousands) | Three Months Ended June 30, 2025 | Six Months Ended June 30, 2025 | | :--------------------------- | :------------------------------- | :----------------------------- | | Operating lease expense | $5,017 | $8,516 | | Finance lease expense | $46 | $123 | | Total Lease Expense | $5,063 | $8,639 | - Weighted-average remaining lease term for operating leases is 8.1 years (vs. 9.1 years in 2024) and for financing leases is 2.8 years (vs. 2.4 years in 2024), with weighted-average discount rates of 7.5% for operating leases (vs. 5.3% in 2024) and 5.7% for financing leases (vs. 5.0% in 2024)[134] NOTE 17. COMMITMENTS AND CONTINGENCIES This note discusses ongoing litigation, including patent infringement and breach of contract suits, and warranty obligations - The Company is involved in ongoing litigation, including the Moskowitz Family LLC patent infringement suit (defense verdict in favor of Globus, appealed by Moskowitz) and the Pimenta Litigation (breach of contract, trial scheduled for August 8, 2025 or later), with outcomes and potential losses currently undetermined or unestimable[135][136][137] | Warranty Obligations (in thousands) | Three Months Ended June 30, 2025 | Six Months Ended June 30, 2025 | | :---------------------------------- | :------------------------------- | :----------------------------- | | Acquired in Nevro Merger | $3,083 | $3,083 | | Provision for Warranty | $912 | $912 | | Utilization | $(974) | $(974) | | Ending Balance | $3,021 | $3,021 | NOTE 18. SEGMENT AND GEOGRAPHIC INFORMATION This note outlines the company's two operating segments and provides a breakdown of net sales by geographic region - The Company operates two segments: Musculoskeletal Solutions and Enabling Technologies, which are aggregated into one reportable segment based on economic similarity and other factors, with CEO Daniel T. Scavilla (as of June 30, 2025) using revenue, gross profit, and operating income to assess performance[139][140] | Net Sales by Geography (in thousands) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :------------------------------------ | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | United States | $600,784 | $499,459 | $1,084,641 | $982,386 | | International | $144,558 | $130,232 | $258,822 | $253,971 | | Total | $745,342 | $629,691 | $1,343,463 | $1,236,357 | NOTE 19. SUBSEQUENT EVENTS This note reports on the enactment of the One Big Beautiful Bill Act and recent changes in the company's executive leadership - On July 4, 2025, the One Big Beautiful Bill Act (OBBBA) was signed into law, introducing significant changes to U.S. federal income tax law, which the Company is currently evaluating for impact[143] - Effective July 18, 2025, Daniel T. Scavilla resigned as President and CEO, and Keith Pfeil was appointed as President, CEO, and CODM, with Kyle Kline appointed as CFO[144] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations This section offers management's analysis of financial condition and results, covering business overview, the Nevro Merger, product categories, geographic sales, and liquidity - Globus Medical is an engineering-driven medical device company focused on musculoskeletal disorders, offering a comprehensive portfolio of innovative technologies across Musculoskeletal Solutions and Enabling Technologies[146][147] - The Nevro Merger, completed on April 3, 2025, involved converting Nevro common stock into cash at $5.85 per share, making Nevro a wholly-owned subsidiary[148] - U.S. net sales increased by 20.3% for Q2 2025 and 10.4% for H1 2025, primarily driven by Nevro sales and other musculoskeletal solutions, while international net sales increased by 11.0% for Q2 2025 and 1.9% for H1 2025, also benefiting from Nevro sales[157][158][169][170] Key Financial Performance Changes (YoY) | Metric (in thousands) | Q2 2025 vs Q2 2024 Change ($) | Q2 2025 vs Q2 2024 Change (%) | H1 2025 vs H1 2024 Change ($) | H1 2025 vs H1 2024 Change (%) | | :-------------------------------------- | :---------------------------- | :---------------------------- | :---------------------------- | :---------------------------- | | Net Sales | $115,651 | 18.4% | $107,106 | 8.7% | | Cost of Sales (excl. amortization) | $(11,275) | (4.3%) | $(57,365) | (11.4%) | | Research and Development | $2,256 | 6.0% | $(21,950) | (23.1%) | | Selling, General and Administrative | $64,168 | 26.8% | $58,288 | 11.9% | | Amortization of Intangibles | $480 | 1.6% | $(394) | (0.7%) | | Acquisition-Related Costs | $19,422 | 141.4% | $18,061 | 111.8% | | Restructuring Costs | $14,113 | — | $(5,028) | (27.1%) | | Bargain Purchase Gain | $110,561 | 100.0% | $110,561 | 100.0% | | Other Income/(Expense), Net | $3,544 | (173.7%) | $26,763 | (143.9%) | | Income Tax Provision/(Benefit) | $(30,494) | (192.7%) | $(847) | (5.9%) | - Cash provided by operating activities increased significantly in H1 2025 to $255.2 million (vs. $106.6 million in H1 2024), driven by higher net income and favorable changes in accounts receivable, partially offset by lower non-cash expense add-backs[183][184] - Cash used in investing activities increased to $167.7 million in H1 2025 (vs. $57.0 million in H1 2024), primarily due to $235 million in acquisition-related costs, partially offset by increased sales of marketable securities[183][185] - Cash used in financing activities increased to $660.3 million in H1 2025 (vs. $107.0 million in H1 2024), mainly due to the repayment of $450.0 million in senior convertible notes and increased Class A common stock repurchases[183][186] Item 3. Quantitative and Qualitative Disclosures About Market Risk This section reports no significant changes to market risk disclosures since the 2024 Annual Report on Form 10-K - No significant changes to market risk disclosures were reported compared to the 2024 Annual Report on Form 10-K[193] Item 4. Controls and Procedures Management concluded disclosure controls were effective as of June 30, 2025, with no material changes in internal control, excluding Nevro due to merger timing - The CEO and CFO concluded that disclosure controls and procedures were effective as of June 30, 2025[194] - No material changes in internal control over financial reporting occurred during the six months ended June 30, 2025[195] - Nevro was excluded from the assessment of internal controls over financial reporting, representing approximately 8.9% of total assets and 7.0% of revenues for the six months ended June 30, 2025[196] PART II. OTHER INFORMATION This section covers legal proceedings, risk factors, equity security sales, defaults, mine safety, other information, and a list of exhibits Item 1. Legal Proceedings This section refers to Note 17 for details on ongoing legal proceedings, highlighting their uncertain outcomes and potential financial impact - The company is involved in legal proceedings, with outcomes uncertain and potential for material adverse impact on financial results, as detailed in Note 17[201] Item 1A. Risk Factors This section reports no material changes to risk factors since the 2024 Annual Report on Form 10-K and the March 31, 2025 Form 10-Q - No material changes to risk factors were reported compared to the 2024 Annual Report on Form 10-K and the March 31, 2025 Form 10-Q[204] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds This section details the expanded $500.0 million share repurchase program and summarizes Q2 2025 repurchase activity - The share repurchase program was expanded by an additional $500.0 million on May 15, 2025, with no time limit[205][207] | Period | Total shares purchased (thousands) | Average price paid per share | Approximate dollar value of shares that may yet be purchased (thousands) | | :------------------------- | :--------------------------------- | :--------------------------- | :----------------------------------------------------------------------- | | April 1, 2025 - April 31, 2025 | — | — | — | | May 1, 2025 - May 30, 2025 | 411 | $60.81 | $475,000 | | June 1, 2025 - June 30, 2025 | — | — | $475,000 | | Total | 411 | | | Item 3. Defaults Upon Senior Securities This item states that there are no defaults upon senior securities to report - Not applicable; no defaults upon senior securities[208] Item 4. Mine Safety Disclosures This item states that there are no mine safety disclosures to report - Not applicable; no mine safety disclosures[209] Item 5. Other Information This section confirms no Rule 10b5-1 or non-Rule 10b5-1 trading arrangement changes by directors or officers in Q2 2025 - No directors or officers adopted, terminated, or modified Rule 10b5-1 or non-Rule 10b5-1 trading arrangements during Q2 2025[210] Item 6. Exhibits This section lists the exhibits filed with the Form 10-Q, including the Nevro Merger Agreement, Equity Incentive Plans, and officer certifications - Key exhibits include the Nevro Merger Agreement, 2021 Equity Incentive Plan, certifications by principal officers, and XBRL documents[211][212] SIGNATURES This section contains the official signatures of the company's principal executive and financial officers, certifying the report's accuracy - The report was signed by Keith Pfeil, President and Chief Executive Officer, and Kyle Kline, Chief Financial Officer, on August 7, 2025[218]