GMED is a medical device company focused on spinal implants. Some key points:
- Stock currently trading at $21.30 per share with a hold recommendation and $23.88 price target (12.12% upside).
- Generates over $500M in annual revenue primarily from spinal implant sales in the US. Has two business segments: innovative fusions and disruptive technology.
- Seeks to increase margins by manufacturing more products in-house and entering new growth markets. Has a robust product pipeline.
- Trades at higher gross and operating margins than competitors like ZBH, JNJ, MDT, and SYK. Maintains a net cash balance sheet.
- Management
5. Corporate Governance
• David Paul – CEO
• Founded: GMED
• Steven Payne – CAO
• Been with company since it went public in 2012
• DanielT. Scavilla - CFO
• Worked for J&J 28 years
• Previous positionVP of Finance
15. Consolidated Balance Sheets - USD ($) $ in
Thousands
Sep. 30,
2016
Dec. 31,
2015
ASSETS
Cash and cash equivalents $
90,192
$
60,152
Restricted cash 477 26,119
Short-term marketable securities 167,727 220,877
Accounts receivable, net of allowances of
$2,694 and $2,513, respectively
86,708 77,681
Inventories 115,606 105,260
Prepaid expenses and other current assets 11,605 7,351
Income taxes receivable 5,895 8,672
Deferred income taxes 0 38,687
Total current assets 478,210 544,799
Property and equipment, net of accumulated
depreciation of $159,314 and $139,114,
respectively
127,084 114,743
Long-term marketable securities 64,451 48,762
Note receivable 25,000 0
Intangible assets, net 67,438 33,242
Goodwill 110,250 91,964
Other assets 1,015 590
Deferred income taxes 28,295 0
Total assets 901,743 834,100
LIABILITIES AND EQUITY
Accounts payable 13,936 15,971
Accrued expenses 43,287 53,769
Income taxes payable 3,696 763
Business acquisition liabilities, current 4,888 12,188
Total current liabilities 65,807 82,691
Business acquisition liabilities, net of current
portion
15,020 21,126
Deferred income taxes 9,013 13,260
Other liabilities 1,784 1,699
Total liabilities 91,624 118,776
Commitments and contingencies (Note 13)
Equity:
Additional paid-in capital 207,182 192,629
Accumulated other comprehensive loss (1,760) (1,958)
Retained earnings 604,601 524,558
Total equity 810,119 715,324
Total liabilities and equity 901,743 834,100
Class A Common
Equity:
Common stock 72 71
16. Income Statement
Consolidated Statements of Income - USD ($) shares in Thousands, $
in Thousands
12 Months Ended
Dec. 31, 2015 Dec. 31, 2014 Dec. 31, 2013
Income Statement [Abstract]
Sales $ 544,753 $ 474,371 $ 434,459
Cost of goods sold 132,803 110,857 100,343
Gross profit 411,950 363,514 334,116
Operating expenses:
Research and development 36,982 31,687 26,870
Selling, general and administrative 214,014 187,798 182,518
Provision for litigation (11,268) 5,667 23,055
Total operating expenses 239,728 225,152 232,443
Operating income 172,222 138,362 101,673
Interest income, net 1,304 805 467
Foreign currency transaction loss (1,159) (899) (804)
Other income 438 374 665
Other income, net 583 280 328
Income before income taxes 172,805 138,642 102,001
Income tax provision 60,021 46,157 33,389
Net income $ 112,784 $ 92,485 $ 68,612
Earnings per share:
Basic $ 1.19 $ 0.98 $ 0.74
Diluted $ 1.17 $ 0.97 $ 0.73
Weighted average shares outstanding:
Basic 95,046 94,227 92,647
20. Risks
• Sale force
• Larger competitors
• Currency exchange
• Disruptive segment
• FDA
• Product expectance
• Obsolete inventory
21. Why GMED
• Superior margin vs their competitors and plan to increase
• Robust pipeline
• Recent entrance into high-growth market
22. Q3 Performance
• EPS: $0.29
• EPS: $0.29
• Revenue: $135.75m (-0.9%Y/Y)
• $-3.95m
• U.S. -4.1%
• International Sale Increased: 34.1%
• Completed acquisition of Alphatec’s
• 1% worldwide decreased
23. Full year Guidance: 2016
• Revenue: $560m
• -2.8%
• 2017 full year sales of $625m
• -2.34%
• EPS: $1.13
• -3.42%
• Increased Spending: Robotics and trauma.
• Launched 7 new products, total of 15 2016