Company Drives Record High Revenue of $811.1 Million and
Delivers Record Profitability Expansion of 400 Basis Points for the Full Year 2015
Completes Acquisition of Ellipse Technologies, Inc. and Provides
Updated 2016 Financial Performance Guidance
SAN DIEGO, CA – February 11, 2016 – NuVasive, Inc. (Nasdaq: NUVA), a leading medical device company focused on transforming spine surgery with minimally disruptive, procedurally-integrated solutions, announced today financial results for the quarter and full year ended December 31, 2015. Key performance highlights included:
Fourth Quarter 2015:
- Revenue increased 5.4% to $215.3 million, or 6.8% on a constant currency basis;
- Non-GAAP operating profit margin up 240 basis points to 17.1%; GAAP operating profit margin of 13.7%; and
- Non-GAAP diluted earnings per share of $0.35; GAAP diluted earnings per share of $0.22.
Full Year 2015:
- Revenue increased 6.4% to $811.1 million, or 8.2% on a constant currency basis;
- Non-GAAP operating profit margin up 400 basis points to 15.4%; GAAP operating profit margin of 17.1%; and
- Non-GAAP diluted earnings per share of $1.31; GAAP diluted earnings per share of $1.26.
The Company also announced the completion of its acquisition of Ellipse Technologies.
“We are pleased to report strong results for 2015 that demonstrate solid revenue growth as NuVasive continues to gain market share globally, as well as record operating profit margin expansion for the year,” said Gregory T. Lucier, Chairman and Chief Executive Officer of NuVasive. “In 2016, we expect to drive further market share gains fueled by the launch of innovations that fulfill unmet clinical and economic needs, coupled with additional investment in our commercial teams around the world. Very selectively, we also intend to explore compelling inorganic opportunities that add value, such as today’s completion of the acquisition of Ellipse Technologies, and reinforce our focus on transformative spine solutions. We remain committed to delivering more profitable growth as we scale the business, drive world-class operations and increase our in-sourced manufacturing capabilities. This winning combination of disruptive innovation, strategic growth and enhanced profitability will create value for our shareholders, and position us well on the path to achieving our long-term performance targets.”
A full reconciliation of non-GAAP to GAAP measures can be found in the tables of this news release.
Fourth Quarter and Full Year 2015 Results
NuVasive reported fourth quarter 2015 total revenue of $215.3 million, a 5.4% increase compared to $204.3 million for the fourth quarter 2014. On a constant currency basis, fourth quarter 2015 total revenue increased 6.8% compared to the same period last year. Full year 2015 total revenue was $811.1 million, a 6.4% increase compared to $762.4 million for the full year 2014. On a constant currency basis, full year 2015 total revenue increased 8.2% compared to the same period last year.
GAAP gross profit for the fourth quarter 2015 was $164.0 million and gross margin was 76.2% compared to a gross profit of $157.8 million and a gross margin of 77.2% for the fourth quarter 2014. GAAP gross profit for the full year 2015 was $616.6 million and gross margin was 76.0% compared to a gross profit of $580.1 million and a gross margin of 76.1% for the full year 2014. Total GAAP operating expenses for the fourth quarter 2015 were $134.5 million compared to $133.3 million for the fourth quarter 2014. Total GAAP operating expenses for the full year 2015 were $477.6 million compared to $561.9 million for the full year 2014.
The Company reported a GAAP net income of $11.5 million, or $0.22 per share, for the fourth quarter 2015 compared to a GAAP net income of $7.5 million, or $0.15 per share, for the fourth quarter 2014. The Company reported a GAAP net income of $66.3 million, or $1.26 per share, for the full year 2015 compared to a GAAP net loss of $(16.7) million, or $(0.36) per share, for the full year 2014.
On a non-GAAP basis, the Company reported net income of $18.0 million, or $0.35 per share, for the fourth quarter 2015 compared to net income of $13.0 million, or $0.26 per share, for the fourth quarter 2014. On a non-GAAP basis, the Company reported net income of $66.9 million, or $1.31 per share, for the full year 2015 compared to net income of $33.3 million, or $0.67 per share, for the full year 2014.
