NuVasive®, Inc.
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NuVasive Announces Second Quarter 2013 Financial Results

SAN DIEGO, CA–(Marketwired – July 30, 2013) – NuVasive, Inc. (NASDAQ: NUVA)

NuVasive, Inc. (NASDAQ: NUVA), a medical device company focused on developing minimally disruptive surgical products and procedures for the spine, announced today financial results for the quarter ended June 30, 2013.

NuVasive reported second quarter 2013 revenue of $165.7 million, a 7.3% increase over the $154.4 million for the second quarter 2012.

Gross profit for the second quarter 2013 was $117.0 million and gross margin was 70.6%. Second quarter 2013 gross margin results reflect the impact of a one-time $7.9 million charge related to royalty accruals in connection with Phase I of the Company’s patent litigation with Medtronic. Excluding the charge, gross profit for the second quarter 2013 was $124.9 million and gross margin was 75.4%, compared to a gross profit of $117.9 million and a gross margin of 76.4% for the second quarter 2012.

Total operating expenses for the second quarter 2013 were $116.9 million compared to $104.9 million for the second quarter 2012. The higher operating expenses in the second quarter 2013 resulted primarily from additional costs associated with higher revenue and international infrastructure expansion.

On a GAAP basis, the Company reported a net loss of $6.5 million, or $0.15 per share, for the second quarter 2013.

On a Non-GAAP basis, the Company reported net income of $9.4 million, or $0.20 per share, for the second quarter 2013. The Non-GAAP earnings per share calculations for the second quarter exclude: (i) non-cash stock-based compensation of $8.8 million; (ii) certain intellectual property litigation expenses of $1.5 million; (iii) amortization of intangible assets of $4.9 million; (iv) acquisition related items of $56 thousand; (v) non-cash interest expense on convertible notes of $3.4 million; and (vi) a one-time $7.9 million out of period royalty expense charge related to royalty accruals in connection with Phase I of the company’s patent litigation with Medtronic. This ruling set the rates at which the Company is required to accrue royalties for the post-verdict period of time. The $7.9 million reflects the difference between the post-verdict royalty rates determined by the recent ruling and the rates that were being used to calculate litigation royalty expense accruals from September 2011 through March 2013.

Cash, cash equivalents and short and long-term marketable securities were $272.7 million at June 30, 2013.

Alex Lukianov, Chairman and Chief Executive Officer, said, “Results in the first half of 2013 demonstrate solid execution against a multi-year plan, and give us increased confidence in our ability to execute to the full year guidance we have outlined. Importantly, we are cultivating the pillars of NuVasive’s foundation to sustain earnings growth well into the future. NuVasive is changing spine surgery with a proven, share taking strategy of Superior Outcomes, Absolute Responsiveness, and Speed of Innovation. That mission will drive our evolution toward $1 billion in revenue with an improved profitability profile.”

2013 Full Year Financial Guidance:



                  Reconciliation of Full Year EPS Guidance

                                                         2013 Guidance
                                                    -----------------------
                                                     Prior (1)  Revised (2)
                                                    ----------- -----------
GAAP earnings (loss) per share guidance             $      0.02 $     (0.09)
Impact of change from basic to diluted share count              $         -
                                                    ----------- -----------
GAAP earnings (loss) per share, adjusted to diluted
 share count                                        $      0.02 $     (0.09)
  Non-cash stock based compensation                        0.45        0.45
  Certain intellectual property litigation expenses        0.06        0.06
  Amortization of intangible assets                        0.27        0.27
  Acquisition related items (3)                            0.03        0.03
  Non-cash interest expense on convertible notes           0.18        0.18
  Out-of-period royalty expense charge                        -        0.10
                                                    ----------- -----------
Non-GAAP earnings per share guidance                $      1.00 $      1.00
                                                    =========== ===========

Weighted shares outstanding - basic                      45,500      45,500
                                                    =========== ===========
Weighted shares outstanding - diluted                    46,500      46,500
                                                    =========== ===========

