SAN DIEGO – May 1, 2018 – NuVasive, Inc. (NASDAQ: NUVA), the leader in spine technology innovation, focused on transforming spine surgery with minimally disruptive, procedurally-integrated solutions, today announced financial results for the quarter ended March 31, 2018.
First Quarter 2018 Highlights
- Revenue increased 4.6% to $260.5 million, or 3.4% on a constant currency basis;
- GAAP operating profit margin of (7.0%); Non-GAAP operating profit margin of 12.3%; and
- GAAP diluted loss per share of ($0.53); Non-GAAP diluted earnings per share increase of 5.4% to $0.39.
“In the first quarter 2018, NuVasive’s International business continued its momentum of 20% growth year over year on a constant currency basis, with our core U.S. hardware business showing solid case volume growth,” said Gregory T. Lucier, chairman and chief executive officer of NuVasive. “As we look forward to the remainder of the year, we expect our continued innovation—including the expansion of our lateral procedural solutions with the integration of Lateral Single-Position Surgery, further build out of our Advanced Materials Science portfolio and the initial launch of our Surgical Intelligence platform—to drive further differentiation of NuVasive technologies with surgeon partners. We also anticipate our Ohio manufacturing facility production ramping up in the second half of the year and we begin to realize the 400 basis point improvement in gross margins through this in-sourcing manufacturing effort.”
A full reconciliation of non-GAAP to GAAP measures can be found in the tables of this news release.
First Quarter 2018 Results
NuVasive reported first quarter 2018 total revenue of $260.5 million, a 4.6% increase compared to $249.0 million for the first quarter 2017. On a constant currency basis, first quarter 2018 total revenue increased 3.4% compared to the same period last year.
For the first quarter 2018, GAAP and non-GAAP gross profit was $186.7 million and $187.1 million, respectively, and GAAP and non-GAAP gross margin was 71.7% and 71.8%, respectively. These results compared to both GAAP and non-GAAP gross profit of $187.6 million, and both GAAP and non-GAAP gross margin of 75.3% for the first quarter 2017.
The Company reported a GAAP net loss of ($27.1) million, or ($0.53) per share, for the first quarter 2018 compared to a GAAP net income of $12.4 million, or $0.22 per share, for the first quarter 2017. On a non-GAAP basis, the Company reported net income of $20.2 million, or $0.39 per share, for the first quarter 2018 compared to net income of $19.7 million, or $0.37 per share, for the first quarter 2017. The GAAP net loss for the quarter was driven primarily by an increase in litigation liability of $29.0 million related to the Company’s previously disclosed lawsuit with a former sales agent, which has been ongoing since 2013.
During the quarter ended March 31, 2018, the Company obtained a favorable tax ruling with respect to its operations in Tennessee. The Company modified its local operations to obtain the ruling, which provides for tax exemptions for property, sales and use taxes specific to the state. With the Company’s primary distribution facility based in Memphis, the Company expects this tax ruling to yield in excess of $100 million in tax savings over the next 15 years. The Company engaged a specialized tax consultant to assist with these efforts and the Company recorded a non-recurring, success-based fee of $6.1 million in its first quarter 2018 financials.
Annual Financial Guidance for 2018
The Company reiterated its full-year 2018 guidance, and assumes a full-year benefit of U.S. tax reform, suspension of the medical device tax and the recent acquisition of SafePassage.
- Full-year 2018 revenue in the range of $1,095 million to $1,105 million reflecting organic growth in the range of 4.7% to 5.7% and reported growth of 6.7% to 7.6%, inclusive of the recent acquisition of SafePassage;
- Non-GAAP diluted earnings per share in a range of $2.44 to $2.47;
- Non-GAAP operating profit margin of approximately 17.6%;
- Adjusted EBITDA margin of approximately 26.9%;
- Non-GAAP effective tax expense rate of approximately 23%, compared with the prior expectation of approximately 24%;
- The Company now expects currency to have a positive impact in 2018 of approximately $10 million, compared with the prior expectation of approximately $5 million; and
- The Company continues to expect to drive at least 100 basis points in non-GAAP operating margin expansion and adjusted EBITDA of approximately $295 million to $305 million.