Cash, cash equivalents and short and long-term marketable securities were approximately $470.1 million at December 31, 2015.
Ellipse Technologies Acquisition Completion
NuVasive also announced the successful completion of its acquisition of Ellipse Technologies, Inc., a privately held medical technology company focused on revolutionizing procedural solutions for complex skeletal deformity. Under the terms of the deal, the Company acquired Ellipse Technologies for a $380 million upfront cash payment and a potential $30 million milestone payable in 2017 related to the achievement of specific revenue targets.
The acquisition reinforces NuVasive’s focus on transformative spine solutions to improve patient outcomes and extends its position as a global spine leader with a comprehensive approach to the fast-growing complex deformity market. Ellipse Technologies’ magnetic growing rod technology is currently receiving rapid adoption in the pediatric deformity and orthopedic markets, providing for new growth opportunities beyond NuVasive’s current portfolio of winning solutions that address adult degenerative and deformity spinal conditions.
The acquisition is expected to accelerate NuVasive’s revenue growth to high single-digits and be accretive to non-GAAP diluted earnings per share by approximately $0.01 in 2016. For 2015, Ellipse Technologies generated revenues of approximately $44 million and 2016 revenues are expected to be approximately $53 million on a reported basis and approximately $60 million on a pro forma basis as the company continues its exceptional growth trajectory.
Annual Guidance for 2016
The Company provided the following updated projections to its full year 2016 guidance, which is inclusive of its acquisition of Ellipse Technologies as of February 11, 2016:
- Revenue of approximately $923.0 million, or approximately 13.8% growth compared to revenue of $811.1 million for 2015, which includes approximately $53 million of revenue contribution from Ellipse Technologies;
- Non-GAAP diluted earnings per share of approximately $1.48, an increase of approximately 13.3% compared to non-GAAP diluted earnings per share of $1.31 for 2015;
- Non-GAAP operating profit margin of approximately 15.8%, an increase of approximately 40 basis points compared to 15.4% for 2015;
- Adjusted EBITDA margin of approximately 25.4%, an increase of approximately 20 basis points compared to 25.2% for 2015; and
- Non-GAAP effective tax expense rate of approximately 41.0%.
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
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, leasehold related charges, integration related expenses associated with acquired businesses, one-time restructuring and acquisition related items, CEO transition related costs, certain litigation charges and non-cash interest expense 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, leasehold related charges, integration related expenses associated with acquired businesses, CEO transition related costs, certain litigation liabilities, acquisition related items 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
The Company will hold a conference call today at 4:30 p.m. ET / 1:30 p.m. PT to discuss the results of its fourth quarter and full year 2015 financial performance. 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 March 11, 2016. In addition, a telephone replay of the call will be available until February 18, 2016. 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: 13629350.
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. NuVasive has emerged from a small startup to become the #3 player in the more than $9 billion global spine market and remains focused on market share-taking strategies as the Company continues on its path to become the industry’s leading spine company. NuVasive offers a comprehensive spine portfolio of more than 90 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 was designed to provide safer, 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.
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 fourth quarter and full year 2015, as well as projections for 2016 financial guidance and longer-term financial performance goals. The numbers for the fourth quarter and full year 2015 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 2016 financial guidance and longer-term financial performance goals represent current estimates, including initial estimates of the potential benefits, synergies and cost savings associated with the acquisition of Ellipse Technologies, which 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 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; the risk that Ellipse Technologies will not be integrated successfully or that the benefits and synergies from the acquisition may not be fully realized or may take longer to realize than expected; and those 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. The forward-looking statements contained herein are based on the current expectations and assumptions of NuVasive and not on historical facts. NuVasive assumes no obligation to update any forward-looking statement to reflect events or circumstances arising after the date on which it was made.
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