(1) Effective tax expense rate of ~80% applied to GAAP earnings and ~40%
    applied to Non-GAAP adjustments
(2) Effective tax benefit rate of ~30% applied to GAAP earnings and ~40%
    applied to Non-GAAP adjustments
(3) Acquisition related items include expenses associated with prior M&A
    activity and as incurred


                Reconciliation of Non-GAAP Operating Margin %

                                                       2012   2013 Guidance
                                                             ---------------
                                                     Actuals  Prior  Revised
                                                     ------- ------- -------
                         Non-GAAP Gross Margin % [A]  75.3%   ~74.0%  ~75.0%
                Out-of-period royalty expense charge    -       -    ~(1.2%)
                                                     ------- ------- -------
                                   GAAP Gross Margin  75.3%   ~74.0%  ~73.8%

                     Non-GAAP Operating Expenses [B]  60.8%   ~60.0%  ~61.0%
                   Non-cash stock-based compensation   4.2%   ~5.5%   ~5.5%
   Certain intellectual property litigation expenses   0.4%   ~1.0%   ~1.0%
                   Amortization of intangible assets   2.0%   ~3.0%   ~3.0%
     Intangible asset and goodwill impairment charge   1.5%     -       -
                          Acquisition related items*   0.3%   ~0.3%   ~0.3%
                                                     ======= ======= =======
                             GAAP Operating Expenses  69.3%   ~69.8%  ~70.8%

                                                     ------- ------- -------
                   Non-GAAP Operating Margin % [A-B]  14.5%   ~14.0%  ~14.0%
                                                     ------- ------- -------

* Acquisition related items include expenses associated with prior M&A
 activity and as incurred


Reconciliation of Non-GAAP Information

Management uses certain Non-GAAP financial measures such as Non-GAAP earnings per share, which exclude non-cash stock-based compensation, certain intellectual property litigation expenses, amortization of intangible assets, intangible asset and goodwill impairment charges, acquisition related items, non-cash interest expense on convertible notes and an out of period royalty expense charge. Management does not consider these costs in evaluating the continuing operations of the Company. Therefore, management calculates the Non-GAAP financial measures provided in this earnings release excluding these costs and uses these Non-GAAP financial measures to enable it to analyze further, and more consistently, the period-to-period financial performance of its core business operations. Management believes that providing investors with these Non-GAAP measures gives them additional important information to enable them to assess, in the same way management assesses, the Company’s current and future continuing operations. These Non-GAAP measures are not in accordance with, or an alternative for, GAAP, and may be different from Non-GAAP measures used by other companies. Set forth below are reconciliations of the Non-GAAP financial measures to the comparable GAAP financial measure.




               Reconciliation of Second Quarter 2013 Results

(in thousands, except per share data)                              (Loss)
                                         Pre-Tax                  Earnings
                                       Adjustments  Net of Tax   Per Share
                                       ----------- -----------  -----------
GAAP net loss                                      $    (6,469) $     (0.15)
Impact of change from basic to diluted
 share count                                                           0.01
                                                   -----------  -----------
GAAP net loss, adjusted to diluted
 share count                                       $    (6,469) $     (0.14)
  Non-cash stock-based compensation    $     8,761       5,257         0.11
  Certain intellectual property
   litigation expenses                       1,480         888         0.02
  Amortization of intangible assets          4,913       2,948         0.06
  Acquisition related items                     56          34         0.00
  Non-cash interest expense on
   convertible notes                         3,382       2,029         0.04
  Out-of-period royalty expense charge       7,901       4,741         0.10
                                                   -----------  -----------
Non-GAAP earnings                                  $     9,428  $      0.20
                                                   ===========  ===========


GAAP weighted shares outstanding -
 basic and diluted                                                   44,412
                                                                ===========
Non-GAAP weighted shares outstanding -
 diluted                                                             46,627
                                                                ===========