Supplementary Financial Information
For additional financial detail, please visit the Investor Relations section of the Company’s website at www.nuvasive.com to access Supplementary Financial Information.
Reconciliation of Non-GAAP Information
Reconciliation of Non-GAAP Information Management uses certain non-GAAP financial measures such as non-GAAP earnings per share, non-GAAP net income, non-GAAP operating expenses and non-GAAP operating profit margin, which exclude amortization of intangible assets, business transition costs, one-time restructuring and related items in connection with acquisitions, investments and divestitures, non-recurring consulting fees, certain litigation charges and non-cash interest expense (excluding debt issuance cost) and or losses on convertible notes. Management also uses certain non-GAAP measures which are intended to exclude the impact of foreign exchange currency fluctuations. The measure constant currency is the use of an exchange rate that eliminates fluctuations when calculating financial performance numbers. The Company also uses measures such as free cash flow, which represents cash flow from operations less cash used in the acquisition and disposition of capital. Additionally, the Company uses an adjusted EBITDA measure which represents earnings before interest, taxes, depreciation and amortization and excludes the impact of stock-based compensation, business transition costs, one-time restructuring and related items in connection with acquisitions, investments and divestitures, non-recurring consulting fees, certain litigation liabilities, and other significant one-time items. 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 further and more consistently analyze the period-to-period financial performance of its core business operations. Management believes that providing investors with these non-GAAP measures gives them additional 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.
Investor Conference Call
NuVasive will hold a conference call today at 4:30 p.m. ET / 1:30 p.m. PT to discuss the results of its financial performance for the first quarter 2018. 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 website at www.nuvasive.com. After the live webcast, the call will remain available on NuVasive’s website through June 1, 2018. In addition, a telephone replay of the call will be available until May 8, 2018. The replay dial-in numbers are 1-844-512-2921 for domestic callers and 1-412-317-6671 for international callers. Please use pin number: 13678607.
NuVasive, Inc. (NASDAQ: NUVA) is a world leader in minimally invasive, procedurally-integrated spine solutions. From complex spinal deformity to degenerative spinal conditions, NuVasive is transforming spine surgery with innovative technologies designed to deliver reproducible and clinically proven surgical outcomes. NuVasive’s highly differentiated, procedurally-integrated solutions include access instruments, implantable hardware and software systems for surgical planning and reconciliation technology that centers on achieving the global alignment of the spine. With over $1 billion in revenues, NuVasive has an approximate 2,400 person workforce in more than 40 countries around the world. For more information, please visit www.nuvasive.com.
NuVasive cautions you that statements included in this news release or made on the investor conference call referenced herein 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. In addition, this news release contains selected financial results from the first quarter 2018, as well as projections for 2018 financial guidance and longer-term financial performance goals. The Company’s results for the first quarter 2018 are prior to the completion of review and audit procedures by the Company’s external auditors and are subject to adjustment. In addition, the Company’s projections for 2018 financial guidance and longer-term financial performance goals represent initial estimates, and are subject to the risk of being inaccurate because of the preliminary nature of the forecasts, the risk of further adjustment, or unanticipated difficulty in selling products or generating expected profitability. The potential risks and uncertainties which contribute to the uncertain nature of these statements include, among others, risks associated with acceptance of the Company’s surgical products and procedures by spine surgeons, spine surgeons, development and acceptance of new products or product enhancements, clinical and statistical verification of the benefits achieved via the use of NuVasive’s products (including the iGA™ platform), the Company’s ability to effectually manage inventory as it continues to release new products, its ability to recruit and retain management and key personnel, and the other risks and uncertainties more fully described in the Company’s news 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.