                Reconciliation of Year To Date 2013 Results

(in thousands, except per share data)                              (Loss)
                                         Pre-Tax                  Earnings
                                       Adjustments  Net of Tax   Per Share
                                       ----------- -----------  -----------
GAAP net loss                                      $    (5,618) $     (0.13)
Impact of change from basic to diluted
 share count                                                           0.01
                                                   -----------  -----------
GAAP net loss, adjusted to diluted
 share count                                       $    (5,618) $     (0.12)
  Non-cash stock-based compensation    $    15,548       9,329         0.20
  Certain intellectual property
   litigation expenses                       2,889       1,733         0.04
  Amortization of intangible assets          9,288       5,573         0.12
  Acquisition related items                  2,517       1,510         0.03
  Non-cash interest expense on
   convertible notes                         6,704       4,022         0.09
  Out-of-period royalty expense charge       7,901       4,741         0.10

                                                   -----------  -----------
Non-GAAP earnings                                  $    21,290  $      0.46
                                                   ===========  ===========

GAAP weighted shares outstanding -
 basic and diluted                                                   44,220
                                                                ===========
Non-GAAP weighted shares outstanding -
 diluted                                                             45,973
                                                                ===========


Conference Call

NuVasive will hold a conference call today at 5:30 p.m. ET / 2:30 p.m. PT to discuss the results. The dial-in numbers are 1-877-407-9039 for domestic callers and 1-201-689-8470 for international callers. A live webcast of the conference call will be available online from the investor relations page of the Company’s corporate website at www.nuvasive.com.

After the live webcast, the call will remain available on NuVasive’s website, www.nuvasive.com through August 29, 2013. In addition, a telephone replay of the call will be available until August 13, 2013. The replay dial-in numbers are 1-877-870-5176 for domestic callers and 1-858-384-5517 for international callers. Please use pin number: 417030.

About NuVasive

NuVasive is an innovative global medical device company that is changing spine surgery with minimally disruptive surgical products and procedurally integrated solutions for the spine. The Company is the 4th largest player in the $8.2 billion global spine market.

NuVasive offers a comprehensive spine portfolio of over 80 unique products developed to improve spine surgery and patient outcomes. The Company’s principal procedural solution is its Maximum Access Surgery, or MAS® platform for lateral spine fusion. MAS provides safe, reproducible, and clinically proven outcomes, and is a highly differentiated solution with fully integrated neuromonitoring, customizable exposure, and a broad offering of application-specific implants and fixation devices designed to address a variety of pathologies.

Having pioneered the lateral approach to spine fusion, NuVasive continues to be at the forefront of the spine industry’s shift toward less invasive solutions. The Company places a large focus on clinical research and support of the Society of Lateral Access Surgery, or SOLAS®, to expand the body of clinical evidence in support of NuVasive’s minimally disruptive solutions and to drive adoption of its techniques. The Company’s dedication to innovation continues to spawn game changing technology such as the PCM® motion preserving disc for the cervical spine, XLIF® Corpectomy for tumor and trauma, and Armada®, which treats adult degenerative scoliosis in a less invasive fashion. The Company has also developed procedural solutions that completely redefine and improve upon traditional procedures like TLIF, PLIF, Posterior Fixation, and ALIF. NuVasive’s solutions are increasingly being adopted internationally, as the Company lays the groundwork to continue growing as a global business and to offer industry-leading, Absolutely Responsive customer service to surgeons world-wide. NuVasive is focused on becoming a $1 Billion Start-Up™; taking market share by maintaining a commitment to Superior Clinical Outcomes, Speed of Innovation®, and Absolute Responsiveness®.

NuVasive cautions you that statements included in this press release that are not a description of historical facts are forward-looking statements that involve risks, uncertainties, assumptions and other factors which, if they do not materialize or prove correct, could cause NuVasive’s results to differ materially from historical results or those expressed or implied by such forward-looking statements. The potential risks and uncertainties that could cause actual growth and results to differ materially include, but are not limited to: the risk that NuVasive’s revenue or earnings projections may turn out to be inaccurate because of the preliminary nature of the forecasts; the risk of further adjustment to financial results or future financial expectations; unanticipated difficulty in selling products, generating revenue or producing expected profitability; and other risks and uncertainties more fully described in NuVasive’s press releases and periodic filings with the Securities and Exchange Commission. NuVasive’s public filings with the Securities and Exchange Commission are available at www.sec.gov. NuVasive assumes no obligation to update any forward-looking statement to reflect events or circumstances arising after the date on which it was made.




                               NuVasive, Inc.
          Unaudited Condensed Consolidated Statements of Operations
                  (in thousands, except per share amounts)

                                     Three Months Ended   Six Months Ended
                                          June 30,            June 30,
                                     ------------------  ------------------
                                       2013      2012      2013      2012
                                     --------  --------  --------  --------

Revenue                              $165,698  $154,419  $325,202  $306,110
Cost of goods sold (excluding
 amortization of purchased
 technology)                           48,744    36,534    87,840    73,467
                                     --------  --------  --------  --------
Gross profit                          116,954   117,885   237,362   232,643

Operating expenses:
  Sales, marketing and
   administrative                     104,272    92,615   204,158   187,293
  Research and development              7,712     9,335    17,407    19,323
  Amortization of intangible assets     4,913     2,903     9,288     5,749
                                     --------  --------  --------  --------
Total operating expenses              116,897   104,853   230,853   212,365

Interest and other expense, net:
  Interest income                         231       204       403       412
  Interest expense                     (6,652)   (6,972)  (13,685)  (13,797)
  Other expense, net                     (440)     (551)     (199)     (114)
                                     --------  --------  --------  --------
Total interest and other expense,
 net                                   (6,861)   (7,319)  (13,481)  (13,499)
                                     --------  --------  --------  --------

(Loss) income before income taxes      (6,804)    5,713    (6,972)    6,779
Income tax (benefit) expense              (76)    3,103      (840)    3,700
                                     --------  --------  --------  --------
Consolidated net (loss) income       $ (6,728) $  2,610  $ (6,132) $  3,079
                                     ========  ========  ========  ========
Net loss attributable to
 noncontrolling interests            $   (259) $   (253) $   (514) $   (457)
                                     ========  ========  ========  ========
Net (loss) income attributable to
 NuVasive, Inc.                      $ (6,469) $  2,863  $ (5,618) $  3,536
                                     ========  ========  ========  ========

Net (loss) income per share
 attributable to NuVasive, Inc.:
  Basic                              $  (0.15) $   0.07  $  (0.13) $   0.08
                                     ========  ========  ========  ========
  Diluted                            $  (0.15) $   0.06  $  (0.13) $   0.08
                                     ========  ========  ========  ========
Weighted average shares outstanding:
  Basic                                44,412    43,347    44,220    43,095
                                     ========  ========  ========  ========
  Diluted                              44,412    44,318    44,220    43,857
                                     ========  ========  ========  ========

Stock-based compensation is included
 in expenses in the following
 categories:
  Sales, marketing and
   administrative                    $  8,278  $  7,737  $ 14,703  $ 13,879
  Research and development                449       592       791     1,057
  Cost of goods sold                       34        16        54        30
                                     --------  --------  --------  --------
                                     $  8,761  $  8,345  $ 15,548  $ 14,966
                                     ========  ========  ========  ========




                               NuVasive, Inc.
                    Condensed Consolidated Balance Sheets
                               (in thousands)

                                         June 30, 2013    December 31, 2012
                                       -----------------  -----------------
                                          (Unaudited)
ASSETS
Current assets:
  Cash and cash equivalents            $          58,880  $         123,299
  Short-term marketable securities               113,779            138,405
  Accounts receivable, net                        96,314             88,958
  Inventory                                      137,394            126,335
  Deferred tax assets, current                    31,136             28,236
  Prepaid expenses and other current
   assets                                          9,016              8,516
                                       -----------------  -----------------
Total current assets                             446,519            513,749
Property and equipment, net                      130,591            125,123
Long-term marketable securities                  100,072             84,412
Intangible assets, net                            97,183            101,362
Goodwill                                         154,846            154,106
Deferred tax assets                               37,677             40,575
Restricted cash and investments                  119,048            118,995
Other assets                                      22,248             25,463
                                       -----------------  -----------------
Total assets                           $       1,108,184  $       1,163,785
                                       =================  =================
LIABILITIES AND EQUITY
Current liabilities:
  Accounts payable and accrued
   liabilities                         $          78,298  $          62,048
  Accrued payroll and related expenses            21,936             27,916
  Senior Convertible Notes, current                    -             74,311
                                       -----------------  -----------------
Total current liabilities                        100,234            164,275
Senior Convertible Notes                         339,108            332,404
Deferred tax liabilities                           3,125              3,129
Litigation liability                              93,700            101,200
Other long-term liabilities                       14,838             15,199
Commitments and contingencies
Noncontrolling interests                               -             10,003
Stockholders' equity:
  Preferred stock                                      -                  -
  Common stock                                        45                 44
  Additional paid-in capital                     734,796            714,865
  Accumulated other comprehensive
   (loss) income                                  (3,413)               786
  Accumulated deficit                           (183,738)          (178,120)
                                       -----------------  -----------------
Total NuVasive, Inc. stockholders'
 equity                                          547,690            537,575
Noncontrolling interests                           9,489                  -
                                       -----------------  -----------------
Total equity                                     557,179            537,575
                                       -----------------  -----------------
Total liabilities and equity           $       1,108,184  $       1,163,785
                                       =================  =================




                               NuVasive, Inc.
          Unaudited Condensed Consolidated Statements of Cash Flows
                               (in thousands)

                                                  Six Months Ended June 30,
                                                 --------------------------
                                                     2013          2012
                                                 ------------  ------------

Operating activities:
Consolidated net (loss) income                   $     (6,132) $      3,079
Adjustments to reconcile net (loss) income to
 net cash provided by operating activities:
  Depreciation and amortization                        30,341        25,313
  Amortization of debt discount                         6,704         6,233
  Amortization of debt issuance costs                     865           912
  Stock-based compensation                             15,548        14,966
  Allowance for doubtful accounts and sales
   return reserve                                         379         1,622
  Allowance for excess and obsolete inventory,
   net of write-offs                                    1,404         1,275
  Other non-cash adjustments                            4,175         3,541
Changes in operating assets and liabilities, net
 of effects from acquisitions:
  Accounts receivable                                  (8,443)          671
  Inventory                                           (13,680)      (10,967)
  Prepaid expenses and other current assets            (1,722)       12,185
  Accounts payable and accrued liabilities              8,830         8,902
  Accrued payroll and related expenses                 (5,885)       (1,973)
                                                 ------------  ------------
Net cash provided by operating activities              32,384        65,759
Investing activities:
Cash paid for business and asset acquisitions          (7,719)       (7,917)
Purchases of property and equipment                   (26,209)      (23,930)
Purchases of marketable securities                   (136,988)     (110,915)
Sales of marketable securities                        145,014       144,427
Purchases of restricted investments                         -      (113,126)
                                                 ------------  ------------
Net cash used in investing activities                 (25,902)     (111,461)
Financing activities:
Principal payment of 2013 Senior Convertible
 Notes                                                (74,311)            -
Tax benefits related to stock-based compensation
 awards                                                 1,261             -
Proceeds from the issuance of common stock              3,123         3,094
Other assets                                               26           242
                                                 ------------  ------------
Net cash (used in) provided by financing
 activities                                           (69,901)        3,336
Effect of exchange rate changes on cash                (1,000)           30
                                                 ------------  ------------
(Decrease) increase in cash and cash equivalents      (64,419)      (42,336)
Cash and cash equivalents at beginning of period      123,299       163,492
                                                 ------------  ------------
Cash and cash equivalents at end of period       $     58,880  $    121,156
                                                 ============  ============


Investor Contact:
Tina Jacobsen
NuVasive, Inc.
858-320-5215
investorrelations@nuvasive.com

Media Contact:
Nicole Collins
NuVasive, Inc.
858-909-1907
media@nuvasive.com

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